Intel, Sun Micro Partner Up

Updated from 2:32 p.m. EST

For the past year, Advanced Micro Devices(AMD) has been making headlines by wooing customers once loyal to Intel(INTC).

On Monday, it was Intel's turn to brag about a new customer, announcing that Sun Microsystems(SUNW) will begin using its Xeon microprocessors in certain servers and workstations.

In a joint announcement, Sun CEO Jonathan Schwartz and Intel CEO Paul Otellini unveiled the partnership, which will see Sun ship dual-processor servers featuring Intel's Xeon late in the first half of 2007. The Intel-based systems will supplement, rather than replace, Sun's current lineup of servers featuring AMD Opteron servers, as well as Sun machines featuring the company's own Sparc processor.

The deal with Sun represents a drop in the bucket for Intel's $35.4 billion in annual sales. But it makes a strong statement that Intel's technology is once again in demand.

Intel unveiled a new line of processors for servers and desktop and notebook PCs last summer, hoping to reverse share gains by AMD, which has invaded once-exclusive Intel accounts like Dell(DELL) .

The news had little impact on Intel's stock, which closed off 3 cents to $20.79, but AMD shares finished 1.1% lower to $17.53.

Shares of Sun closed off 2 cents to $5.75.

AMD issued a statement saying that it was not troubled by the Sun/Intel announcement.