11/03/2017
The End Of Wintel: How The Most Powerful Alliance In Tech History Is Falling Apart
AARON TILLEY, FORBES STAFF
The Microsoft-Intel alliance – the “Wintel” duopoly — defined the PC era. For decades, the two giants worked hand in hand building the software and hardware platforms of personal computing and pushed their technology into virtually every home and business in the developed world and beyond.
But both Microsoft and Intel faltered in the mobile era, and their relationship began to fray. Now a resurgent Microsoft — boosted by a strong cloud business — is busy courting new partners and it’s not afraid to leave Intel behind when it suits its goals.
This week at the Open Compute Summit in Santa Clara, Calif., Microsoft announced dramatic shifts in the technology that will power its sprawling data center infrastructure. The most consequential: a partnership with chipmakers Qualcomm and Cavium to integrate ARM-based processors into its servers. Until now, chips based on Intel’s x86 architecture have been practically the only option available for data centers.
Microsoft said it would incorporate server chips from Qualcomm and Cavium into Project Olympus, the company’s open source hardware design for the data center. Microsoft has tailored a version of its Windows Server operating system to run on the ARM processor. Microsoft is evaluating ARM-based chips to power services like its Bing search engine, and technologies ranging from storage to machine learning and big data.
“This is the final nail in the coffin in the divorce between Microsoft and Intel,” said Tirias Research analyst Paul Teich. “They’ve been trying to separate for years. They have no love for each other. As Microsoft seeks to gain independence from the PC, I think that means independence from Intel.”
The alliance marks one of the most significant commitments from a major data center operator to the ARM-based processor. A long list of companies — including AMD, AppliedMicro, Broadcom, Texas Instruments and the defunct Calxeda – have tried to bring the ARM architecture to the data center world for years, but with little success. Teich anticipates that with Microsoft on board, other data center players — like Amazon and Google — will start making the switch to ARM servers soon.
Microsoft has recently distanced itself from Intel in other areas too, including PCs. In December, Microsoft announced it would work with Qualcomm to make a full-fledged version of Windows 10 for Qualcomm’s upcoming mobile chip, the Snapdragon 835.
But it’s in the booming data center business that the divorce between the two companies is most significant. Even in Intel’s own x86 market, Microsoft appears eager to find new partners. Microsoft announced on Wednesday that it would be one of the first buyers of AMD’s new server chip, Naples, which is supposed to start shipping in the second quarter of this year.
AMD has long been a key rival of Intel but it had faltered of late. Naples is AMD’s first competitive server chip in many years. In some initial benchmark tests, AMD said its chip was two and a half times faster than Intel’s Xeon. AMD promises the chip will be cheaper than Intel too.
If Microsoft is consorting with others, it doesn’t mean it’s filing for divorce from Intel. In a blog post, Microsoft said it’s also collaborating closely with Intel in Project Olympus to incorporate the chipmaker’s upcoming Xeon processors and accelerators. Intel’s data center business also operates at such a massive scale that declines in market share will likely take a while to manifest.
“Intel is an excellent Microsoft partner, and our partnership continues to thrive,” a Microsoft spokesperson sent in response to queries about its future relationship with Intel. “We have a longstanding history together of helping customers of all sizes with their server and cloud computing needs.”
But Microsoft’s new alliances signal a significant shift in the overall market. For years, data center operators lacked much choice in processors. With virtually no competition, Intel’s Xeon server chips rose in price and became the most profitable segment of the company’s business. Intel is now going to have to start competing more on price and technological advancements.
“The days of [Intel] having completely unchecked dominance in the data center appear to be growing more numbered,” wrote Stacy Rasgon, a senior analyst at Bernstein Research, in a recent note.
Bernstein recently downgraded Intel’s stock based on the increased competition in the data center.
“Microsoft has been investing to drive down the operational costs of their data centers and we see this as part and parcel of that plan,” Rasgon continued. “In fact if they can get Intel and the ARM vendors into an arms race, then Microsoft can only benefit.”
Intel is also seeking its own independence from Windows and the overall PC market. After all, the PC business has been in a five year sales decline. Data centers and the Internet of Things represent the company’s largest opportunities at the moment.
But of the two, Microsoft appears to be the most motivated to put some distance into what was once tech’s most lucrative partnership.
“Somebody had to be the first to buy an alternative architecture at scale,” Teich said. ”Microsoft was it. The company is eager to move on and become hardware agnostic. This would be the last part of what used to be Wintel.”
