This seems a bit short sighted on Qualcomm's part. With their CDMA patent licensing it it's sunset years, they need a higher margin part going forward.
An activist investor that is forcing Qualcomm to sacrifice long term planning for short term stock gain. When they get involved companies do stuff like Qualcomm is doing, abandon long term efforts for short term gain.
Unlike other technology stocks, Qualcomm has about the same share price as it had before the 2008 stock market crash. Intel is more than double, Microsoft is up 3 times. Texas Instruments is up 3 times. Even Cisco is up 50%. And forget about stocks like Apple, Amazon, or NVIDIA. So where's this long term gain you are talking about? For how long are investors supposed to be patient before they demand changes?
To be clear, data center is far outside Qualcomm's core competency. They are trying to break into a market that doesn't really exist that has little synergy with the rest of their business. The only reason one would say they have an advantage there over others is their size and cash reserves. In actuality, Marvell probably has the advantage. Calls for fiscal responsibility in strategic initiatives are, over the long term, what stops companies from being massively inefficient sinks. It doesn't have to be a situation of the company going under, just a matter of return on capital. The activist investors you are talking about own a significant part of the company. They are expecting a return on that significant investment, else they would be invested in something else. If they see a way for value to be created they might try to initiate it rather than pull out and invest their money elsewhere.
Their entire business is dependent on smartphone sales. Even a single client (of about 6 total) abandoning their CPU's could cost them 30% of their business. Spending a bit of their revenue to expand beyond a constrained and not growing market segment should be the priority.
Consider for a moment if they could take even 5% of the server market they'd probably quadruple their revenue. Instead the activist investor has forced them to sacrifice long term planning and focus exclusively on short term profits. When the inevitable crash comes to the smartphone market (either in the form of a new competitor or other), Qualcomm will be crushed because their entire company is based on a single market. Anyone investing long term shouldn't have this stock at all because of this shift.
"Their entire business is dependent on smartphone sales."
What do you mean by that?
"Consider for a moment if they could take even 5% of the server market they'd probably quadruple their revenue."
I think you underestimate the size of Qualcomm or overestimate the size of server revenue. Qualcomm had revenues of $22.3 billion last year. Server revenue was less than $80 billion, I believe. Note, this was all server revenue, not just server processors, and it includes IBM's mainframe business. Intel's data center revenue was less than $20 B in 2017, and that includes server revenue they get from chipsets, motherboards, and Omnipath (networking) sales. They have 95% of the market. If Qualcomm captured 5% of that, an ambitious goal, they'd get $1 B in revenue, which would boost their revenue by less than a paltry 5%. A big difference from quadrupling it.
You also can't expect Qualcomm to operate with the fat margins that Intel gets from its data center business. The market conditions for the two companies would be very different because of the difference in scale, the entrenched platform Intel has, and probably the greater synergy between the design of Intel's desktop processors and their server processors compared to the design of Qualcomm's server SOCs and their smartphone SOCs. Note that Qualcomm has been using ARM cores in their smartphones.
You are right that the server market is a place of good growth, but that doesn't mean that Qualcomm is the best company to go after it. As far as the smartphone market, one can expect growth to slow, possibly even stagnate, but what do you foresee that will cause a "crash"? 5G will only increase the utility of smart phones. And Qualcomm is more than just smart phones. They have a strong 5G patent portfolio. They will make money from 5G through more than just smart phones, such as internet of things and automotive.
I don't think Qualcomm is currently a good investment. Their licensing deals are likely to change, negatively affecting their revenue. But I don't think that trying to fight Intel in server CPUs is the wisest use of their capital. It would make the investment even worse. They just aren't the right company for it.
"Their entire business is dependent on smartphone sales."
What do you mean by that?
---- Edit: Ignore that part. I misread what you wrote. I read it as the entire server market is dependent on smartphone sales. Qualcomm is heavily dependent on smartphone sales. They should diversify, yes. Some diversification will happen organically with 5G, as mobile technologies will become important for more than just smart phones. But they should choose wisely where they diversify.
If you read Cloudflare's report testing engineering samples of this hardware, as linked to in TFA, you'll see that it acquits itself quite well on the performance per watt and bang for the buck metrics.
