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    Intel Looks to Gain Back Market Share

    Written by

    Scott Ferguson
    Published April 16, 2008
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      Intel is poised to regain some of its long-lost market share in the first part of 2008, thanks to its line of microprocessors for servers and with Advanced Micro Devices still stumbling to regain its footing with its quad-core Opteron chip.

      When Intel detailed its 2008 first-quarter financial earnings April 15, the chip giant’s overall numbers were in line with Wall Street expectations, while the company showed that the demand for its servers and notebooks remained strong despite growing concerns about the U.S. economy.

      In a call with analysts, CEO Paul Otellini declined to discuss specific market share numbers compared with AMD but noted that there was “good news” in relation to the company’s processors, especially its line of 45-nanometer chips and its “Caneland” platform for multiprocessor systems.

      Otellini also said Intel had reaped benefits from selling chips to companies such as Google and Amazon.com that are building large server farms or delving into cloud computing.

      While specific reports on market share have not been released just yet-Intel controlled about 76 percent of unit shipments in the fourth quarter of 2007, while AMD held about 23 percent, according to IDC-analysts said they believe that Intel is benefiting from several factors. The most obvious is that its main competitor, AMD, has continued to struggle financially after acquiring ATI Technologies in 2006 (Intel’s finances have remained upbeat).

      With this already heavy burden, AMD then did not bring its quad-core Opteron chip to market on time in late 2007 due to a technical glitch. The result is that AMD is expected to post poor first-quarter numbers on April 17, with some Wall Street estimates calling for a net loss of $263 million or 42 cents a share.

      The one place the Opteron chip was expected to compete head-to-head with Intel’s Xeon processor was within the multiprocessor server space. This was the area Otellini highlighted during his call with analysts.

      “AMD is addressing this, but when they had the ATI acquisition they had a lot to digest and I think they are recognizing that and are starting to come back,” said Leslie Fiering, an analyst with Gartner. “It will be interesting to see what happens through the rest of the year, but at the moment the product lineup favors Intel.”

      For several years, AMD has successfully argued that the chip technology used for its Opteron processors was superior to Intel’s offerings. This helped the smaller chip maker gain market share within enterprise data centers, which benefited the company’s entire product line.

      To counter this, Intel pushed quad-core Xeon processors into the market first and then made the jump to 45-nanometer manufacturing, which gave its chips an additional performance boost. Later in 2008, when Intel introduces its “Nehalem” microarchitecture, the company will offer an integrated memory controller for the first time, erasing another technological advantage over Opteron.

      Mike Feibus, founder of TechKnowledge Strategies, said the server market is slow to turn around, but it now seems that Intel is starting to reap the benefits of its new designs and products. AMD, on the other hand, is only now bringing its quad-core Opteron to the marketplace.

      “Technology wins in the server market,” Feibus said. “That’s how AMD broke into the server market-because they offered such an advantage when they came out with [the original] Opteron that companies that stuck with Intel for too long really got burned. So, those days are over. It drives home the point that the decisions made [in the server market] are driven by performance and Intel has addressed its shortcomings.”

      It will take some time for AMD to gain back market share and show that its Opteron chips can still compete with what Intel has to offer, Feibus said. After AMD gets past its first-quarter financial problems, it will have a chance to show off some new technology when it switches to its own 45-nanometer process later in 2008.

      Scott Ferguson
      Scott Ferguson

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