Bloomberg News

AMD Goes After Server Market With New Chips, Price Cuts

November 15, 2011

(updates with share price in sixth paragraph)

Nov. 14 (Bloomberg) -- Advanced Micro Devices Inc., the second-largest maker of computer processors, will use its first new design since 2003 and low prices to try to regain market share from larger rival Intel Corp.

The Sunnyvale, California-based company will begin selling chips based on the new Interlagos design, priced between $125 and $1,019 per chip, said Patrick Patla, general manager of the server business.

AMD is trying to reverse an almost 20 percentage-point slide in market share since 2006, brought on by delays in chip updates and designs. The setbacks turned AMD into an also-ran in the market for chips that run corporate networks. The company had 5.2 percent of the market at the end of the third quarter, with Intel holding the rest, according to Dean McCarron, analyst at Mercury Research in Cave Creek, Arizona.

“We’ve got to get relevance back,” said Patla in an interview. “We want to drive rapid expansion of our market share.”

AMD has priced its chips so that they will provide 55 percent more performance than Intel equivalents, Patla said. The two companies are chasing customers in the growing market for servers that run data centers at companies like Facebook Inc. and Google Inc. Some of the new AMD chips will draw as little as 5 watts per processing core, making them ideal for that market, he said.

Shares of AMD rose 0.3 percent to $5.97 at 10:14 a.m. in New York. The stock had declined 27 percent this year before today.

Last Big Hit

The company’s last big hit in servers was Opteron, introduced in 2003, which helped AMD squeeze more profit from each chip. In 2005, AMD’s products began to approach Intel’s gross margins, which run as high as 67 percent. That’s when AMD’s fortunes reversed. Opteron’s successor, Barcelona, was late to the market and needed to be redesigned.

Intel put pressure on AMD by implementing a system in which Intel redesigns its entire product range or introduces a more efficient manufacturing process every year.

--With assistance from Xu Wang in New York. Editors: Donna Alvarado, Nick Turner

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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