The shift to cloud computing is fueling strong growth in Intel's enterprise server business as the company gears up to play in the tablet and smartphone segment.
Despite
a challenging first quarter and weakening consumer demand, strong business
spending and emerging markets are driving demand for Intel's traditional
businesses. Company executives are expecting the momentum to continue for the
rest of 2011 as the company strengthens its presence in the mobile device
segment.
During
an April 19 conference call with analysts and journalists announcing the chip
maker's record first-quarter numbers, Intel CEO Paul Otellini said the shift of
critical business applications to the cloud drove IT business spending. "Cloud
build out" drove demand for high-end servers, storage and networking
products for big centralized data centers.
Intel
had a record first quarter that kicked off a strong start to 2011, thanks to
continued strong enterprise sales despite a softening in consumer markets in
the United States and Western Europe. In the first quarter, revenue came in at
$12.9 billion-up 25 percent over the same period in 2010-with net income
hitting $3.3 billion, a 34 percent jump.
Intel
continued its strong performance from the end of 2010, as revenue and net
income were up 12 percent and 3 percent, respectively, compared with fourth-quarter
2010 results.
Intel
is taking advantage of the explosion of devices that can connect to the
Internet. "We not only participate through selling our products into these
device categories, but we also profit from the wide array of products that we
sell in the build out of the data center capacity required to serve all of
these devices," Otellini said.
The
data center group saw quarterly revenue rising 45 percent over the fourth-quarter
2010 and 65 percent from first-quarter 2010. Otellini said the group is
expected to reach $10 billion in revenues for 2011.
Despite
initial problems with the Cougar
Point chipset, Intel appears to have recovered nicely, reporting strong
demand for its Sandy Bridge processors. A technical error in the chipset led
Intel to issue a product recall, fix the problems and then reissue the product.
Intel recovered from the setback faster than the company expected in January,
according to company executives.
Calling
early demand for Sandy Bridge "outstanding," Otellini projected the
ramp to continue on a very sharp growth trajectory for the rest of the year,
with unit shipments expected to "more than double" from the first
quarter to second quarter. "I believe that this is the very best product
Intel has ever delivered to our customers," Otellini said.
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