Weaker Server demand forecasted

Industry analysts, such as Ticonderoga Securities and Mercury Research, are expecting server demand to weaken in the next six months. While Dell and H-P had strong performance in the first half of 2010, most analysts attributed this to pent-up demand as firms delayed purchases during the recession. (source: ComputerWorld) Now that those lifecycle replacements have been completed, it makes sense that the market will soften.

My expectation is that we will see a rather pronounced slowdown in server orders, especially in the lines geared to small- to medium-sized businesses. My clients are replacing existing infrastructure but are not significantly adding capacity because they are quite uncertain about what the 2011 economy will look like. They would like to prepare for growth, but they are conserving cash. They are planning, but not buying.

The article cited above references the impact it will have on chip makers, such as Intel and AMD. But I'm also considering how this will affect infrastructure software vendors, as the most prudent operating system strategy ties those license updates to server purchases. I believe this will have a noticeable impact on sales of Windows Server licenses, VMWare licenses, and even business continuity solutions.

Better Laptops are Coming

Last week, Intel announced a new line of processors built for the latest style of portable computer: Ultra Thin Laptops. The idea is to take the form factor of the netbook -- skinny & light -- and imbue it with the power of a modern laptop. The chips are the latest iteration in the ultrathin processor series that AMD pioneered last January. According to Intel, this chips require less power than traditional laptop processors. While they are not to be as powerful as a conventional laptop processor, they are expected to be more robust than their Atom processors, which are the chip of choice for today's netbooks.

This development is going to create competition for ... and the Windows-based answer ... to the Apple iPad. The opportunity, though, is for one of the leading laptop manufacturers to sell a touch-screen ultrathin laptop for under $1,500. I don't know if Dell or Lenovo or HP or Acer can pull that off. But if they can, then such a machine could be a category-killer for the traditional laptop. Most professionals do not need the power and capacity of a desktop replacement laptop. But the netbooks are just a bit underpowered for their needs. This machine would fill that gap. And the touch-screen would satisfy their desire to have a technologically advanced device on their desk.

For more, read ... ComputerWorld: Intel to launch new chips

Big news from Intel

The data center world is headed for major changes. Yesterday, Intel debuted a fully-functional, 48-core chip, which is expected to be 10 to 20 times more powerful than conventional dual- and quad-core chips. What this means is that today's data centers and server rooms, with 5, 10 or even 15 robust servers, can potentially be scaled back to 2 or 3 servers. This has significant implications for space planning, energy costs, and staffing.

While Intel is initially targeting cloud-based applications for this device, one can easily imagine mid-sized firms taking advantage of this technology. The chip is still in the research phase, and Intel has not announced plans for when it will be commercially available. However, they are expected to put 6-core and 8-core processors on the market early next year and important design elements of 48-core superchip will be integrated into Intel's products during 2010, as well. By early 2011, we will be seeing the 6-core chip finding their way into high-end workstations, which will have implications for capital expenditure strategies during that time.

Read the article at ComputerWorld:
Intel unveils energy-efficient 48-core chip
By Sharon Gaudin

New SAN technology - faster response time

A new technology is on the horizon that could provide a significant boost to the Storage Area Network (SAN) market. It's called Fibre Channel over Ethernet (FCoE) and it is expected to hit the streets later this year. All of the major players are developing the necessary infrastructure, including chipsets, network adapters and switches capable of handling 10 gigabits per second of data transfer.

According to an article published today at InformationWeek, Cisco has developed 10-Gpbs capable switches in 20- and 40-port models, and is expanding the product line with chassis/blade versions for delivery later in 2009. Intel, Emulex and QLogic are already shipping 10-Gpbs network interface cards designed to work with these Cisco devices. And other manufacturers are building new lines of products to support these developments.

The significance of this is found in the way today's businesses are exploiting their data. Contemporary business applications, both internal and customer-facing, require rapid access to ever-increasing amounts of data. Think about the predictive modeling that goes into Amazon's "recommendations" and expand it exponentially. That kind of analytical power will create unacceptable response times using conventional data access technology. It's why fiber channel SAN devices were originally developed. By enhancing the capability of Ethernet to transport data more speedily from the SAN to the application server (that's doing all the work), we can make more sophisticated analysis available to all types of users. This will improve decision-making, enhance customer experiences, and make SAN technology more flexible and adaptable to changing business requirements.

InformationWeek Reports: Tech Strategy (Link requires registration)

Intel makes a $7 Billion Bet

Earlier today, Intel announced a two-year plan to expand existing factories in New Mexico, Arizona, and Oregon to manufacture silicon wafers with 32nm process technology. This announcement, coming during these economic times, is certainly not trivial... and it is some welcome news on a day when the markets are reacting with disapproval to Pres. Obama's Monday night press conference and Treasure Secretary's Geithner's bank rescue plan. As of this writing (12:40pm EST), Intel's share price was still struggling (down a little over 3½%).

Nevertheless, I see this as boding well for Intel's future. AMD is having trouble keeping pace in terms of price & performance. Microsoft is pushing hard to get Vista in their rear-view mirror, and the release Windows 7 will likely inspire consumers to replace their now-aging XP machines. Plus, the claim of 7,000 new jobs in those three states will help to put the negative vibes of the Irish plant closings behind them. Expect Intel to reestablish themselves as the king of the chip mountain inside of 15 months.

Read Intel's Press Release: Intel To Invest $7 Bln. In US Manufacturing Facilities
Intel Corporation: INTC (NASDAQ)
Microsoft Corporation: MSFT (NASDAQ)

Intel shifts chip design direction

Moore's Law asserted that processing speed would double every 18 months. It was really more of a promise than a prediction, and for several decades, the technology industry delivered on that promise. That may be changing.

