Microsoft and Intel's financial results this week brought into sharp relief the one-time PC partners' attempts to gear up for cloud computing, where Microsoft is soaring and Intel has not quite taken off.

Chipmaker Intel has seen its share price drop 2 per cent over the past year, as software maker Microsoft's stock has risen 30 per cent.

Microsoft's market capitalisation of around US$439.68 billion ($635 billion) is almost three times Intel's at US$151 billion, compared with about double five years ago.

Both Intel and Microsoft are betting their businesses on the cloud.


Microsoft's cloud business, a combination of services and software catering to corporations moving computing functions to remote data centres run by outside providers, is growing strongly, although analysts want more clarity.

At Intel, in a quarter where the company announced plans to cut 12,000 jobs as it shifts away from the PC, data-centre business revenue rose 9 per cent to US$4 billion. That segment includes the chips powering cloud data centres, where the company says it is doing well.

"There's this perception that Microsoft is more on the cusp and benefiting from this [cloud] trend," said Dan Morgan, a fund manager at Synovus Trust who holds both companies in his portfolio.

Microsoft's best-known play in the cloud is Azure, a set of services for computing and storage as well as tools for software developers.

Azure is gaining ground on Amazon's AWS unit, the industry heavyweight in cloud computing services. Azure commands about 10 per cent of the US$23 billion market, estimates Synergy Research, compared with AWS' 31 per cent.

Much of the difference in the companies' fortunes boils down to Microsoft's fundamental business as a software company versus Intel's as a hardware company, argues Nick Sturiale, a venture capitalist at Ignition Partners.

Clients are spending an ever-larger part of their technology budget on software, according to research firm Gartner. And Intel's customer base for data-centre chips is consolidating into a few big companies, including Facebook, Google, Amazon and Microsoft itself, from a much wider group.

"The cloud vendors are brutal price negotiators and have more power over Intel," said Sturiale. Average prices of data centre chips fell 3 per cent in the past quarter, although Intel said that reflected the fact that cheaper chips were gaining ground the fastest.


Intel could suffer as big data-centre builders like Facebook increasingly design their own data-centre hardware. Intel has held its own, but one day its customers could extend their cost-cutting to chips.

Intel makes other promising products, including chips for internet-connected devices known as the Internet of Things. If a blockbuster consumer or business product in that market comes along, those chips could take off.