AMD's rapid rise from start-up to $5 billion semiconductor powerhouse is, as Humphrey Bogart's English teacher once said, the stuff of which dreams are made. AMD went after those dreams with an unabashed enthusiasm that would always be the company's trademark, from its first clone of Intel's 8080 to supercharged chips that enjoy a cult following among hard-core gamers.

In the process, AMD has become known as the company that kept Intel honest, the Linux of the semiconductor world. Competition from AMD has reversed the trend of rising prices and stagnant innovation that characterise a controlled market. AMD is responsible for £300 desktops, £700 rack servers, and multi-gigahertz, mainstream microprocessors, despite the fact that most of them have Intel's logo on them.

Today, AMD's pluck is paying off bigger than ever before. After decades of aping Intel architectures, the AMD64 architecture, rooted in Opteron and Athlon 64 processors, has been imitated by Intel in the form of Nocona, Intel's 64-bit version of Xeon. In a stunning reversal of fortune, Intel was forced to build that chip because Opteron was invading a server market that the Intel Itanium was supposed to dominate.

Suddenly, Intel is feeling a breeze where its pants used to be. But with Intel mad as hell and hot on AMD's heels, can AMD grab enough sales traction to hold up to the punishing onslaught that everyone knows is coming?

Anyone shopping for servers needs to consider that question seriously because Opteron creates a new 64-bit path to follow - one that continues the x86 tradition rather than, as Itanium does, consigning that architecture to the dustbin of history. To understand the crossroads at which AMD finds itself and what the implications are, shrewd observers must take a hard look at the company's technologies and market position now and in the past.

My friend, my enemy
AMD has had a massive impact on the market, but prior to Opteron, it showed a disappointing lack of ingenuity in its PC processors. That copycat tendency stretches all the way back to the early 1970s, when AMD built the 8080A, a knock-off of Intel's 8080. Shortly thereafter, Intel and AMD struck up cross-licensing deals spanning 17 years, knighting AMD as Intel's chipmaker-in-waiting when demand exceeded supply.

Despite highly successful semiconductor product lines and plenty of engineering wins of its own, AMD came to be known as just another maker of CPUs based on Intel's blueprints. AMD was one of a pile of x86 licensees that included Cyrix, NEC, and NexGen. There were glints of cleverness such as AMD's short-lived RISC approach to an Intel-compatible CPU. But overall, Intel held the reins on its licensees, and they were all content with that.

Then things took a horrible turn for AMD: Intel pulled the plug on its AMD agreements before they expired. Intel no longer needed or wanted a second source, and AMD was getting a little too creative with its variations on Intel's designs. AMD was forced to persevere without Intel's blessing.

With the introduction of Athlon in 1999, AMD showed real promise that it could make it on its own. Prior to Athlon, AMD's processor line was technologically suspended somewhere between the 80486 and early Pentiums. Athlon busted down the door with the intent to go straight after Pentium II. It was a huge risk. Athlon was not a drop-in replacement for any Intel processor. It required its own motherboard and chip set, which, although software-compatible with Intel's, forced manufacturers to alter their production lines and testing.

That gave Intel an easy way to keep AMD in its cage. Intel went to its OEMs - which it controlled through allocated distribution of parts - to discourage them from making the investment in retooling for Athlon-compatible products. Rather than risk supply problems with Intel, most manufacturers effectively froze AMD out. And when Microsoft got serious about its enterprise push with the release of Windows 2000 Server, Intel had Pentium II, Pentium III, and Xeon ready to rush the entry-level server space that Unix players HP, IBM, and Sun Microsystems had neglected. Intel was madly grabbing IT unit share, and although AMD wanted a piece of that, there was no way to blunt Intel's advance.

IT shops were grateful for the downward pressure that AMD's competition exerted on desktop PC prices, but Windows 2000 was seen as an Intel OS. At that time, it was hard enough for IT to trust Microsoft as an enterprise player, let alone risk the compatibility and stability problems that a non-Intel CPU might bring to the mix.

AMD's strategy for penetrating Intel's blockade was an odd one. Small VARs and individual system builders were strong proponents of choice and were in dire need of a stable supply of chips. The Web sites that served the enthusiast communities, which included gamers and PC technophiles, were no fans of the one-vendor market.

These small-fry operators built their systems from components, and motherboards made by Asian manufacturers were standard fare in custom-built systems. AMD couldn't convince any major motherboard makers to break loose from the Intel clan, so AMD made a motherboard of its own as a reference implementation and shipped it to every online source that might give Athlon some exposure. Soon these sites were benchmarking Pentium II and Pentium III against Athlon, and as AMD knew it would, Athlon kept up with Intel's CPUs cycle for cycle and wouldn't quit.

In Athlon, the grassroots IT community saw an alternative to Intel's tightly controlled line-up. It pressured Asian motherboard manufacturers, and a crack in the wall appeared when a lone motherboard maker stepped forward and then quickly retreated after what was assumed to be a tap on the shoulder from Intel. But it was the grassroots, low-volume builders that kept Intel motherboard makers in business. One by one, companies such as MSI, Supermicro, and Tyan bowed to system builders' demand for choice.

