Monday, October 16, 2017

PC liquid-cooling company moving to data centres

A chip cooling technology company is the hottest stock in Oslo.

Oslo-listed Asetek A/S, an Aalborg, Denmark-based company that delivers liquid cooling systems for personal computers and servers, has risen 136 percent so far this year, making it the biggest gainer on the Oslo Stock Exchange. Now it's targeting a bigger chunk of the data center cooling business to ensure lasting returns.

"The data center is where the biggest potential is long-term," Chief Executive Officer  Andre Eriksen said by phone on Wednesday. "In the longer perspective, I believe that data centers will be liquid cooled."

Asetek's cooling systems are used in products from Dell, HP, Lenovo and Intel and are in high demand from do-it-yourself enthusiasts and gamers eager for high-performance computers. The growth of E-sports, where professional competitors play video games before audiences of fans, has seen a resurgence in personal computers after lagging gaming consoles in recent years. The company  raised its outlook in August for 2017 desktop sales growth to 10 to 20 percent growth from the single digit growth it saw earlier.

"It's difficult to say how big e-sports can be," Eriksen said. "It's outgrowing everything we could believe five years ago. It's still growing pretty fast. There is solid demand in the desktop space."

Technology stocks have been among the leaders in the STOXX Europe 600 Index this year as companies start to reinvest in computer systems and consumers take up new services that require more and more data. The STOXX 600 Europe Technology Index is up 21 percent year-to-date compared with 8.3 percent for all sectors.

Asetek's Eriksen started building data chip cooling systems "just for fun" when he studied at Aalborg University to help his gamer friends speed up their computers. Two decades later he now runs a 3.2 billion-krone ($400 million) company.

Game Changer

With 91 percent of revenue coming from the desktop business, data center cooling certainly has room to grow for the company. Asetek was selected by an undisclosed partner for a new data center product to be unveiled in November with revenue coming in from then, it said earlier this year. Eriksen estimates the total data center cooling market is worth about $5 billion to $10 billion.

This new partnership will be the "next important trigger" for the stock, according to Danske Bank analyst Johan Murer, who rates the stock a buy. With Intel as the most likely partner, there's more room for the shares to advance if Asetek "lives up to expectation on the data center partnership," he said.

But high expectations may also open the door to disappointment.

"Asetek has indicated that it will be a game changer for the company," Murer said in an email. "The stock could fall back if the partner isn't Intel."

Tech Stock

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