H-P to Use AMD Server Chips

The decision marks another win for Intel's rival in the server chip market.
By K.C. Swanson ,

Updated from 1:22 p.m. EST

Hewlett-Packard

(HPQ) - Get Report

on Tuesday became the latest big boxmaker to announce it will use chips from

Advanced Micro Devices

(AMD) - Get Report

to power its servers.

The news, though widely anticipated, nonetheless underscores a major shift for H-P, which previously had thrown all of its marketing and research firepower behind the Itanium silicon that it co-developed with

Intel

(INTC) - Get Report

. Dubbed "Itanic" by critics, Itanium has mostly underwhelmed on the sales front. The vast majority of software is not yet optimized to work with the high-end silicon, which crunches 64 bits of data at a time.

In contrast, AMD's chips offer a kind of two-for-one deal: They work with the existing generation of software, which processes only 32 bits of data at a time, but also can scale up to take advantage of next-generation software that has been reconfigured for data-intensive computing.

Last week, in a bow to the

greater appeal of AMD's strategy, Intel said it would begin

offering a chip similar to AMD's.

Tuesday, H-P said it plans to offer servers based on the two-in-one style chips from both AMD and Intel.

H-P will offer two-processor and four-processor servers based on AMD's Opteron server chip in the first half of 2004, and will start shipping an Opteron-powered blade server in the second half of the year.

It also will begin offering servers based on Intel's Xeon processors with 64-bit extensions, as they become available later in the year. One- and two-way servers will become available this summer, with four- and eight-way hardware expected to hit the shelves next year.

H-P's Rich Marcello, general manager of its Itanium-based line, dismissed the notion that Itanium sales might be cannibalized by Opteron, which also has a 64-bit capability. The "sweet spot" for AMD's chips tends to be servers with between one and four processors, while Itanium is more popular for servers with more than four processors, he noted. "We don't see any major conflict between Opteron and Itanium as a results of this announcement," he said.

The news marks another incremental win for AMD, which already has seen its chips adopted by

IBM

(IBM) - Get Report

and

Sun Microsystems

(SUNW) - Get Report

.

In fact, the reason behind the surge of interest in AMD's server chip highlights a potentially troubling development for Intel: according to H-P, its customers think AMD's silicon offers better 32-bit performance than Intel's Xeon chip, on some fronts. "We're releasing these three Proliant servers based on demand for better 32-bit performance," said H-P's Brad Anderson, general manager of industry standard servers.

H-P shares were recently down 56 cents, or 2.4%, to $22.34. AMD was up 13 cents, or 0.9%, to $14.12 and Intel was off 1 cent, or 0.03%, to $29.23.

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