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AMD's tough times

The chipmaker had a good run while Intel was more or less sleeping. Now it's time to wake up and smell reality.

There was a time when Advanced Micro Devices was on a roll, and really seemed to have Intel's number--especially in the server space.

AMD's Opteron processor represented a significant advance in x86 processor design, causing Intel no end of headaches. More than any other single reason, Opteron is what forced Intel to largely rototill its product roadmap a couple of years back in order to switch its focus from frequency to multicore designs sooner than it had intended. For that matter, Intel may well have never added 64-bit extensions to its x86 processors had AMD not done so first. (Intel's plan and preference was for customers requiring the larger memory capacities allowed by 64-bit addressing to adopt Itanium processors instead.)

But then throughout 2007, Intel was seemingly hitting on all cylinders. It came into the year propelled by its"Woodcrest" Xeon processor, based on the new Core microarchitecture, and "Clovertown", the first x86 quad-core design. In September, it rolled out "Tigerton" (Xeon 7300) for four-socket servers and capped the year with the introduction of "Penryn," a new design that's the first to use Intel's 45-nanometer manufacturing process.

For its part, AMD turned in mostly poor financial results and had problems rolling out its new "Barcelona" quad-core processor. Its recent financial analysts day could not have been much fun for company execs. At the last minute, the company canceled an event for industry analysts a few weeks prior. Based on AMD's discussions and disclosures at its financial analysts day--as well as other discussions and happenings over the past year--here are some of my thoughts on where AMD stands today.

Barcelona was not just late, but disappointing. The two things go somewhat hand-in-hand of course. In the Moore's Law-driven processor business, even the most extraordinary or cleverly designed products aren't nearly as interesting six months or a year later. Even before the latest round of Barcelona delays, the announced product was clearly not the game-changer that AMD had suggested it would be. That's not to say that it doesn't perform reasonably and even have areas of particular performance strength (especially floating point and virtualization), but when you set the expectation of a home run and end up poking a single, people are bound to be disappointed.

Intel is doing things right. x86 processor sales are perhaps not quite a zero-sum game. Innovation and advances encourage sales and upgrades that wouldn't happen were they not present. However, there are still plenty of cases in which someone has decided to purchase an x86 server; they'll evaluate the options and make their selection. In this case, what matters isn't so much how absolutely good the Intel or AMD product is, but how they stack up relative to each other. Thus, when Intel was faltering, AMD's advantage derived both from its own good execution and Intel's bad execution. AMD hasn't done everything right over the past year, but a big part of their problem is that Intel hasn't done much wrong.

AMD's routes to market are stronger than they used to be. This is one area where AMD has continued to improve its position, even as its product advantages have shrunk. In 2000, AMD processors were designed into a single HP notebook. Around that same time I conducted a series of interviews with ISVs, OEMs, and end users to look into how they viewed the AMD brand relative to Intel. Bottom line? No one preferred AMD, and the vast majority strongly preferred Intel. Even in 2003, when AMD announced the much-anticipated Opteron at the Hudson Theater in New York, IBM was the only Tier 1 OEM on stage. The Barcelona launch included representatives of all the Tier 1 companies. And AMD has been gaining design wins in the client space as well. In short, to the degree that AMD can deliver competitive products, it has far more and far better avenues to actually sell them than it once had.

AMD is shifting its emphasis from server CPU performance to a view that's more about "platform" performance and functionality, on clients as well as servers. Specifically, Opteron performance has clearly been the tip of AMD's arrow. With Intel ramping up its 45-nm process, my take is that AMD recognizes that it will (at best) be just able to play second fiddle if it runs basically the same plays as Intel does. Some of this is about leveraging its ATI assets and integrating graphics processing units for "stream computing" as well as for virtualization. It's also about trying to find and exploit market segments where Intel may not be as focused. None of this is unreasonable, although the full realization of "Fusion" (the integration of GPUs on the processor) is near the end of the decade and Intel is also going after new market areas such as ultramobile PCs.

AMD had a good run when Intel was more or less sleeping. AMD took that opportunity to, among other things, establish itself as a mainstream supplier for enterprises and others. That's the good news. The bad news is that its current products don't offer an especially compelling reason for people to buy them.