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semiconductor star, ARM's technology has typically been found in smartphones and tablets, although HP will use the chips within a soon-to-be-launched server technology called Redstone.
"The low-power attributes of ARM's architecture cloud give HP an advantage when selling into environments where power consumption is a critical factor," explained Brian Marshall, an analyst at International Strategy & Investment Group, in a note. "We think HP is targeting cloud-computing applications in the data center with the Redstone platform."
Companies such as
Google(GOOG - Get Report) and
Apple(AAPL - Get Report), which has built a
massive new data center in Maiden, North Carolina, are famed for their reliance on vast server farms, so HP clearly sees a big market opportunity.
The initial Redstone offering, launched in the first half of next year, will be built using ARM chip technology adapted by Texas startup Calxeda. The Austin-based firm touts its ARM Cortex-based EverCore processor as a way for companies to slash data center energy consumption by up to 90%.
Redstone incorporates 2,800 servers in a single data center rack, which HP says will significantly reduce the amount of cabling and switching needed by companies. Based on the Palo Alto, Calif.-based firm's own lab tests, Redstone, could reduce data center complexity by up to 97% compared to a traditional server.
Subsequent versions of Redstone will be built using Atom processors from HP's longstanding chip partner
Intel(INTC - Get Report), according to HP.
International Strategy & Investment Group's Marshall estimates that if ARM-based CPUs feature in 30% of its Industry Standard Server (ISS) shipments in 2012, HP could raise its ISS operating margin profile by 150 basis points.
"This development would add around $220 million in incremental operating income to HP in calendar year 2012 and drive our [fiscal 2012] $4 [EPS] estimate to $4.09," he added.
HP shares rose 60 cents, or 2.34%, to $26.24 on Tuesday, far outpacing the broader advance in tech stocks that saw the
Nasdaq rise 1.12%.
--Written by James Rogers in New York.
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