JF - Re: ". However I was hoping for your thoughts on Intel's move into server farms, irrespective of the source the lack of network ownership does make me wonder what a viable strategy to overcome this weakness might be."
First, I view this as speculative since it is essentially a SERVICE business - and Intel has always been a MANUFACTURER. This venture will be entirely different for them.
Second, the margins must necessarily be LOWER during the early stages while the equipment is still "new".
Third, assuming Intel provides GOOD value and SERVICE to attract serious, long term customers, Intel creates CONTINUOUS REVENUE STREAMS based on more or less fixed assets.
Continuous, steady revenue streams are great and have excellent prospects - as the INSURANCE COMPANIES have demonstrated over hundreds of years (allowing for the occasional BIG PAY OUTS for major calamities) - Warren Buffett knows this as well as any one.
The Revenue Streams then become a source of NEW CAPITAL that can be plowed back in for further expansion, or re-invested in other ventures.
But the key element here is establishing new sources of REVENUE STREAMS - and eventually FREE CASH FLOW - from old and new customers making use of the Web Hosting Facilities.
And with the Internet/E-Commerce in its infancy, this business could have EXPLOSIVE upside potential as all sorts of Internet business need additional capacity - ISPs, ASPs, Libraries, reference material suppliers, Academic and Scientific repositories of data/information, digitized reproduction of every past-published book, newspaper, magazine, etc.
Paul |
