Another cool article
Thursday, March 02, 2006
Google's Economics
Forbes re-reported the story that Google is going AMD, even though INTEL CEO Paul Otellini sits on Google's board. Surprised? Not really, it's a simple matter of economics.
Google has 200,000 servers right now, and it's adding more and more every day. How much can Google save by going AMD?
Marc Andreessen has done a study for his own dotcom startup's data center choices, he found by using SUN's Opteron servers instead of Intel Xeon, he could save $97.5 - $39.0 = $58.5 per server per month on energy and rack space. Since Marc is using his hard earned money, I bet he is pretty adamant on minimizing the total cost.
Now, let's apply the Marc Andreessen study to Google. With 200,000 servers, the total savings per year is:
$58.5 * 12 * 200,000 = $140,400,000 = $140.4 million
Google has 295.5 million outstanding shares, the savings above translate nicely into $0.475 EPS.
With a P/E of 75, that translates into $10.5 billion of added market cap. Even though INTEL is quite rich, I doubt it can pay Google that much money to keep it.
Now, consider that Google must grow and add more servers....
posted by Sharikou, Ph. D @ 11:58 AM
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