Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Mary Cluney who wrote (138647)	7/5/2001 12:11:51 PM
From: pgerassi	Read Replies (1) \| Respond to of 186894

Dear Mary: It is actually worse than Dan noted: 1) Of the 4 million in servers, more than 80% are 1-2 way PC types. This includes NAS (network attached servers (fancy name for glorified storage server PCs with multiple controllers and large numbers of disk drives)). This market is growing at those rates you describe to the whole market and that is why the percentage of this is actually rising of the total server market. I class almost all Beowulf Clusters in here as well since they are mostly comprised of 1-2 way computing nodes. This area may have steady losses in market share for Intel due to AMD MP systems (includes Hammers within your three year time frame). 2) Another 10% are in 4 to 8 way PC types. This market is growing but slower than the 1-2 ways above. These typically have more invested in redundant power supplies large amounts of high speed LAN ports and larger disk drive arrays. In the typical system, the CPU is likely to be less than 5% of total cost. And the maintenance contract is likely to be 20 to 40% of the cost annually and is valuable for the preventative maintenance supplied. 3) The rest is n-way PC CPUs and Mainframes whether RISC or Legacy. Those mainframes, the 3090s, 4300s, and other such systems, are mostly composed of IO processors with a few main CPUs doing the directing and heavy number crunching. Here the CPU cost is less than 1% of the total. The main CPU portion of one $10M server was less than $100K in one bid I saw broken down to true costs (do not believe that customers, especially big ones, do not know the true costs of these things). Most went to IO processors, memory, disk, printers, tape libraries, and infrastructure. One year of maintenance was buried in the contract as the warranty. The ongoing 24-7 maintenance was about 50% of the cost annually. It is an old true saw that most mainframe companies could give you the mainframe for free, if you pay for 5 years of maintenance, just like the elevator manufacturers. For a company like IBM, figure at least half of their annual server revenue is derived from just maintenance (some estimates are much higher). That $60 billion in annual IBM server revenue probably contains between $300M and $1B in main CPU chips. That $90 billion server market in three years may contain only $4 to 8B in CPUs mostly in glorified 1-2 way SMP PCs. In that part of the market, Itanium is not going to be very large. Matter of fact even Xeons will have to fight first Athlon MPs and then Hammers (the 64 bit extensions will be a "Don't Care", but "Nice") for this market. So you can see that this will not be that lucrative for either AMD or Intel compared to the desktop and mobile environments. Its the same thing that makes more money for home builders using brick and home builders who carve them from huge monoliths of stone. The suppliers of those monoliths make less money than those who supply the bricks even though they get a lot of money for a single monolith. Pete