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qualcomm ceo steve mollenkopf ces 2017 Ethan Miller/Getty Images
Qualcomm Inc. CEO Steve Mollenkopf speaks at CES 2017 in Las Vegas

Qualcomm Begins Selling Server Chip It Says Beats Intel's

Centriq 2400 does better on energy use, cost, Qualcomm says; step comes as Qualcomm considers a takeover bid by Broadcom

Ian King (Bloomberg) -- Qualcomm Inc., trying to break Intel Corp.’s lucrative stranglehold on server chips, said it began selling a new processor that will outperform its rivals and has support from some of the industry’s biggest buyers of the technology.

The Centriq 2400 processor, which uses ARM Holdings technology, is now on sale, Qualcomm said Wednesday at an event in San Jose, California. The chips, which are manufactured by Samsung Electronics Co., offer better results than an Intel Xeon Platinum 8180 processor, based on energy efficiency and cost, Qualcomm said.

The world’s biggest maker of chips for phones is kicking off the public phase of its attempt to get into new markets just as it has become the target of what would be the largest technology takeover ever. Broadcom Ltd. is offering to buy it for about $105 billion in a proposal that Qualcomm views as a low-ball bid, which may precipitate a lengthy proxy battle demanding attention from the company’s management.

Qualcomm’s server chip push, led by former Intel executive Anand Chandrasekher, is part of Chief Executive Officer Steve Mollenkopf’s attempt to diversify the company’ sources of revenue. He’s also targeting personal computers and is in the middle of trying to close a more than $40 billion acquisition of NXP Semiconductors NV, to kick-start Qualcomm’s move into the growing market for chips used in cars.

For Intel, which has more than 99 percent of the market for chips that run computer servers in data centers, Qualcomm represents the first major effort by a chip designer that uses ARM technology to break into this lucrative market.

“We take all competitors seriously, and while Qualcomm is launching its very first server processor, cloud customers around the world have been rapidly adopting our newest Intel Xeon Scalable processors that deliver outstanding performance on a wide range of workloads,” Intel said in a statement.

Intel shares slid less than 1 percent to $46.64 while Qualcomm rose 1.4 percent to $65.02 at 2:53 p.m. in New York.

While ARM technology is the fundamental basis for phone chips, the designs haven’t been used much in data centers, where Intel’s designs dominate.

“That’s an industry that’s been very slow moving, very complacent on the side that we’re going after,” Paul Jacobs, executive chairman of Qualcomm, said onstage at the event. “We’re going to change that.”

Servers, the machines that crunch data in corporate networks and act as the backbone of the internet, are a much smaller market than phones and personal computers when measured by shipments. But the price that the chipmakers are able to charge for the high-performance parts needed to run them makes the market attractive. Qualcomm’s new Centriq chips will sell for $1,995 each. In its most recent quarter, Intel’s data center group turned $4.9 billion of revenue into $2.26 billion of operating profit.

Companies whose business depend on large data centers, such as Alphabet Inc.’s Google, Facebook Inc., Microsoft Corp. and their Chinese rivals, determine which component suppliers are successful. Their orders now make up more than half the market as corporations outsource their computing over the internet to services provided by Inc.’s Amazon Web Services and its rivals.

“We welcome choice in the processor design space for data centers,” said Bart Sano, vice president, platforms, Google, in a statement provided by Qualcomm. “Choice leads to innovation which ultimately benefits our users.’’

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