At the upcoming annual International Solid-State Circuits Conference, which starts Sunday in San Francisco, Intel is presenting research findings that could completely change the direction of chip design for the next 20-30 years. Instead of focusing on raw speed ... a focus that has given mankind affordable multi-gigahertz personal computers ... the company is moving towards something they call a "System on a Chip" or SOC. This will result in chips that can completely different tasks, such as core processing and radio transmission. Such a chip could enable over-the-air connectivity at speeds that rival (and maybe even surpass) the highest speed tethered connections. Some are predicting transfer rates as high as 5gb per second, which would make today's 3g and tomorrow's 4g networks feel like the old-time dialup 1400 baud modems.

This is garnering a lot of attention from industry insiders, even if the average consumer could care less about it. I suspect this development will turn out to be a game-changer in favor of Intel, and AMD better catch up quickly. And the wireless carriers had better pay close attention, too.

Read more from other bloggers:
Wall Street Journal: Digits
C-Net: Nanotech - the circuits blog

Some big names won't be around in 2010

A recent survey by CIO Insight identified twelve companies that will either fold or be acquired in 2009. 200 participants were asked to indicate which companies, out of a choice of more than 20, would encounter one of those fates this year. The results are in the graph below.


A few surprises for me.

• Salesforce.com - It's hard for me to imagine that 19% of respondents picked them to go away this year. Their growth has been fairly steady, and at times spectacular. And I don't see Oracle or Microsoft wanting to pick acquire a product that competes with their in-house apps. Their alliance with Google bears watching, though.
• AMD - As far I can tell, there is no other viable competitor to Intel. And the market is too big for just one player.
• CA - This company, formerly known as Computer Associates, isn't going anywhere. Their strategy has been growth through acquisition for nearly two decades, and that kind of culture makes them a very unlikely target.

The other big names on the list are, in my opinion, very much in play for this year. Few will go out of business, but at least one or two will end up in a deal. From this list, I'd expect Citrix, Juniper and Checkpoint to be the most likely acquisition targets. Novell is part of Microsoft's Linux Defense strategy, but it provides no other real benefit to society. Expect that product to be even less relevant a year from now.

CIO Insight survey results: Dire Predictions
Survey Methodology: How the survey was conducted

Is Intel cutting prices?

Last week, Barron's reported that Intel is planning significant price cuts across multiple chip lines in the coming months. The new pricing is expected to affect their quad-core and double-core server chips, including the Xeon line. The impact could be as much as a 40% for some models.

Barron's source is an industry analyst named Michael McConnell, and I haven't seen any confirmation or denial from Intel. So it will be interesting to see how this plays out over the coming months. AMD is increasingly aggressive in the server market, which I believe to be the big growth industry for the next 5-10 years.

Tech Trader Daily from Barron's - Intel reportedly cutting prices
Intel Corporation: INTC (NASDAQ)
Advanced Micro Devices, Inc.: AMD (NYSE)

USB finally gets an upgrade

At last week's Consumer Electronics Show (CES) in Las Vegas, Intel debuted the next version of USB. USB 2.0 was introduced in April 2000, and since then, thousands of devices have used the protocol to established wired connectivity. Everything from cameras to PDAs to external storage devices are dependent on the USB 2.0 standard.

USB 3.0, however, promises much better performance. The theoretical limit for data transfer over USB 2.0 connection is 480Mbps. Intel claims that USB 3.0 will move data at an astounding 5Gbps ... or a more than fivefold increase. Other standards have emerged since USB 2.0, like eSata and Firewire. Both are far superior to USB 2.0, running at 3Gbps (eSata) and 800Mbps (Firewire - full duplex). Yet neither will be able to measure to USB 3.0.

The technology is to be production ready by early 2010, however don't expect to see widespread use until 2011 or 2012. The devices that use the protocol will have to adapt, and PC components will need to be developed. There are physical differences in the connection points, and device drivers need to be created and tested.

So there is a lot to do before the bulk of the consumer market can take advantage of this advance. Yet, it's encouraging that Intel has begun tackling this challenge. Portable devices are able to store huge amounts of data, and USB is still the practical way of putting it there. Yet, lots of data means lots of time spent waiting for the files to transfer. USB 3.0 is an important step in the right direction.

Intel Corporation: INTC
Photo Credit: Reuben Lee/CNET Asia
More Information: Cutting Edge blog post @ CNet

Getting smaller

Intel is celebrating that their "Atom" chip is exceeding their sales targets for the year so far. They are designed for mobile devices, internet appliances and really small form-factor machines. And they are priced for the current market conditions.

All this suggests that mobility is going to drive more application demand in the next 12-24 months. Application development teams should begin building their skill sets for these kinds of solutions. And IT leaders should anticipate that executives will want to have more and more functionality available regardless of location. Granted, this is only one device in a large marketplace, but I believe that it is a harbinger of the next era in ubiquitous computer use.

Read the article on InformationWeek: Intel reports Atom Chip results

Intel stays strong

Intel reported a 25% jump in profits. Most of the increase came from global laptop sales, according to a report in this afternoon's WSJ. What will be interesting to see is how much correlation there continues to be with Microsoft. In the past, the two firms rode the same waves together. But as firms hold back on moving to Vista, and begin to explore other alternatives, we may start to see a gradual decoupling.

Intel has taken advantage of more price competition in mobile PC's, along with poor performance by AMD, to make this move. Look for them to build momentum as the year progresses. And remember, no matter what the market looks like, someone is always making money!