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HP Said to Plan ARM-Based Servers in Challenge to Intel

(Bloomberg) — Hewlett-Packard Co., the largest computer maker, is planning to sell servers based on ARM Holdings Plc technology, two people familiar with the matter said, posing a challenge to Intel Corp.’s dominance.

Hewlett-Packard is working on the chips with Austin, Texas- based Calxeda Inc., a company partly owned by U.K.-based ARM, said the people, who declined to be identified because the plans haven’t yet been made public.

The move would escalate ARM’s rivalry with Intel, which accounts for about 90 percent of the processors used in servers, the powerful machines that run websites and corporate networks. ARM aims to enter the $9 billion server-processor market by building chips that will help companies rein in the cost of maintaining expanding fleets of servers.

“One of the biggest issues today in the server farms is power management,” ARM Vice President Michael Inglis said in an interview last week. He said his company doesn’t comment on agreements before they’re officially announced.

Laura Beck, a spokeswoman for Calxeda, also declined to comment on a possible accord with Hewlett-Packard. Calxeda has a product release event scheduled for Nov. 1, she said, without providing details. Michael Thacker, a spokesman for Palo Alto, California-based Hewlett-Packard, declined to comment.

Calxeda designs chips based on technology more commonly used in mobile phones to create processors for cheaper servers that consume less electricity. Such machinery is increasingly being used in so-called cloud computing centers, which provide access to software and computing tasks remotely, over the Internet, rather than through companies’ own systems.

ARM Encroaches

Though he declined to discuss specific customers, Inglis said ARM-based chips will appear first in machines that are used to support basic access to websites, then graduate into more powerful systems.

“As we move forward into 2014 you’ll begin to see systems emerging,” he said.

Intel, based in Santa Clara, California, is already playing catch-up with ARM in the swiftly expanding market for smartphones. ARM’s technology is the most widely used in mobile phone processors. Intel has said its chips will begin appearing in handset models next year.

ARM is putting pressure on Intel in other areas. Chipmakers such as Qualcomm Inc. and Nvidia Corp. are working on ARM technology-based chips that they say will appear in more tablets and laptop-like devices.

Relying on Servers

Intel has come to rely on its server chip business more for growth and profitability as PCs face competition from tablets and phones. Intel’s Data Center group grew 35 percent last year, compared with a 21 percent gain by the division that provides chips for PCs.

The market for server processors will be about $9 billion this year, according to IDC, a Framingham, Massachusetts-based researcher.

ARM’s stock has surged 39 percent this year, and the company reported profit more than doubled in the third quarter as sales jumped 22 percent.

Hewlett-Packard, the top maker of personal computers, is also Intel’s biggest customer, accounting for about 19 percent of its revenue, according to Bloomberg data.

Hewlett-Packard shares fell 3.7 percent to $25.05 yesterday in New York. Intel rose less than 1 percent to $24.63. ARM rose 2.5 percent to 590 pence at the close of trading in London.

King is a reporter for Bloomberg News in San Francisco.
Ricadela is a reporter for Bloomberg News and Bloomberg Businessweek in Frankfurt.

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