Intel Corporation (NASDAQ:INTC) talks a big game about its future, promising to make its way into nearly every computing device imaginable. Whether it’s PCs, tablets, smartphones, or other computing devices, Intel wants its processors to power the future of computing. To date, Intel hasn’t been very successful in delivering on its promise, given that the world has embraced mobile computing faster than Intel can keep up with.
For Intel to remain relevant in the world of mobile computing, it needs to deliver a highly efficient yet powerful mobile computing solution that outperforms the sea of ARM Holdings plc (ADR) (NASDAQ:ARMH) designs. Moreover, it should probably get used to the fact that it won’t be able to command the premiums it’s grown accustomed to in the PC world.
To pull off this foray into mobile computing, Intel Corporation (NASDAQ:INTC) is banking on its leading-edge capacity to carry the weight of its ambitions, which bears the lowest unit cost, offers the highest performance, and consumes the lowest power. In other words, after a complete makeover, Intel Atom will hopefully become Intel’s knight in shining armor on nearly all computing fronts.
Threats on threats
Considering how data needs have effectively exploded in recent years thanks to the rise of cloud computing and always-connected devices, you would think that Intel’s data-center group has been consistently booming quarter after quarter. However, last quarter, Intel’s data-center group experienced a 6.9% sequential decline in revenue, indicating that despite growing data needs across the world, the data-center industry appears to be shifting away from the server monolith model.
Now, if you couple this growing movement with the fact that high-density, low-power server clusters are on the rise at cloud-based companies, it becomes easy to see how Intel Corporation (NASDAQ:INTC)’s data-center business, which is heavily reliant on selling server monoliths, could become disrupted.
High replacement value
Low-power server clusters utilize tens of thousands of low-power processors to execute tasks and work especially well for cloud-based services. To boot, these outfits are constantly looking to keep a lid on energy costs associated with data centers, while still being able to scale performance.
If the low-power server market grows larger than the 6% to 10% that Intel currently estimates it to be, the presumed erosion of Intel’s Xeon line of server processors may be replaced with Intel’s upcoming line of Avoton Atom processors. Naturally, it’s going to take multiple Avoton processors to match the power of a single Xeon processor, not to mention that Intel’s peak profitability was reached during the 2009 to 2010 Intel Atom heydays.
The road ahead
Considering Intel Corporation (NASDAQ:INTC) currently trades at a 35% discount to the S&P 500, investors aren’t necessarily getting their hopes up that Intel will successfully capture new market share. However, if the server industry continues shifting toward more efficient power designs, Intel Atom may be able to increase its market share, which could translate into increased profitability for the company.
Between smartphones, tablets, and now servers, there’s no denying that Intel has put a serious amount of faith in its Atom processor.
The article Do All Roads Lead to Intel Atom? originally appeared on Fool.com.
Fool contributor Steve Heller owns shares of Intel. The Motley Fool recommends and owns shares of Facebook and Intel.
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