Compared with virtualization, it would be more secure. If a dedicated ARM (or Atom) microserver were competitive with mid-range VPS, people would buy it.
Virtualization is "leaky", there are esoteric attacks against other guests on the same host that allow attackers to obtain encryption keys. Last time I checked, the mitigation strategy was to move to dedicated hardware.
I doubt dedicated microservers will be competetive with VPS for a while yet because you can't oversell them.
