Advanced Micro Devices Inc.s fourth quarter advance against Intel Corp., could signal a shift in the two companies ongoing battle.
AMD, which on Wednesday reported a fourth quarter earnings jump whereas Intel on Tuesday missed its fourth-quarter estimates, claims to have gained at least a point of market share in the fourth quarter.
Intels share, which has hovered around 80 percent of late, slipped by about the same amount, is executives confirmed. The change was a significant one for AMD, whose PC processor business has slowly grown slowly over the last three years, increasing by about two points per year trough the third quarter of 2005.
The two chip makers late 2005 performances appear to have set the stage for a new battle in 2006—one in which the companies are increasingly vying for business buyers, a traditional stronghold of Intels.
AMD, whose CEO, Hector Ruiz, said now has more momentum than ever, will seek to use its past successes with its Opteron server chip to springboard into selling a wider range of business PCs.
But Intel, which blamed its market share loss on its inability to synchronize its processor and chip-set shipments, will work to ensure that its fourth quarter performance wont become a turning point for AMD.
Intel CEO Paul Otellini said an all new product lineup, which rolls out in the second half of 2006, will allow Intel to beat back AMD and regain its lost market share.
For AMD, the business PC space “quite likely is going to be a major source of growth going forward,” said Dean McCarron, analyst with Mercury Research in Cave Creek, Ariz. “Very modest gains in the business market will drive significant growth for AMD.”
Intel has ample incentive to fight back, however.
“What I expect will happen is that this turns into a pretty aggressive battle between the two companies,” McCarron said.
“Intel certainly commands more of the [PC] OEM landscape. But AMD is coming into all of this, overall, with a pretty significant pricing discount. This sets them up pretty much perfect for a quite a battle.”
Thus far, AMD has found strong business partners in Hewlett-Packard Co. and Fujitsu-Siemens Ltd.
HP offers AMD chips in its HP Compaq dx5150 desktop and two of its HP Compaq nx6000-series notebooks.
At the same time, Fujitsu-Siemens is a strong proponent for AMD in Europe, offering AMD Athlon and Sempron processors in its Esprimo P5600 desktop, for example.
Still, AMD has been working to gain even more of a presence in the business space, said Dirk Meyer, president of AMDs Microprocessor Solutions Sector, in a recent interview.
“The first thing youve got to do is get design wins,” Meyer said. “The next step is to start to generate familiarity of the platforms across … the ecosystem, which consists of both end users and the channel from which they buy.”
To that end, AMD has also been working to strengthen relations with systems resellers, VARs and systems integrators and, more recently, launched a corporate PC stability program, dubbed its Commercial Stable Image Platform, which guarantees no changes to specific machines based on its chips and third-party hardware for 15 months.
Generally, PC stability programs—Intel calls its program the Stable Image Platform—promise certain business PCs without changes for a similar time period, allowing three months for testing and another 12 in which to roll out new PCs.
“Im confident enough that we have enough [design wins] that will be showing up [in 2006], so well be reasonably able to substantiate a move in our share,” Meyer said.
Benefiting from Intels Stumbles
Nathan Brookwood, an analyst with Insight64, in Saratoga, Calif., said AMD has benefited from strong execution and stumbles by Intel over the past 18 to 24 months.
AMD was first out with 64-bit x86 chips, its first Opteron and Athlon 64 processors in 2003, and was first to offer a dual-core chip in early 2005.
“As we start the year, AMD clearly is ahead in terms of performance, in terms of power, in terms of performance-per-watt,” Brookwood said.
Although Intels chips have lagged in performance and power consumption, according to experts, its prepping a new line of more energy efficient dual-core processors for all three business computer categories, including desktop, notebook and server, and will roll them out during the second half.
The chip maker will add dual-core processors code-named Conroe, Merom and Woodcrest for desktops, notebooks and servers, respectively.
Woodcrest, for one, will consume a theoretical maximum of about 80 watts, about 30 less than the current Xeon line and deliver as much as a 3.5 times greater performance per watt and double the overall performance versus Intels current single core Xeons, the company said.
The ultimate quality of the new chips will determine whether it can gain back share and, if so, how much, Otellini maintained during a conference call with analysts Tuesday that the chip makers lineup will gain strength throughout the year based on the introduction of several new platforms based on dual-core processors.
Indeed, “We will be in position to gain share over the course of 2006,” Otellini said on that call. However, he said Intel is “starting out in a bit more of a hole for 2006 than we thought.”
Still, “Our product portfolio as we shift to dual core only gets stronger,” he said. “I believe youll be able to plot the take-back—the regain or market share—along the dual-core road map of the company.”
If Intel rolls out the new chips without hitches, that gap could close, he said. If that happens, AMD can expect to see fewer defections from Intel users than it saw in 2005.
“It will be much more of a horse race [in 2006] between Intel and AMD on performance and power than it was in 2005,” Brookwood said.
Even Dell Inc., whose executives have waffled over whether to use AMD chips in recent years, have praised Intels future chips.
“Intels got a better road map coming up, in terms of performance and in terms of thermals in the coming year, so thats been very encouraging for us,” Kevin Rollins, Dells CEO, said in an eWEEK interview published earlier this month.
“Its definitely one of those time-will-tell things. I think its safe to say Intel becomes significantly more competitive in the second half of the year. But that also means AMD has six months to prepare for that,” McCarron said.
Intel has other levers it can pull, including potentially tapping its newest generation of 65-nanometer manufacturing, which works to lower its costs, to offer more competitive prices. The 65-nm manufacturing will also make possible the introduction of its next-generation architecture processors.
However, AMD, which is opening a new 65-nanometer factory in Dresden, Germany, this year, will also update its processors, shipping higher-performance chips that can take advantage of DDR2 memory at mid-year. It is also set begin the shift to 65-nanometers later this year, the company has said.
The company believes its efforts will allow it to expand to 25 to 30 percent of the overall x86 processor market by 2008 or 2009, Ruiz said.
Fourth-quarter 2005 market share estimates have not yet been published, but based on AMDs claims it appears to have moved at least somewhat closer to the 20 percent mark at the close of 2005.
The Sunnyvale, Calif., chip maker garnered 17.8 percent of x86 processor shipments during the third quarter of 2005, up from 16.2 in the second quarter and 15.9 percent in the same quarter in 2004.
Whereas Intel ended the same quarter with 80.8 percent of shipments, down from 82.3 percent in the second quarter of 2005 and 82.1 percent in the third quarter of 2004, the Mercury Research figures show.
AMDs market share low, in recent times, came in the third quarter of 2002, when it held 11.6 percent of shipments.
AMDs most recent market share high, a share of about 20 percent or more, came from the first quarter of 2001 through the third quarter of 2001, Mercury figures show.
Thus “The stage is set for a very interesting market battle between the two companies,” McCarron said. “It isnt just about [chip] megahertz or gigahertz now. It involves things like power, performance and software support. Also the battle has been moved outside the consumer arena. That changes things a lot, too.”