Intel Not Hit by Hard Drive Supply Issue

Behind the headlines, a story on chipmaker Intel's earnings shows strong sales and demand for the company's data-center servers and the PC client desktop and laptop machines that they serve.

The positive result belies expectations that flooding in Thailand, which hit hard-drive manufacturing, would push down sales. Besides being good news for Intel, the results highlight strong IT demand for computing power and continued growth in virtualization.

Unexpected Good News

As reported by Brooke Crothers at CNET, Intel's revenue grew last quarter. Previously, the company had warned that its sales would probably be hurt by severe floods in Thailand. The floods have disrupted production of hard drives, for which Thailand is a major supply source.

Apparently, the supply shock has been absorbed by drawing down inventories. Thus, it did not affect actual sales of desktop and laptop computers produced by the company's PC Client group. These machines are the mainstay of business computing at small and midsize businesses (SMBs), whether standalone or networked through servers in a data center.

Nor, judging from the robust Data Center Group results, were sales of servers adversely affected. According to Agam Shah at InfoWorld, the Data Center Group was up eight percent last year. Intel's PC Client group, responsible for desktops and laptops, registered even more growth, 17 percent year over year. Obituaries for the PC seem to have been premature.

The CNET report, paraphrasing Intel CEO Paul Otellini, indicated that "server and storage growth in the Data Center Group was strong." Servers and data center storage underlie virtualization, the technology basis for both the public cloud and private clouds.

A Reflection of IT Strength

Intel's better-than-expected performance--especially in its business products--reflects in part broader economic trends. As recovery takes hold, firms that put off replacing older desktop and laptop machines can upgrade.

But the trend also reflects the continued importance of IT for SMBs, as well as movemeward virtualization. Over the last year there was a great deal of hype about the "consumerization of IT."

But mobile consumer gadgets are not up to the task of handling enterprise-strength solutions. Thus we may be starting to see a return to reality among SMBs, as the front office realizes that robust data capabilities require robust IT operations.

It remains to be seen whether disruption of the hard drive supply chain may still lead to some weakness in sales later this year. But even if it does happen, it will be a weakness of supply only. Both servers for data centers and PC clients to be served by them are in growing demand.