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IBM Puts AMD Inside

Alexei Oreskovic

According to news reports, IBM is expected to unveil mainstream servers based on AMD processors at an event in New York on Tuesday.

A representative from IBM would not comment on the reports first published earlier this month by News.com. A representative from AMD was not immediately available for comment.

The move would further AMD's penetration into the server sector, where it has enjoyed its greatest commercial success, and represent another milestone in the Sunnyvale, Calif., chipmaker's battle with Intel(INTC Quote).

IBM and AMD already have various partnerships in place involving semiconductor research and development and manufacturing. But IBM currently uses AMD processors in only a small percentage of its servers, opting for chips by Intel, as well as its own Power processor, in the vast majority of its systems.

By contrast, Hewlett-Packard(HPQ Quote) and Sun Microsystems(SUNW Quote) offer AMD processors in a wide range of their server products.

And in May, Dell(DELL Quote) announced that it would use AMD chips in its class of high-end servers that feature four processors under the hood. The news was a blow to Intel, as Dell has been one of Intel's most loyal customers, selling exclusively Intel-based systems until that point.

Dell's move, as with IBM's expected announcement, are particularly significant as they come as Intel rolls out its newest server processor. The Xeon 5100 features a new microarchitecture that Intel says erases the performance and energy-efficiency advantage that AMD's Opteron chip has enjoyed for the past year or so.

Gordon Haff, an analyst at industry research firm Illuminata, says the Xeon 5100 does indeed put Intel's server processors on more-or-less equal footing with AMD. But during the time Intel was catching up, the server market changed.

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"One of the things you're seeing is the recognition that, yes, Intel may be curing some of the worst breakages that it's had over the last couple years, but that notwithstanding, AMD is here to stay," explains Haff.

"So, if your goal is to really be a broadline supplier, you have to, at some level, offer servers based on processors from both vendors," Haff says.

For IBM, offering AMD chips in its systems could provide a way to increase its server sales.

IBM was the No.1 player in the $51 billion worldwide server market last year, according to industry research firm IDC. However, IBM trails H-P in the fastest growing category of so-called volume servers, which are based on the x86 chips manufactured by Intel and AMD. According to IDC, H-P led the volume server market at the end of the first quarter, followed by Dell.

It's unclear whether the partnership will involve a new line of IBM servers based on the AMD processors, an expansion of its existing server line or something different altogether. Presently, IBM uses AMD chips in some of its two-processor servers, but does not offer AMD in any of its four-processor servers.

Of course, there are extra costs associated with IBM broadening its server line to feature AMD chips. But those costs may be offset by the revenue opportunity that comes from selling AMD-based systems, say analysts.