As motherboards began to show up, system builders, including mid-volume manufacturers, were overjoyed to see faster processors, faster memory, faster bus speed and more solid overall design than they could afford from Intel. Athlon proved consistently fast and stable. Compatibility was eliminated as an issue. And AMD earned its entry server credentials with the solid performance of AMD's dual-processor CPU, Athlon MP, showing AMD could break through the ceiling Intel tried to impose.

Hammering out partnerships
To get out of the bargain server market, AMD bet its life on Hammer, its first total system architecture that wasn't a carbon copy of Intel's. The details of AMD's Hammer processor were published well in advance of its unveiling. But Intel did not suspect that the processor - which it planned to bury under a mountain of hype - was the tip of a wedge. AMD built a whole-market strategy around Hammer with high-powered partnerships, inventive marketing that ignored Intel's existence, strong engagement with grassroots and commercial developers, and the brass ring: Windows.

In April 2003, AMD threw a press conference to roll out its first Hammer processor, the 64-bit Opteron. At the very instant Hammer became Opteron, Microsoft lifted it into parity with Itanium on its 64-bit Windows road map. The commitment from Microsoft to build non-Intel architecture into 64-bit client and server editions of Windows was the grail that AMD had been chasing ever since Intel tore up its contract.

Whether dealing with Microsoft or with Taiwanese motherboard makers, AMD's approach to partnerships differs from Intel's. Intel has created an insular empire, whereas AMD is building its empire through open co-operation with partners. AMD's embracing of developers has been inclusive, not selective; a Hammer emulator was available to developers as a free download long before the technology became a chip. Whereas Intel might tap a third-party fab as a second source, IBM and AMD are working together to the benefit of both partners on cooler, denser, 65nm process technology at IBM's fab. AMD's second fab in Dresden is slated to start producing samples in 2005 and to be ready for full production in 2006. And AMD still has its original fabs in Dresden and Texas.

Assured of a stable supply and finally, albeit barely, in the black again, AMD is running for daylight. In just more than a year, Opteron grew from a new dual-processor technology with one first-tier OEM to a quad-processor technology with HP, IBM, and Sun signed on. Sun is committed to a 64-bit edition of its Solaris operating system for its growing line-up of Opteron systems. AMD is on target for eight-processor Opteron and has already extended its 64-bit technology down to notebooks, desktops, and workstations. AMD has raised the performance of and grown its 32-bit, Athlon-based processor line as well, creating new options at all levels from dual-processor servers down to value home PCs. Not only has AMD stopped waiting for Intel, it has created a broader product line and is now encroaching on Intel's unit sales.

Where AMD stands with IT
Today, IT operations can safely and affordably purchase Opteron servers as upgrades to Windows Xeon servers. And as InfoWorld benchmarks have shown, 32-bit Windows applications that rely heavily on I/O and smooth scalability will get an immediate and substantial kick from Opteron. In addition, 64-bit Windows and the development tools that follow will raise 32-bit enterprise app performance and capacity up another notch, making way for 64-bit optimised server software. This is the first time IT has been offered a three-stage migration path - 32-bit, 32-bit apps on a 64-bit OS, and pure 64-bit - on a single architecture; none of these steps requires so much as pulling a server out of the rack.

Those companies, organisations, and technologists leery of buying on potential can wait - Opteron will only get faster over time - or they can climb into pure 64-bit Linux PC servers now. AMD64 support has been merged into the Linux kernel tree for some time, so most free and commercial Linux distributions, including SuSE (now part of Novell), Mandrake, Gentoo, and TurboLinux already run on Opteron in 64-bit mode. Version 5.2.1 of FreeBSD is also running on Opteron. The full GNU suite of Linux development tools compile and debug Opteron code.

The toughest challenge AMD faces now is not surviving Intel's competition or ramping up supply; it's convincing businesses they want 64-bit capabilities anywhere but in high-performance servers. It's an easy sell for developers targeting Opteron, but beyond that, the benefits aren't obvious. Many will be enlightened by 64-bit Windows. On the desktop, gamers and enthusiasts will once again assume the role of convincers.

During 2005, AMD's strength and influence will grow, as new fabs and processes come on line. The 90nm process that AMD already has on line will be used to boost the performance and reduce the power consumption of Opteron, Athlon 64 desktop and mobile CPUs, and the Athlon 64 FX performance desktop product lines. In the second half of 2005, AMD plans to exploit the new process to bring dual-core (two CPUs on one die) Opteron and Athlon 64 FX processors to market. With Opteron's direct CPU-to-CPU interconnects, servers built with dual-core AMD processors can house 16 CPUs in one chassis with no logic - or associated overhead - to slow traffic between processors.

As the one company delivering stable, affordable processors for everything from home computers to eight-way servers, AMD looks like a modern-day, more enlightened Intel. Intel has remade itself more than once and won't allow itself to stay, if only in perception, a step behind AMD. But AMD won't ever kowtow to Intel again. And IT will never again be forced to submit to the price and technological power that Intel unilaterally decides the market needs.