Data Centers Buoy Intel Sales

Intel says that while enterpise server sales may be slowing, sales of processors to data centers are picking up.

Server sales to enterprise companies were stagnant in the fourth quarter of 2006, marking the 10th consecutive quarter of slowing server sales, according to the latest quarterly survey data from IDC. The slowdown is attributed to growing adoption of virtualization technology, which allows companies to get more mileage out of their existing servers.

While enterprise server sales are cooling, the data center market continues to heat up. That's the news from Intel, which says that it's selling plenty of processors to Google, Yahoo, Microsoft and fast-growing Chinese search provider Baidu. Here's what the company tells ZDNet:

Intel is more than making up for slower sales of enterprise servers due to consolidation and virtualization by selling processors, such as the Xeon 5100 (Woodcrest) and 5300 (Clovertown) series, for large-scale datacenters built by leading Internet portals. "In the last three months we have shipped more product into this segment than in the prior year," said Tom Kilroy, vice president and general manager of Intel's Digital Enterprise Group. "It is driving a lot of growth, relieving some of pressure as enterprise consolidate. The Internet more than makes up for it."

Data center service providers have long maintained that virtualization and consolidation will help their business over the long run, as the need for industrial-strength power and cooling leads more companies to shift their equipment from back-office server rooms into hosted data center environments. Intel's update suggests that this forumula has held true for the largest data centers - the massive search engine server farms - but it may take some time to get a better sense of virtualization's long-term impact on colo and managed hosting centers.