- Qualcomm has unveiled its first ARM-based server.
- The company is perhaps the biggest to back ARM-based servers.
- How will AMD, which failed to crack the server market using ARM servers, benefit from Qualcomm's move?
To many investors, AMD (NASDAQ:AMD) is a company that is whistling by the graveyard. The company’s ARM servers have been beaten to a pulp by Intel's x86 servers, and there appears to be little hope of recovery for AMD. But now with news that Qualcomm (NASDAQ:QCOM) has finally made good its promise to enter the budding ARM server market, the ARM camp including AMD now has a new lifeline, and it can definitely use one, as evident from this AMD stock analysis video, which highlights the company's worsening fundmentals.
Ubiquity Of x86 Giving ARM A Headache
During its heyday about a decade ago, AMD managed to give mighty Intel (NASDAQ:INTC) a run for its money when its popular low-power 64-bit x86 server chips helped the company to grab a comfortable 25% of the server chip market. But Intel soon introduced 64-bit capabilities into its Xeon processors and it was game over for AMD. About two years ago, AMD tried to make a comeback by designing server chips around the ARM architecture that powers mobile devices. But that did not work out very well leading to AMD announcing early this year that it was paring back its ARM efforts in favor of x86 once again.
Many PC and server companies have been shunning ARM because a lot of software that powers the web has been written for x86 architecture. As a result, companies that not too long ago backed ARM such as Microsoft (NASDAQ:MSFT) and NVIDIA (NASDAQ:NVDA) have lately ditched the platform. Microsoft’s Surface 2 and Surface RT tablets were powered by ARM chips and Windows RT OS. But software designed for x86 runs poorly on Windows RT, which prompted Microsoft to ditch ARM chips in favor of Intel’s x86 Atom chips for Surface 3.
ALPHABET INC-C (NASDAQ:GOOG) Chromebooks were the next battlefield for ARM chips. About 3 years ago, virtually all Chromebooks sported ARM chips. By mid-last year, Intel had managed to turn the tables by grabbing 75% of Chromebook chips while ARM chips went into just 30% of the tablets.
Then there is the much-touted microserver revolution that has so far failed to materialize. Microservers were supposed to become the next big thing in the server space due to their low power consumption and higher flexibility compared to traditional servers. Several analysts were very bullish about the possibilities for microservers, with HIS iSuppli Research estimating that microservers would account for 10% of all server shipments by 2016. But indications are that microservers have failed to take of as earlier anticipated, with analysts estimating that microserver shipments currently account for just 1%-2% of all server shipments.
All these trends have led to AMD suffering serious revenue and profitability declines. During the last quarter, AMD reported revenue of $942 million, a huge 35% Y/Y decline while its net loss widened from $36 million a year ago to $181 million. But with leading mobile technology company Qualcomm now having joined the ARM camp, the chip architecture now has a big proponent that can help it grow its server market share to help it compete effectively with Intel.
Qualcomm wants a piece of the server market that is estimated to reach $15 billion by 2020. The mobile technology company sees a big opportunity in the Internet of Things which appears to be the next big thing after the mobile era. All those interconnected gadgets will generate massive amounts of data that will need to be collected and analyzed in data centers. Qualcomm’s new server consists of a 24-core System-on a-chip (SoC) based on the ARMv8-A instruction set that can tackle everyday IaaS and PaaS applications, as well as Big Data and machine learning applications. Unlike AMD, Qualcomm has the chops to advance the ARM cause. If ARM can get a proper foothold in the server market, then it will be game on once again for companies like AMD.
AMD stock has been making good gains ever since the company announced a 5% cut to its workforce.
But the latest piece of news perhaps provides an even better ground for the shares to rally since it proves ARM, and by extension AMD, is not quite dead.