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AMD's New Server Chips Could Lift Stock

AMD's server processor business accounts for about 44% of the $9.70 Trefis price estimate for the stock.
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NEW YORK (TheStreet) -- AMD's (AMD) - Get Report new server processors (Opteron 4000 series) aim to reduce the power consumption in data centers by 24% compared with previous generation server processors. Priced as low as $99 a chip, 28% lower than the least expensive Intel (INTC) - Get Report server processors, these new AMD processors will appeal to cloud service providers and corporate data centers.

Electricity costs are an important factor for data centers and IT budget-makers are always looking for hardware options that can deliver the desired computing performance at lower power consumption.

We estimate that the server processor business accounts for about 44% of the $9.70 Trefis price estimate for AMD's stock. We believe these new processors can help AMD gain share against its rival Intel in the global server market resulting in a potential upside of 10% to its stock.

AMD's new processors fit into tightened IT budgets

Business clients, still cautious about their IT spending, will find AMD's new processors as a relief to their tightened budgets. In addition to savings associated with ultra power-efficient platforms, the AMD Opteron 4100 Series processor offers price points as low as $99 with no compromise in performance.

In addition, these chips also fit well in the current trend of having arrays of cloud computing servers built from low-priced chips that can quickly scale performance. Using such chips, power-efficient and scalable clouds can be built without spending on expensive high-end dedicated servers.

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New processors can increase AMD's server processor market share

AMD has gained about 18 percentage points of market share since 2005, primarily at the expense of its rival Intel. We currently forecast AMD's share in the global server market will remain flat in 2010 at around 30%.

The high computing performance delivered at reduced cost will make AMD new server processors popular among corporate data centers and the data centers of cloud service providers. If these new processors help AMD gain 5 extra percentage points of market share across our forecast period, there would be a 10% upside to our estimate for AMD's stock.

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$9.70 Trefis price estimate for AMD's stock here.

Trefis

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