Why is Micron bullish on enterprise DRAM opportunities?
Server bit grew at a rate of 30% quarter-over-quarter
In the prior parts of this series, we discussed the PC and mobile segment of Micron’s (MU) DRAM business. However, there’s another important segment for Micron’s DRAM business, which is the server segment for enterprises. During the conference call to announce fiscal Q3 2014 earnings, Micron’s management mentioned, “Demand for server DRAM is also increasing. Server bits were up 30% quarter-on-quarter driven by data center and enterprise growth in density per unit memory content leading to enhanced system level performance.” Management also mentioned that hyper-scale cloud and data center growth is driving server bit growth at Micron.
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The cloud infrastructure market’s growing at a decent pace
The cloud infrastructure equipment market mainly consists of servers, networks, and storage on cloud platforms. According to a report from Synergy Research Group, this market grew by 7% in 2013 to reach $41 billion. According to another report from Synergy Research Group for Q1 2014 and as the chart above shows, Cisco (CSCO) leads the cloud infrastructure equipment market, closely followed by HP (HPQ). IBM (IBM), Dell, and EMC (EMC) constitute the three remaining players in the top five rankings in this market.
The traditional server market growing at a slower rate
Compared to the cloud infrastructure market, the traditional server market is undergoing slow growth. According to a report from Gartner, the worldwide server market increased from 2.50 million units in Q4 2012 to 2.58 million in Q4 2013 at a growth rate of 3%. However, in term of revenues, the server market declined from $14.62 billion in Q4 2012 to $13.66 billion in Q4 2013, at a rate of 6.6%. Although Micron supplies DRAM products both to traditional server vendors and cloud infrastructure equipment vendors, the company would benefit from the broad market shift from traditional to cloud platforms.