Credit: Intel's networking efforts are paying off. Image source: Intel's February 2017 investor meeting presentation.Microprocessor giant Intel (NASDAQ: INTC) is aggressively going after the market for network infrastructure silicon, one that the company says was worth $18.6 billion in 2016 and is going to grow to $19.3 billion in 2017.
For years, Intel has been providing investors with annual updates on the company's progress in capturing its piece of the networking-chip pie. At its Feb. 9 investor meeting, data-center-group (DCG) chief Diane Bryant disclosed that it has now become the largest vendor of network silicon and offered some additional insights into this business.
Intel's networking efforts are paying off. Image source: Intel's February 2017 investor meeting presentation.
"The lion's share of that network revenue comes from Xeon," Bryant said. She then went on to point out that the company's Xeon average selling prices within networking have been on the rise -- up 18% in 2016 over 2015 -- which has helped to lift the company's overall network average selling prices. "That's because customers are buying up the [product] stack as the network workloads are converging onto Intel," Bryant explained.
She then went on to talk about how the company uses its Atom and Xeon D processor families to go after lower cost/power/performance networking applications.
Average selling prices within this segment dropped steadily from 2013 to 2015 (presumably because Intel didn't update its Atom product family for this market during that time), but saw a bump up in 2016 -- something that Bryant attributed to the introduction of the company's Xeon D processor family (not as high performance as the traditional Xeon E5 chips, but higher performance than the Atom chips).
Investment takeaway
Networking really looks like an interesting opportunity for Intel -- it's a significant business for the company today, and the company seems to be quite good at gaining market segment share here. The market itself is also growing, which certainly helps the story along, though share gain is clearly the main growth driver.
Continued growth and success in the networking silicon market will be important to the DCG story over the long term as the company aims to lessen DCG's dependence on the large, but declining, enterprise-server market.
10 stocks we like better than Intel
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Intel wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of February 6, 2017
Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
