AMD has pinned this year's recovery hopes on the planned "Barcelona" quad-core Opteron server chip, following a $574 million loss for the last quarter of 2006.
The competing "Clovertown" quad-core Xeon chip from Intel has been adopted mainly for high-end research server platforms since its launch in November. But it is hobbled by a lack of multi-threaded software needed to take full advantage of the new chip technology. AMD hopes to sell its Barcelona chip to users ranging from managers of high performance computing centers to small businesses.
When it launches the processor in the middle of 2007, AMD said it expects a bounce in revenue because many customers have delayed buying new systems until it comes out. It also hopes Barcelona will let the company finally break into the low-end server segment, including one-chip and two-chip computers and tower PCs as well as rack mounted servers.
"We're not yet in the SMB segment; it represents for us a great volume opportunity since we have so little market share now," said Kevin Knox, vice president of AMD's commercial business.
AMD's share of the market for servers, blades and workstations has grown from just 2.8 percent in 2003 - the year it launched the Opteron chip - to six percent in 2004, 12.2 percent in 2005 and 27 percent in 2006, according to company figures. The only problem with that growth is that AMD has so few customers in the single-processor server segment. Its only products in that market include IBM's x3105 and Sun's Sun Fire X2100.
AMD will also try to squeeze extra profits from denser chips as it shifts from 90nm chip design to 65 nm, and from more efficient manufacturing as it changes from 200mm to 300mm silicon wafers.
"Volume has not been the issue, we had a bigger challenge with ASPs," Knox said in reference to average selling prices. "You get into these things when you have products that are very close to equal performance. That is where you get squeezed on the price side, because it's your only leverage left."
Barcelona could change all that as the new chip will perform so much better than Intel's dual-core and quad-core Xeon offerings that, the company claims.
However, analysts warn that the market may not be ready for quad-core processors, regardless of the vendor. "We're concerned about this whole rush to multiple-core processors, as if the technology could be the saviour of AMD or anyone else. We're concerned quad-core computing is coming up too fast," said Gartner analyst John Enck. "It's basically an arms race between Intel and AMD, so we're at the point where there's more technology being offered, so they can keep up with each other, than we can actually use."