Microsoft has witnessed good long term growth in portions of its cloud business, a mix of software and services that cater to the corporations in moving computing functions to remote data centres run by the external providers.
Although the revenue for cloud services business Azure doubled in the previous quarter, the company said that the intelligent cloud department, which includes it saw a revenue growth of just three percent during the period. The operational profits for the division also came down by fourteen percent.
The world’s popular chipmaker, Intel also has an unclear path when it comes to the growth of its cloud operations; this has made the investors sceptical about the future. The share price of the company has dropped down by one percent in the last one year, while Microsoft’s stock increased by thirty percent.
The market capitalisation of Microsoft is approximately around $440 billion, which is close to 3 times that of Intel’s $151 billion. Those computers that run Windows on Intel chips ruled the personal computing age. This is slowly coming to an end as more people are turning to mobile phones for their computing needs and corporations do not prefer desktops these days. Both the companies are run by relatively new CEOs Satya Nadella and Brian Krzanich, and both of them are trying to establish their companies on the cloud.
According to the research firm Gartner, many clients spend a large part of their technology budget on software. The customer base of Intel for data centric chips is consolidating into some big names like Google, Amazon, Microsoft and Facebook.
When enquired about the current situation, an internal source from Intel said that the cloud vendors are pretty harsh when it comes to price negotiations and that they are more powerful than Intel. In the last quarter alone, the average prices of data centre chips dropped by three percent; however, Intel stated that the cheaper chips were attaining ground the fastest.
Intel could suffer a big blow since the big data centre builders like Facebook are designing their own data centre hardware. Intel has so far managed to stay safe; however, one day the customers can extend their cost cutting to chips. During a call last week along with the analysts, Krzanich said that Intel’s top-to-bottom understanding of the cloud-based data centre is needed and also a close watch on the competitors can help Intel stay ahead.