Opteron Faces Down Intel in Business Servers

While the Opteron chip began as a niche player, AMD has added extra processor cores to help reposition the newcomer chip for more mainstream business tasks.

The arrival of a new generation of servers based on Advanced Micro Devices Opteron processor is beginning to reposition the newcomer chip for the mainstream. The chips prospects appear upbeat, analysts say, even though it will face stiff opposition from market leader Intel.

The Opteron, which arrived a little over two years ago, had been a niche player, occupying areas such as high-performance computing clusters. But the latest version of the chip, which is beginning to arrive at businesses in new servers, has headed into the mainstream of the corporate server market.

Early adopter IBM originally positioned the chip toward high-performance computing clusters, where 64-bit capabilities—one of its main claims to fame—helped it boost performance. But the forthcoming generation of Opteron-based servers appears poised to take on tasks more often used in businesses, such as databases.

Part of the reason is a performance bump from the addition of extra processor cores—dual-core chips, such as the Opterons introduced in April, contain two distinct processor cores, allowing a single chip to do more work—in addition to 64 bits, according to the server vendors.

The 64-bit capabilities are no longer new but now are better supported by applications and operating systems, thanks to the recent release of Microsoft Corp.s 64-bit Windows Server 2003 x64 Editions.

Intel Corp.s Xeon chip continues to dominate the server space in numbers—just as Intel continues to dominate the overall x86 chip market—with more than 90 percent of the chip shipments, by most accounts.

But Opteron still has allowed AMD (Advanced Micro Devices Inc.), the perennial underdog, to make some inroads in the server space over the past two years.

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For AMD, which has said publicly that it came up just short of a goal to capture 10 percent of server chip shipments in 2004, its a victory. Server chips cost hundreds of dollars more than standard desktop parts, and increasing sales to this market segment has boosted the companys financial fortunes.

"Opteron has done quite well considering AMD started out from zero and [the server space] is such a risk-averse market," said Dean McCarron, principal analyst at Mercury Research, based in Cave Creek, Ariz.

"The trend has certainly been up, and if it continues to gain share at the same pace it did in the past year, itd be reasonable to think within a year [Opteron] would be well into [AMDs] double-digit server market share goal."

Like others, Hewlett-Packard Co.s earliest Opteron customers were in the high-performance technical computing arena, as well as financial institutions, who were interested in number-crunching power they could utilize for market forecasting and analysis, said Colin Lacey, director of platform marketing for industry standard servers in HPs Technology Solutions Group.

Now the company sees Opteron used for Web hosting and databases, as well as ERP (enterprise resource planning) and CRM (customer relationship management) use. To that end, HP has expanded its product offerings—as have all three of the major companies that sell the systems—and Lacey said the company "will continue to see increased participation, increased share with the Opteron platforms. Right now theres a compelling value prop there, without a doubt."

But despite having gained favor with IBM, HP and Sun Microsystems Inc., AMD must continue to move forward against Intel.

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