AMD Betting Success Isn't Gone in a Flash

However, despite big question marks on the outlook for AMD's flash business, analysts are quick to offer praise for its Opteron server chip line, which launched in April 2003.

Opteron-powered servers have caught on with IT managers because the silicon is compatible with existing corporate software, which is optimized to process data 32 chunks at a time, but can also scale up to do 64-bit processing if the software is available. The product has proven so popular that a humbled Intel was forced to roll out a Xeon server chip with similar twofold processing capabilities.

"They had a cutting-edge technology that came out before Intel and that opened some eyes in terms of what AMD can do," said Michael McLaughlin, principal analyst at Gartner, referring to Opteron. "That has given Intel kind of a bruise -- not a black eye, but definitely a bruise."

Meanwhile the reception for Intel's much-hyped Itanium silicon, which does only 64-bit processing, has been underwhelming.

Already revenue for Opteron is starting to catch up to that of Itanium, reaching $191 million in the second quarter -- more than half of Itanium's $319 million in sales. "That's a pretty quick ramp, and it goes to show the market is really embracing this chip," said McLaughlin.

Though analyst Lau just downgraded AMD, likewise says he's been impressed by the performance of its microprocessor business. Opteron's memory architecture allows for better performance relative to competing Intel's offerings, he said. He thinks Opteron could see a sales catalyst when Microsoft(MSFT) rolls out software -- probably sometime next year -- that can take advantage of the silicon's high-end processing power.

And he lauds this week's announcement of a dual-core X86 processor from AMD as "an amazing engineering milestone for a smaller company like AMD. Their R&D is a fraction of Intel's."

For a company that's used to being tagged as a runner-up, the kudos on processors are a welcome change. Amid so many signs of progress, investors can only hope that a downturn in the flash business doesn't spoil the party. But if it doesn't, a revitalized AMD should keep the heat on Intel on both counts.

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