The same CloudFlare that is monetarily affiliated with Qualcomm and the only one allowed to post results of the Qualcomm chips? Hmm. Not suspect at all :P
It's not about the CPU anymore anyway. In terms of dollars, Intel already lost a large chunk of the server market to Nvidia, FPAGs, Google's TPU while in terms of compute, they lost absolutely massive share. They are trying to catch up and plug the hole but that's gonna be easy. ARM has said for some years that they are targeting 7nm so you should see sampling next year and deployments in 2020 but what they need to do is to commoditize the CPU and focus on accelerators.
Cavium (perhaps to be rolled into Marvell) is an obvious candidate... As far as I can tell Centriq is a better product than ThunderX 2 (certainly lower power), but ThunderX 2 seems to have a much better PR team. Cavium/Marvell may well pick up what's useful from QC.
Next we have Ampere. God knows what their business plan is exactly, but they're supposed to be in this space.
Then we have Fujitsu. They're more targeting HPC, but what they produce may be valuable for some segments of "server".
Then there are various Chinese companies, of which Phytium has the most western visibility. These may be a slow burn, but there are clear political reasons why they would have more or less endless support from the Chinese government, and I think you'd have to be crazy racist or nationalist to believe that China will never be able to create competitive cores.
Beyond these there are a variety of possible dark horses. What about Oracle buying QC's assets, working with Fujitsu, or otherwise switching to an ARM core? I suspect very little of the delivered value of their HW is the SPARC ISA; it's mostly in the high throughput engine (ie lots of "smallish" cores) and the DB-specific accelerators.
What about Amazon (remember Annapurna...) moving up from their current IoT focus to warehouse specific cores? They're in the same sort of position as Cloudflare, and the same sort of concerns.
What about Apple creating their own data warehouse core and then selling it (or simply selling services that run on it, ala AWS/Azure)?
People have so little imagination, so much certainty that the patterns of today will be the patterns of ten years from now. Ask Blackberry or MS about that. When exactly was it the iPhone came out again --- a thousand years ago, was it? When did AI start becoming a huge thing?
Why do you think Centriq is better than Thunder X2? For this sort of thing one needs real world benchmarks. The benchmarks will be different for different real world uses, so to evaluate the size of the market that each processor it competitive with Intel would take a bit of time. Also, Marvell (their buyout of Cavium should close soon) has two different Thunder X2s. The one that has been released is a derivative of Broadcom's Vulcan project. Cavium's internally developed SOC is upcoming and I think will focus on a similar market to Centriq, so you can probably expect it to use less power, as the Centriq does.
As far as Ampere, I'd just forget about them until you actually hear some real product being released.
Regarding Cavium's advantage, it's more than just PR. Cavium, and Marvell, have existing data center expertise and channels.
I don't know if Marvell would buy Centriq as they already have two different teams to integrate and two different server SoC lineages. I have no idea who would buy it. Who wants to compete with Intel in server CPUs by trying to break into a market (ARM servers) that doesn't really exist at the moment? The company I can think of that is in the best position to do it, NVIDIA, doesn't seem interested. Certainly someone will buy it, though, even if it's a venture capitalist as with the X-Gene line. I just don't think there's going to be a bidding war for it.
The rumors about Qualcomm giving up on server ... first you spend money, then you give up before even trying. That's what Intel does with every new market and Qualcomm might want to avoid that disease.
At its core, what you need is high perf density and high perf density comes at high efficiency so find radical solutions for glasses and IoT and apply some of them to server. Intel can't afford to disrupt a market it owns, outsiders can and should even if the software side is a huge barrier.
It costs a lot less money to do research and development than it does to actually put something into production, especially considering that the results of R&D can probably be sold off to recuperate some of the losses. Production losses are irretrievable. Also, I'm guessing Intel incurred more losses going into marketing and production with their smartphone SoCs than Qualcomm has with their ARM servers.
proof, once again, that there just aren't all that many embarrassingly parallel user space problems. the ARM approach needs a new OS. who will do that?
This is not a TECHNOLOGY story, about Centriq being a bad or unneeded product. It is a BUSINESS story about QC, after years of mismanagement, trying desperately to hit certain financial numbers so that the current management team get to stay in place (and continue their reign of destruction...)
The analogy (though with different details) would be to something like Jobs cancelling Newton after he returned as part of the drastic reshaping of the company to keep it alive while he planned its resurrection. This was not exactly a vote that handheld mobile devices were a bad idea (he then gave us the iPod, followed up of course by iPhone); it was more that at that exact point in Apple history they were a distraction. And, as far as technology goes, rather than Apple's business details, Newton was on the right side of history; Palm Pilot and Treos, various CE devices, Blackberry... It took some floundering, but the prophets of that technology WERE correct in the big picture.
