Struggling to compete with Intel, second-place chipmaker achieves success with a chip that provides a smooth migration path to 64-bit computing
Intel changed its mind once it saw the warm reception Opteron received. Intel earlier this year said it will add 64-bit extensions to its 32-bit Xeon processors, even though it might slow sales of Itanium. Intel also adopted a new numbering scheme for its processor lines that shifts the focus away from clock speeds, a strategy on which AMD embarked in 2001.
"It's quite clear that Intel's preference would have been to have a very neat market segmentation between Itanium and x86, with no 64-bit crossover," Mercury Research analyst Dean McCarron says. "They didn't want to go there if they didn't have to, but it was also clear the market said they liked 64-bit x86."
Intel executives acknowledge that AMD has made gains in the server market. But they argue that Itanium has been successful and remains key to their strategy for competing against high-end systems based on RISC chips. "For us, the big opportunity is the non-Intel-server market," says Ajay Malhotra, general manager of enterprise marketing and planning at Intel. "Xeon, with or without extensions, wouldn't have given us the perfect tool to go after the RISC market--the mission-critical segment."
More than half of server-market revenue is derived from RISC architectures such as Sun's Sparc, IBM's Power, and HP's PA-RISC, even though x86-based machines account for as much as 90% of unit volume, Malhotra points out. "If Xeon extensions alone could have gotten us there, you could probably suspect Intel would've done that," he says. "The money that eventually gets shifted [away from RISC systems] I'm confident will move to Itanium, not to Xeon with extensions and not to Opteron."
Intel also argues that Itanium has been more successful than its public image would suggest. The company shipped more than 100,000 of the processors in 2003, a respectable number for a new architecture in the high-end server market where total shipments are limited. In comparison, AMD shipped slightly more than 65,000 Opterons last year, according to statistics from Mercury Research.
AMD expects those numbers to grow significantly this year and next. The company shipped around 70,000 Opterons in the first quarter of this year, and volumes are expected to increase significantly as the year goes on, analyst McCarron says. It's only in the past couple of months that major computer makers, which account for 70% of all x86-based servers sold, began to offer Opteron systems in earnest to the open market.
"We're seeing significant opportunities in the marketplace, and, frankly, we can hardly build the systems fast enough," says Jonathan Schwartz, president and chief operating officer of Sun. Opteron-based servers are now a strategic focus at Sun, he says.
Still, those numbers are tiny compared with the volume server market that's dominated by Intel's Xeon processor, McCarron says. Intel shipped about 6 million Xeons last year and 1.7 million in the first quarter of this year.
Opteron represents new opportunities for AMD on several fronts, McCarron says. Although AMD achieved its largest share of the microprocessor market in early 2001, when it was inside about 22% of all PCs, those numbers came from consumer PCs using its Athlon processor. Today, AMD controls about 15% of the microprocessor market and only 5% of the server processor market. But its growing success in the enterprise is expected to provide it with opportunities to gain greater access to the business desktop and laptop markets as well, he says.
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