Baidu Is Helping Disrupt the Server Market: Microsoft Corporation (MSFT), Intel Corporation (INTC)

Not to be left out, both Dell and H-P have begun work on their own Open Compute compliant designs. Facebook is currently testing one of the H-P servers, but as Ars Technica reports, has no plans to include OEM servers in its new Swedish data center. One has to wonder if this shift in the server business helped lead Michael Dell’s decision to take his namesake company private. The LBO will allow drastic restructuring without the scrutiny one would endure as a publicly traded company.

What Are the Implications?

For companies like Facebook and Baidu that rely on enormous amounts of computing power, the benefit is clear: cost reduction. Both operate on massive scales, so even small power savings can have a significant effect on the bottom line. For ARM and the companies that fabricate their designs, moving in to the server space opens the door to a huge market and revenue source.

As you would expect, the news isn’t so rosy for the traditional powers. Even if Intel and AMD manage to erase the power efficiency advantage, they’ll still face pricing pressure due to the Open Computing initiative. Adding options puts more power in the buyer’s hands and will ultimately lead to price competition and shrinking margins. The same can be said for the server manufacturers, though they may welcome the price competition on some of their manufacturing inputs.

The article Baidu Is Helping Disrupt the Server Market originally appeared on Fool.com and is written by Chris Moore.

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