I think it has been discussed here a number of times. Xeon will not be replaced for 80% of the server market. Yes there could be some server markets that could use Avoton or next Intel chips. It helps Intel both ways. Once it is determined that Atom chips or ARM equivalent are just as good as it looked on paper, everyone will come back to Intel even more. With future core chips even less power hungry, it will become a mute point to use Atom or equivalent.
Another bear scenario is that Atom replaces Xeon sockets with much lower margin dollars.
1. Intel says server Atom and Xeon have same margins 2. Xeon is far more useful than Atom over a wide range of applications (FP intensive, single thread performance sensitive, business critical applications etc)