According to a report by Bloomberg, Google, which buys its data center server chips from Intel, could take that highly lucrative business to competitor Qualcomm if that company’s chips meet performance standards.
Citing “people familiar with the matter,” Bloomberg reports the search giant “is planning to publicly give its support to early versions of Qualcomm’s chips at an investor event next week, according to people familiar with the matter. The two have already cooperated on design work and Google will commit to using the processors if they meet performance goals, said the people, who asked not to be identified because the plans aren’t yet public. Representatives of both companies declined to comment.”
Qualcomm is the biggest supplier of mobile phone chipsets and this entrance into the booming high-capacity data center market would represent a major new business line.
Michael McConnell and Hans Chung of Pacific Coast Securities said if the search giant makes the move as reported, “It would be a clear sentiment positive for ARM Holdings and Qualcomm, and a negative for Intel.”
The analysts continued to note that the Mountain View, California-based tech giant “plans capital expenditures of $12 billion this year, our cloud, analytics and data infrastructure analyst Brent Bracelin estimates Google could consume approximately one million server units this year. We estimate an average attach rate of two Intel processors per server unit at Google.
“While it is highly unlikely that Google will design Qualcomm processors into all of its future server platforms, we estimate that Google as a whole represents an incremental revenue and [earnings per share] opportunity of $450 million and 8 cents for Qualcomm. Conversely, we estimate the loss of Google as a server processor customer would adversely affect Intel’s revenue and earnings per share by $1.3 billion and 10 cents, respectively.”
