Is Alphabet (GOOG)’s Google Plotting To Sidestep Intel Corporation (NASDAQ:INTC) with Qualcomm (QCOM) in Data Center?
It turns out Alphabet Inc (NASDAQ:GOOG)’s Google could be warming up Qualcomm, Inc. (NASDAQ:QCOM)’s data center processors. That could mean Google is plotting to ditch Intel Corporation (NASDAQ:INTC) server chips in its data centers. There are speculations that Google could soon take the opportunity to voice its support for Qualcomm server chips through a video to be shown at a Qualcomm analyst event.
If Google cuts or reduces data center ties with Intel Corporation (NASDAQ:INTC), it would be a serious blow to the latter. Intel has increasingly come to rely more on server business as its core PC business decays. In 2015, Intel generated $16 billion in sales in its data center division, resulting in a profit of $7.8 billion in the division.
99% market share
Data centers are Intel’s fastest growing business and presently the most profitable operation. Part of the reason Intel enjoys strong gains in the data center market is that it controls nearly 99% of the market. Because of the massive market share, the company also enjoys incredible pricing power.
Luring Intel’s major data center buyers
However, not everyone is happy with Intel’s data center success and one of those plotting its downfall is Qualcomm. Faced with slowdown in smartphone and tablet markets, Qualcomm is looking for growth beyond mobile and it has identified data center. To take on Intel, Qualcomm can be seen courting Intel’s major customers with Google and Facebook Inc (NASDAQ:FB) being some of them.
At its analyst day in 2014, Qualcomm showed a video in which a Facebook executive praised the company’s data center processor efforts. This time around, Qualcomm plans to show a video from Google. It is not exactly clear who will be speaking in Google’s video, but you can be sure that the video will be speaking positively about Qualcomm’s server processors.
$1.3 billion revenue loss for Intel
If Qualcomm succeeds in pulling Google from Intel Corporation (NASDAQ:INTC)’s data center processors, it could end up adding at least $450 million in additional annual revenue. On its part, Intel could suffer $1.3 billion revenue hit following the loss of Google data center socket. However, it is worth noting that past efforts to take server business from Intel have failed. Part of the reason is that the based the ARM-based technology that rivals base their work on doesn’t measure up to Intel’s server chips.
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