Intel Chases Cloud With High-End Server Chip

SAN FRANCISCO ( TheStreet) -- Intel ( INTC) beefed up its enterprise strategy on Tuesday, attempting to ride the cloud wave with a new high-end server chip.

Launching the new Xeon E5-2600 processors, Diane Bryant, vice president and general manager of Intel's Datacenter and Connected Systems Group heralded an 80% performance gain over the prior generation of Xeon chips.

Bryant, who was Intel's CIO until recently, also highlighted the E5's improved security, bandwidth and power efficiency, touting the chip as ideal for cloud computing.

"The E5 really is the heart of the data center," she explained, during a keynote presentation at the Contemporary Jewish Museum in downtown San Francisco, pointing to the explosion in consumer gadgets. "Cloud computing allows new services to be rapidly deployed to all of these devices - the result is an ever increasing demand on the data center infrastructure."

A host of big-name customers that use Intel's chips, such as HP ( HPQ), Dell ( DELL), Cisco ( CSCO) and Oracle ( ORCL), were involved in the glitzy launch event, along with enterprises that rely heavily on Intel technology, such as car giant BMW and Dreamworks Animation.

Mario Müller, BMW's vice president of IT Infrastructure, described the huge growth in machine-to-machine communications, which is fueling demand for chips like the E5 Xeon. "Our vehicles are connected to our internal cloud," he said, explaining that this can be used to provide services such as tracking stolen cars. "Soon, we will have more than 10 million vehicles covered - that's one Terabyte of data volume a day."

Although better known for its PC processors, Intel has been aggressively ramping up its server business. In 2011, for example, revenue from Intel's Data Center Group climbed 17% year-over-year, surpassing $10 billion for the first time. Bryant said that Intel wants to double this figure by 2015.

The no. 1 chip maker, which competes with AMD ( AMD) in the PC market, and the popular Qualcomm ( QCOM) in smartphones, has certainly been reaping the benefits of an improved IT spending climate.

Intel beat Wall Street's earnings and profit forecast in its recent fiscal fourth-quarter results, boosted by hardware and software spending and growing demand in emerging markets.

The Santa Clara, Calif.-based company, however, has hardly been Silicon Valley's most dynamic stock during the last few years, although Intel shares have climbed almost 10% in 2012.

Thanks to its healthy dividend strategy, strong cash flow, and significant market opportunity, perceptions of Intel are starting to change.

By tapping the booming cloud computing market, the Dow component could significantly expand its enterprise presence.

There are myriad types of cloud technology available for enterprises and service providers. These include "public" clouds, where customers access services like storage and server power from third-party companies, as well as "private" clouds, which are run at customers' own sites. Private clouds could be used, for example, to provide company-wide marketing or HR services across multiple locations.

Tech research firm IDC estimates that revenue from public IT cloud services alone exceeded $21.5 billion in 2010 and will reach $72.9 billion in 2015, growing four times faster than the IT market as a whole.

Speaking during Tuesday's Intel event, Bryant said that servers built from E5 chips could feature in any type of data center, from public cloud facilities, to enterprise and telecom sites and supercomputing centers. "We're already in 10 of the Top 500 supercomputers with the E5 ," she said.

Intel shares crept up 6 cents, or 0.24%, to close at $26.60 on Tuesday.

-- Written by James Rogers in New York.

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