The WSJ highlighted some gloomy numbers from Intel’s Data Center Group recently “Intel’s Data-Center Revenue Disappoints” 01/14/16 And the WSJ is right, Intel DCG’s results were disappointing relative to analysts’ expectations, but it didn’t really pick up on what the potential implications are for other players in enterprise IT. What’s interesting is when you view Intel DCG as the bellwether for enterprise IT. After all it is at the core of the data center and everything needs compute. And being a quasi-monopoly it is the most unfiltered view that we can get of compute in the enterprise. Well, unfiltered by not having little complications like changes in market-share to distort that view. So if we think of viewing other IT vendors’ enterprise performance through the lens of how they grew their product revenue relative to Intel DCG then everything becomes a little clearer and easier to understand. Here’s what it looks like:
So this includes HP ESSN (products only remember), Cisco Products, IBM Total Systems and Dell Enterprise. Well, whenever Dell Enterprise reported its numbers publicly that is. Viewed historically, Intel DCG reported its lowest year-over-rear revenue growth for 11 quarters. What’s also clear is that in most quarters, Intel’s DCG out-grew most other major IT vendors most of the time. In fact in 17 of the 25 quarters shown in the chart, Intel’s DCG had the highest growth-rate. Takeaways are:
- Intel DCG’s growth tends to be the upper limit of enterprise vendors’ product revenue growth which also means that whenever Intel DCG has a bad time, pretty much everyone has a bad time
- If a business did out-grow Intel DCG, it was doing exceptionally well
- Intel reporting cycle is ahead of the others and as such is also an early indicator – and in this case a possible early indicator of poor enterprise results.
HP ESSN outgrew Intel DCG for one quarter in 2010, as did IBM’s Data Center Group – the DC5 of IT, yes, they really are glad it’s all over – in 2011. But that was pretty much a swan-song for IBM … and arguably Hewlett-Packard Company.
Dell Enterprise managed to out-grow Intel DCG for 5 out of 6 quarters from 2012-13. This is noteworthy because no-one else has ever outgrown Intel DCG over such as sustained period in recent history.
Here you can see the sort of grief that Cisco was going through ….. with growth rates <5% from 2011 to nearly the end of 2014 with Intel DCG out-growing them by more than 1500 bps for 5 straight quarters in 2014-15.
Reminder: revenue growth is only worthwhile if it contains calories and there a lot of segments with few or no calories. But these are relatively clean, comparable numbers that come straight from companies’ 10-Q’s.
So the big questions are can anyone buck Intel DCG’s downward revenue growth trend? Indeed, can Intel DCG buck Intel DCG’s trend? And no, that’s not a typo.
