This Semiconductor Trend Favors Intel And Marvell

In a report published Monday, MKM Partners' Executive Director Ian Ing previewed the 6th Open Compute Platform Conference (OCP VI). It will be held Tuesday in San Jose and led by Facebook Inc FB.

The conference "is focused on open standards and longer term breakthroughs to build and operate low-cost, efficient data centers (with implications in semiconductors and optical transceivers)," Ing explained. The firm expects the event to be positive for Intel Corporation INTC "on IA's largely continued dominance over ARM," and for Marvell Technology Group Ltd. MRVL, "greater use of client drives in enterprise applications." Thus, the firm will look for "potentially disruptive trends on the horizon," like Intel's forays into optical connectivity, for their semiconductor coverage.

The firm rates shares of both Intel and Marvell at Buy, with respective price targets of $45 and $18.

The report highlights a few points to keep in mind:

• "ARM-server debate likely positive for INTC," since they think it remains dominant.
• They note Cavium Inc CAVM appears "the most positive on its imminent ARM-server prospects, but it also notes that "ThunderX" needs a modest portion of the market to be meaningful and successful for CAVM (NR, $69.72)." The analysts "expect a lower profile at OCP from ARM (NR, $53.45) and AMCC (NR, $5.46), as these other players appear to be refreshing their roadmaps to better hit the evolving market target."
• "All quiet on ‘Silicon Photonics. In the past, some analysts have overstated the threats at OCP around Silicon Photonics' alternatives in displacing optical transceiver modules. While the debate appears to have died down after CSCO's (CSCO, Neutral, $28.93, $30 FV) CPAK mis-steps, concerns could potentially flare up again (where FNSR (Buy, $22.23, $24 PT), AVGO, and JDSU (Buy, $13.89, $17 PT) are exposed) should Arista (ANET, Buy, $67.89, $80 PT) and/or Intel be more vocal in adoption. We believe INTC has long term aspirations to control its own destiny in the data center, including greater ownership of long-range optical connectivity (currently focused on short ranges like intra-blade and top-of-rack) and NAND storage supply."
• "Watch potential BOM cost re-priority."
• "Client solutions attractive in enterprise."
• "Attendance Skyrocketing."