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May 19, 2011 4:51 am
Apple may have put the traditional powers of the PC industry in the shade of late with breakout products such as the iPhone, the iPad and its ultra-thin MacBook Air.
Behind this lies a shift to a new style of computing. “The numbers from all three companies reflect a massive push to the cloud,” said Rob Enderle, a US technology analyst.
Paul Otellini, executive of Intel, put it succinctly at his company’s analyst day on Tuesday: “The money is in the infrastructure.”
Internet data centres and hosting are one of the fastest growing areas in the build-out of the mobile internet, he said. According to Intel’s calculations, an extra server is needed for every 600 smartphones that are sold, and for every 122 tablet computers.
The chipmaker forecasts a 15 per cent compound annual growth rate in its server business between 2010 and 2015, with its revenues doubling over five years to reach $20bn a year.
That should translate into growth for HP and Dell as well, who supply many of those servers. Both companies on Tuesday reported a strong pick-up from data centre demand in their most recent quarters, though their overall performance was markedly different.
Dell attributed an unexpectedly strong jump in its gross profit margin, which topped 23 per cent, to a shift in its business mix towards storage and services. It is also benefiting from a buying cycle by corporate customers, many of which held back after the financial crisis and are only now getting around to upgrading older machines.
HP also reported a solid 15 per cent rise in sales of servers and storage and networking equipment. However, that was overshadowed by a warning from the company about an erosion of profitability in its services division, and slumping consumer PC sales.
Its divergence with Dell in the corporate market reflected the different trajectories the two companies were on, said Roger Kay, a technology analyst at Endpoint Associates. While Dell was finally seeing some results from its long-awaited turnround, HP’s services division is suffering from the results of prolonged underinvestment that will take time to sort out, he said.
The pick-up in the data centre market as a result of the new generation of mobile devices and the rise of cloud computing is set to be a long-term trend, analysts said. Security breaches like the one suffered recently by Sony could slow this by reducing demand for “public cloud” services like those from Amazon, Mr Enderle said. But he added that this could actually benefit companies like Dell and HP, which sell “private cloud” products and services for companies to build their own, more secure systems.
While the move to the cloud is lifting some parts of the traditional tech world, however, the concerns it has left over the PC market – long the main engine of the tech industry – have if anything intensified by the latest evidence.
HP reported that its sales of PCs to consumers fell by 20 per cent in its latest quarter, increasing the fears that sales of tablet computers are eating into demand for notebook computers.
“It’s not that consumers aren’t buying – it’s just that they aren’t buying anything but Apple,” said Mr Enderle. Along with growing demand for the iPad and iPhone, Apple had also seen a big pick-up in demand for its own personal computers, he said.
In claiming confidence for their own personal computing products, the powers of the PC world cling to two beliefs. One is that demand for PCs will continue to grow, even if tablets and smartphones eat into some of the market.
With customers in emerging markets accounting for much of the expected extra demand, and with a new generation of lighter, more portable PCs under development, Intel executives said that they still expected their market to grow.
Stacy Smith, the chipmaker’s chief financial officer, this week showed analysts his own worst-case calculation: if tablet sales reach 150m in 2013 – the most optimistic forecast by research firms – and there is a 33 per cent cannibalisation of notebook PCs, the PC market will still grow by 10 per cent in terms of units sold.
The PC technology companies are also readying their own responses to the new mobile computing ecosystem led by Apple and ARM, the UK chip designer whose technology is used in most mobile devices. But with the counter-attack barely off the drawing-board, they will have to take solace from their data centre successes for the time being.
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