Which of these viewpoints matters to you depends on whether your concern is playing the stock market with a short term horizon, or considering the grand flow of tech.
This is bad news. Not only Qualcomm wasted all their R&D and their steps into the server market when Intel is weak against Epyc. The Centriq was a bold step ahead. EETimes noted it wouldn't be the case when Broadcom bought them or their agenda.
Seems like the investor pressure ramped up very high or the going private by Jacobs shook up the BOD. Too bad they had moved so much of the core design team to Centriq from Snapdragon and now this.
Intel is an idiot when they were doing SoC they only had 2-3 companies Asus and Dell. Asus Zenfone 2 CPU perf was great at SD 805 but the PowerVR sucked. Instead of development of that they abandoned, add in the zero documentation unlike Qualcomm CAF.
Seems like every company is now focusing on the short term stock gains like Apple. Zero substance. Unfortunate.
Hopefully they at least come up with an 85x SD like 82x fill custom Arch unlike the ARM derivatives we have now.
Not good news. ARM on datacenter is a new market so it makes sense to stick with it for a few years while the hardware, software and user demand converge. I guess this means CloudFlare's interest means nothing and they'll go back to using Intel. Now Qualcomm has only the smartphone industry to rely on whereas competitor NVIDIA diversified into automotive computing and HPC.
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BillBear - Monday, May 14, 2018 - link
This seems a bit short sighted on Qualcomm's part. With their CDMA patent licensing it it's sunset years, they need a higher margin part going forward.rahvin - Monday, May 14, 2018 - link
An activist investor that is forcing Qualcomm to sacrifice long term planning for short term stock gain. When they get involved companies do stuff like Qualcomm is doing, abandon long term efforts for short term gain.Yojimbo - Tuesday, May 15, 2018 - link
Unlike other technology stocks, Qualcomm has about the same share price as it had before the 2008 stock market crash. Intel is more than double, Microsoft is up 3 times. Texas Instruments is up 3 times. Even Cisco is up 50%. And forget about stocks like Apple, Amazon, or NVIDIA. So where's this long term gain you are talking about? For how long are investors supposed to be patient before they demand changes?Yojimbo - Tuesday, May 15, 2018 - link
To be clear, data center is far outside Qualcomm's core competency. They are trying to break into a market that doesn't really exist that has little synergy with the rest of their business. The only reason one would say they have an advantage there over others is their size and cash reserves. In actuality, Marvell probably has the advantage. Calls for fiscal responsibility in strategic initiatives are, over the long term, what stops companies from being massively inefficient sinks. It doesn't have to be a situation of the company going under, just a matter of return on capital. The activist investors you are talking about own a significant part of the company. They are expecting a return on that significant investment, else they would be invested in something else. If they see a way for value to be created they might try to initiate it rather than pull out and invest their money elsewhere.rahvin - Tuesday, May 15, 2018 - link
Their entire business is dependent on smartphone sales. Even a single client (of about 6 total) abandoning their CPU's could cost them 30% of their business. Spending a bit of their revenue to expand beyond a constrained and not growing market segment should be the priority.Consider for a moment if they could take even 5% of the server market they'd probably quadruple their revenue. Instead the activist investor has forced them to sacrifice long term planning and focus exclusively on short term profits. When the inevitable crash comes to the smartphone market (either in the form of a new competitor or other), Qualcomm will be crushed because their entire company is based on a single market. Anyone investing long term shouldn't have this stock at all because of this shift.
Yojimbo - Thursday, May 17, 2018 - link
"Their entire business is dependent on smartphone sales."What do you mean by that?
"Consider for a moment if they could take even 5% of the server market they'd probably quadruple their revenue."
I think you underestimate the size of Qualcomm or overestimate the size of server revenue. Qualcomm had revenues of $22.3 billion last year. Server revenue was less than $80 billion, I believe. Note, this was all server revenue, not just server processors, and it includes IBM's mainframe business. Intel's data center revenue was less than $20 B in 2017, and that includes server revenue they get from chipsets, motherboards, and Omnipath (networking) sales. They have 95% of the market. If Qualcomm captured 5% of that, an ambitious goal, they'd get $1 B in revenue, which would boost their revenue by less than a paltry 5%. A big difference from quadrupling it.
