AMD has moved from being an afterthought among server customers to the darling of the enterprise world in just a year, and is now an alternative to Intel on IT managers’ shopping lists.

The company’s Opteron chip has opened doors of corporate server rooms for AMD, and many enterprises are flirting with the new kid on the block, one dominated for years by Intel, which owns 90 per cent of the market for IA-32 servers. There are even hints that previously Intel-only vendors such as Dell are flirting with Opterons.

Opteron shipments have doubled each quarter since the product was launched, according to research firm IDC. However, with just 35,000 Opteron servers shipping in 2003, Opteron still represents a tiny fraction of the 3.26 million-unit IA-32 server market.

By not breaking binary compatibility with the millions of existing IA-32 applications, Opteron has given customers a less painful route to 64-bit computing than the one provided by Intel's Itanium 2 processor. AMD's hardware is also uniquely positioned to take advantage of the move toward clustered applications.

Software vendors like Oracle, IBM and SAP have been working to make their applications work with clusters of low-cost systems. According to Dave Driggers, CEO of Verari Systems, enterprise users are starting to show interest in Opteron for these types of applications, both for its low cost and its strong I/O capability and 64-bit processing capabilities.

Driggers, whose company sells AMD and Intel cluster systems, said Opteron systems represented about 20 per cent of his company's business in 2003, a number that jumped to 40 per cent in the first quarter of 2004. "Opteron has gained quite a bit of market share within our company. There's heavy interest for database, for file servers and [for] traditional enterprise products," he said.

Spam filtering company Postini bought 32 of those Opteron systems to run database cache servers. Company's VP Jon Prall said the fact that a white box, dual-processor Opteron was able to outperform a much more expensive four-processor Sun 480 system turned him into a believer. "The Opteron is truly an amazing chip," he said. "It's completely changed my perception of AMD."

Changing the perception of customers like Prall is what AMD must do if Opteron is to become a serious competitor to Intel's Xeon. "I think the biggest challenge for Opteron is getting into the mindset of the enterprise that they are an enterprise player," Verari's Driggers said. "They've always been considered the generic Intel product."

By year-end, AMD hopes to extend its toehold in the enterprise to include four-way servers. Currently, most Opteron servers are one-way or two-way systems clustered together for greater performance.

As part of the Opteron anniversary, HP will unveil its first four-way Opteron system: the Opteron DL585, which will be priced starting at $8,299 (£4,610).

The multiple Hypertransport links on each 800 series Opteron processor allows system builders to link the chips directly together, cutting down on latency caused on other interconnects, said Ben Williams, director of AMD’s server/workstation business segment.

Customers running four-way or eight-way servers from other RISC vendors can switch to two-way or four-way Opteron servers, and not only cut their hardware costs but reduce their software costs in per-processor pricing configurations, Williams said. "The price per processor (on an eight-processor machine) is four to five times that of the price on four-way," said Postini’s Prall. "So right there is a huge motivation to use small boxes," he said.

Weather.com's Technology VP Dan Agronow did just that when he purchased eight two-way servers from IBM in the fourth quarter of 2003 to replace five four-way IBM servers with Intel's 900 MHz Xeon MP processor. Agronow only needs six of the Opteron servers to replace the four-way servers, keeping two Opteron servers as a backup. He has seen a 25 per cent increase in the number of concurrent queries his database can handle without any impact on performance, he said. "Opteron's price-performance made a huge difference. The price point for the two-ways are just fantastic," he said. "They've been rock solid." Weather.com is the online site for The Weather Channel.

Opteron's most visible success story has come from AMD itself. The company has now been profitable for two straight quarters following nine straight quarters of losses. "AMD is viewed as a credible, tier one server processor supplier, which certainly wasn't the case a year ago," said Dean McCarron, principal analyst with Mercury Research.