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AMD Relying on Chip Do-Over

SAN FRANCISCO -- Even the biggest bunglers get a second chance.

For Advanced Micro Devices (AMD - Get Report), the do-over comes Thursday with the launch of its new server microprocessor, dubbed Shanghai.

After the disastrous launch of its previous chip left AMD bleeding red ink and market share for much of the past 18 months, AMD can't afford to drop the ball again. Every aspect of the Shanghai rollout must be flawless if AMD hopes to have any kind of future.

The good news is that AMD is off to a fine start: The new processor is shipping on schedule with specifications that appear to be on target (even ahead of target, if you ask AMD).

The question is whether the conservative mentality that AMD developed as a result of its near-death experience will prevent it from getting a leg up against Intel (INTC - Get Report), which is prepping a major upgrade to its own chip line.

And with the state of demand and the global economy in question, the upside of new products may be limited for both companies. On Wednesday, Intel shaved nearly a billion dollars off its fourth-quarter sales forecast.

Nathan Brookwood, a semiconductor analyst at Insight64, says AMD is back on track with the release of Shanghai.

But, he notes, AMD doesn't have any products in its pipeline that will deliver the type of performance advantage to leave Intel in the dust.

"They have made a conscious decision, at least as I read the tea leaves, on programs that have relatively low technical drift, because they don't want to miss anything," he says. "The offshoot of that is they're not taking those big risks where you might get a giant leap."
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