You also can't expect Qualcomm to operate with the fat margins that Intel gets from its data center business. The market conditions for the two companies would be very different because of the difference in scale, the entrenched platform Intel has, and probably the greater synergy between the design of Intel's desktop processors and their server processors compared to the design of Qualcomm's server SOCs and their smartphone SOCs. Note that Qualcomm has been using ARM cores in their smartphones.
You are right that the server market is a place of good growth, but that doesn't mean that Qualcomm is the best company to go after it. As far as the smartphone market, one can expect growth to slow, possibly even stagnate, but what do you foresee that will cause a "crash"? 5G will only increase the utility of smart phones. And Qualcomm is more than just smart phones. They have a strong 5G patent portfolio. They will make money from 5G through more than just smart phones, such as internet of things and automotive.
I don't think Qualcomm is currently a good investment. Their licensing deals are likely to change, negatively affecting their revenue. But I don't think that trying to fight Intel in server CPUs is the wisest use of their capital. It would make the investment even worse. They just aren't the right company for it.
Yojimbo - Thursday, May 17, 2018 - link
"Their entire business is dependent on smartphone sales."What do you mean by that?
----
Edit: Ignore that part. I misread what you wrote. I read it as the entire server market is dependent on smartphone sales. Qualcomm is heavily dependent on smartphone sales. They should diversify, yes. Some diversification will happen organically with 5G, as mobile technologies will become important for more than just smart phones. But they should choose wisely where they diversify.
The_Assimilator - Monday, May 14, 2018 - link
Still waiting for those super awesome ARM server CPUs that are going to totally eat x86's lunch and completely disrupt the market in months.Have a feeling I'm still gonna be waiting a while.
BillBear - Monday, May 14, 2018 - link
If you read Cloudflare's report testing engineering samples of this hardware, as linked to in TFA, you'll see that it acquits itself quite well on the performance per watt and bang for the buck metrics.Dayman1225 - Monday, May 14, 2018 - link
The same CloudFlare that is monetarily affiliated with Qualcomm and the only one allowed to post results of the Qualcomm chips? Hmm. Not suspect at all :PElstar - Monday, May 14, 2018 - link
ARM servers don't have to be great at everything, they just need to be good enough most of the time to be competitive.jjj - Monday, May 14, 2018 - link
It's not about the CPU anymore anyway. In terms of dollars, Intel already lost a large chunk of the server market to Nvidia, FPAGs, Google's TPU while in terms of compute, they lost absolutely massive share. They are trying to catch up and plug the hole but that's gonna be easy.ARM has said for some years that they are targeting 7nm so you should see sampling next year and deployments in 2020 but what they need to do is to commoditize the CPU and focus on accelerators.
sseemaku - Monday, May 14, 2018 - link
But who will make the actual server cpu product? At this point, seems like everyone has given up!name99 - Tuesday, May 15, 2018 - link
Cavium (perhaps to be rolled into Marvell) is an obvious candidate... As far as I can tell Centriq is a better product than ThunderX 2 (certainly lower power), but ThunderX 2 seems to have a much better PR team. Cavium/Marvell may well pick up what's useful from QC.Next we have Ampere. God knows what their business plan is exactly, but they're supposed to be in this space.
Then we have Fujitsu. They're more targeting HPC, but what they produce may be valuable for some segments of "server".
Then there are various Chinese companies, of which Phytium has the most western visibility. These may be a slow burn, but there are clear political reasons why they would have more or less endless support from the Chinese government, and I think you'd have to be crazy racist or nationalist to believe that China will never be able to create competitive cores.
Beyond these there are a variety of possible dark horses.
What about Oracle buying QC's assets, working with Fujitsu, or otherwise switching to an ARM core? I suspect very little of the delivered value of their HW is the SPARC ISA; it's mostly in the high throughput engine (ie lots of "smallish" cores) and the DB-specific accelerators.
What about Amazon (remember Annapurna...) moving up from their current IoT focus to warehouse specific cores? They're in the same sort of position as Cloudflare, and the same sort of concerns.
What about Apple creating their own data warehouse core and then selling it (or simply selling services that run on it, ala AWS/Azure)?
People have so little imagination, so much certainty that the patterns of today will be the patterns of ten years from now. Ask Blackberry or MS about that. When exactly was it the iPhone came out again --- a thousand years ago, was it? When did AI start becoming a huge thing?
