Weak server chip shipments on the horizon, analysts say

Computer makers may order fewer chips on weaker server demand

The server market is showing signs of weakening, which could lead to a downturn in server chip shipments, further affecting the revenue of chip makers already hampered by lackluster demand for home PCs, financial analysts said Friday.

"Near term, we believe weak PC trends and server-related customer consolidation could lead to weak server orders because of uncertainty in current server suppliers' existing and future product road maps," said Apurva Patel, a financial analyst at Ticonderoga Securities, in a research note sent on Friday morning.

Top PC and chip makers so far have highlighted weakness in the home PC market, but not the server market. According to IDC, second-quarter server revenue grew at Dell and Hewlett-Packard as customers refreshed IT infrastructures after delaying purchases during the recession.

But expected slow economic growth through the second half of the year could damage server chip shipments and revenue, said Dean McCarron, principal analyst at Mercury Research. Chip makers could be affected by server makers tightening up inventory in anticipation of weak server demand.

"At this point we have no confirmation that server numbers will be off, but it's a reasonable expectation that things will be soft," McCarron said. "If the OEMs tighten inventory, it reduces demand of [chips] from the chip manufacturer," McCarron said.

In response to reduced demand from server makers, chip makers may also try to cut down on inventory, McCarron said.

Intel and AMD have both lowered revenue expectations for the third fiscal quarter on weak PC demand in mature markets. AMD on Thursday lowered its revenue forecast for the third quarter, citing weak demand for laptops in Western Europe and North America. Both companies report their third-quarter earnings in October.

AMD is having trouble selling its 12-core Magny-Cours chip and has failed to make a dent into Intel's offerings, said financial analysts from the FBR Capital Markets in a research note.

"AMD's product offering doesn't seem competitive versus Intel; AMD's Magny-Cours server product is seeing limited upside," the analyst firm wrote.

AMD is due to release new 8- and 16-core chips based on the Bulldozer architecture, which could reach servers early next year. Demand for AMD server chips could see an uptick when chips based on the new architecture ship, analysts said.

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags business issuesAdvanced Micro Deviceshardware systemsComponentsprocessors

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Agam Shah

IDG News Service
Show Comments

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

David Coyle

Brother PocketJet PJ-773 A4 Portable Thermal Printer

I rate the printer as a 5 out of 5 stars as it has been able to fit seamlessly into my busy and mobile lifestyle.

Kurt Hegetschweiler

Brother PocketJet PJ-773 A4 Portable Thermal Printer

It’s perfect for mobile workers. Just take it out — it’s small enough to sit anywhere — turn it on, load a sheet of paper, and start printing.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?