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11/16/2010
02:21 PM
Alexander Wolfe
Alexander Wolfe
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Top 5 Reasons Intel Is Winning And 4 Potential Pitfalls

Wins include the dominance of the Xeon server processor and research into data centers on a chip, while stumbling blocks center on a second-place communications chip business and settling on a potential successor to CEO Paul Otellini.

Rich, smart, and seemingly set for the future is no way for Intel to be -- if you're one of its competitors. From the perspective of the chip behemoth, though, things have never looked better. Last week, Intel announced plans to increase its stock dividend next year, which prompted CEO Paul Otellini to crow: "Intel remains on track to have our best year ever."

Otellini has enabled Intel to achieve its enviable position via a series of smart moves through which he has broadened its revenue-generation base away from an overdependence on PC processors. Therein lies the story of both Intel's current success and future potential "gotchas."

"We are transforming from a company with a primary focus on the design and manufacture of semiconductor chips for PCs and servers to a computing company that delivers complete solutions in the form of hardware and software platforms and supporting services," is how Intel characterized that strategy in its most recent quarterly report .

I contend that, while Otellini has moved rapidly, his journey isn't complete yet, and it can also be argued he hasn't moved rapidly enough. (Case in point: He's thus far failed to make Intel a dominant player in smartphone chips.) Still, sometimes it's as important to be lucky as it is to be smart, and the rising economic tide is certainly lifting Intel.

Whether such forward progress can proceed unabated depends on whether Intel continues to capitalize on its recent successes, five of which are outlined below, and manages to avoid the list looming pitfalls, which follows:

Top 5 Successes

1) Xeon Server Processor. One might assume that Intel's dominance in server chips has long gone unchallenged, and that this bullet point is a no-brainer. One would be wrong.

From April, 2005, when AMD introduced its Opteron server chip, pretty much until early 2009, when Intel debuted its Nehalem Xeon -- billed at the time as its most important server launch in 15 years -- leadership of the server processor arena was hotly contested. For much of the period, AMD arguably held a technology lead.

However, those Nehalem Xeons -- along with business troubles and a chip launch glitch which derailed AMD's efforts to keep up its pace -- put Intel firmly back on top. According to the most recent IDC numbers , Intel currently holds 80.7% of the server processor market. And Xeon is used in the most powerful supercomputer in the newly released Top 500 rankings.

Intel has continued to apply pressure with subsequent launches like the Xeon 5600 and 7500 Series. I don't mean to imply that AMD has ceded this space -- that's far from the truth. Indeed, as has historically been the case, one could argue that it's only the presence of AMD which has forced Intel to drive its designs forward.

Looking ahead, Intel will seek to maintain leadership by folding into Xeon more of those features currently only available on its ultra-high-end Itanium architecture.

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