Yojimbo - Thursday, May 17, 2018 - link
Why do you think Centriq is better than Thunder X2? For this sort of thing one needs real world benchmarks. The benchmarks will be different for different real world uses, so to evaluate the size of the market that each processor it competitive with Intel would take a bit of time. Also, Marvell (their buyout of Cavium should close soon) has two different Thunder X2s. The one that has been released is a derivative of Broadcom's Vulcan project. Cavium's internally developed SOC is upcoming and I think will focus on a similar market to Centriq, so you can probably expect it to use less power, as the Centriq does.As far as Ampere, I'd just forget about them until you actually hear some real product being released.
Regarding Cavium's advantage, it's more than just PR. Cavium, and Marvell, have existing data center expertise and channels.
I don't know if Marvell would buy Centriq as they already have two different teams to integrate and two different server SoC lineages. I have no idea who would buy it. Who wants to compete with Intel in server CPUs by trying to break into a market (ARM servers) that doesn't really exist at the moment? The company I can think of that is in the best position to do it, NVIDIA, doesn't seem interested. Certainly someone will buy it, though, even if it's a venture capitalist as with the X-Gene line. I just don't think there's going to be a bidding war for it.
jjj - Monday, May 14, 2018 - link
The rumors about Qualcomm giving up on server ... first you spend money, then you give up before even trying. That's what Intel does with every new market and Qualcomm might want to avoid that disease.At its core, what you need is high perf density and high perf density comes at high efficiency
so find radical solutions for glasses and IoT and apply some of them to server.
Intel can't afford to disrupt a market it owns, outsiders can and should even if the software side is a huge barrier.
Yojimbo - Tuesday, May 15, 2018 - link
It costs a lot less money to do research and development than it does to actually put something into production, especially considering that the results of R&D can probably be sold off to recuperate some of the losses. Production losses are irretrievable. Also, I'm guessing Intel incurred more losses going into marketing and production with their smartphone SoCs than Qualcomm has with their ARM servers.FunBunny2 - Monday, May 14, 2018 - link
proof, once again, that there just aren't all that many embarrassingly parallel user space problems. the ARM approach needs a new OS. who will do that?name99 - Tuesday, May 15, 2018 - link
You're missing the point.This is not a TECHNOLOGY story, about Centriq being a bad or unneeded product.
It is a BUSINESS story about QC, after years of mismanagement, trying desperately to hit certain financial numbers so that the current management team get to stay in place (and continue their reign of destruction...)
The analogy (though with different details) would be to something like Jobs cancelling Newton after he returned as part of the drastic reshaping of the company to keep it alive while he planned its resurrection.
This was not exactly a vote that handheld mobile devices were a bad idea (he then gave us the iPod, followed up of course by iPhone); it was more that at that exact point in Apple history they were a distraction. And, as far as technology goes, rather than Apple's business details, Newton was on the right side of history; Palm Pilot and Treos, various CE devices, Blackberry... It took some floundering, but the prophets of that technology WERE correct in the big picture.
Which of these viewpoints matters to you depends on whether your concern is playing the stock market with a short term horizon, or considering the grand flow of tech.
Yojimbo - Tuesday, May 15, 2018 - link
Seems he reached his limit.Quantumz0d - Tuesday, May 15, 2018 - link
This is bad news. Not only Qualcomm wasted all their R&D and their steps into the server market when Intel is weak against Epyc. The Centriq was a bold step ahead. EETimes noted it wouldn't be the case when Broadcom bought them or their agenda.Seems like the investor pressure ramped up very high or the going private by Jacobs shook up the BOD. Too bad they had moved so much of the core design team to Centriq from Snapdragon and now this.
Intel is an idiot when they were doing SoC they only had 2-3 companies Asus and Dell. Asus Zenfone 2 CPU perf was great at SD 805 but the PowerVR sucked. Instead of development of that they abandoned, add in the zero documentation unlike Qualcomm CAF.
Seems like every company is now focusing on the short term stock gains like Apple. Zero substance. Unfortunate.
Hopefully they at least come up with an 85x SD like 82x fill custom Arch unlike the ARM derivatives we have now.
serendip - Wednesday, May 16, 2018 - link
Not good news. ARM on datacenter is a new market so it makes sense to stick with it for a few years while the hardware, software and user demand converge. I guess this means CloudFlare's interest means nothing and they'll go back to using Intel. Now Qualcomm has only the smartphone industry to rely on whereas competitor NVIDIA diversified into automotive computing and HPC.CityBlue - Wednesday, May 16, 2018 - link
"(4)8 core processors are dumb" (c) Anand Chandrasekher 2013.