Opteron Won't Kill Xeon... Yet

As tough as it was for AMD to launch its x86-64 Opteron, the company will have a tougher road ahead making a dent in rival Intel's market share, according to analysts.

After four years of research and product development, the Sunnyvale, Calif.-based semiconductor maker Tuesday took the wraps off of its "Sledgehammer" processor. The chip is designed for servers and workstations. It's desktop counterpart, the Athlon 64 (codenamed Clawhammer) is scheduled for a September 2003 release.

Most significant about Opteron's new architecture is that it runs current 32-bit applications but gives buyers a transition path to 64-bit computing rather than the start-from-scratch approach of Intel's 64-bit Itanium family.

The company is so confident about the capabilities of its 64-bit line that back in November, AMD President and CEO Hector Ruiz called it a "Xeon-killer." The company even maintains the chip will best Itanium's proprietary EPIC architecture. Already partners like Adaptec; Arima; ATI; Computer Associates; Cadence; Cray; LSI Logic; Mandrake; Mentor Graphics; MSI; National Semiconductor; NVIDIA; Oracle; Red Hat; Silicon Image; Sun Microsystems; SuSE Linux; Trident; and UnitedLinux have pledged support for the Opteron server chips. AMD says all the top-tier vendors are looking at ways of using the processor.

But even with Microsoft and IBM standing by its side at the launch Tuesday, analysts say the real test will be how well the rest of enterprise buys into AMD's migration strategy.

"They're not going to take tremendous share from Intel, but it is significant from AMD's perspective," Gartner analyst Joe Byrne told internetnews.com. "The people who are attracted to Opteron are the same that are attracted to AMD today. The beauty of the AMD strategy is that success is not contingent on how fast they run but on how they allow old code to run faster. There has to be systems based around the Opteron and it has to be stable. Ideally the Microsoft and IBM would have compatible software and hardware available today. The second best scenario is to have support, which is what they did. It does look like they are being aggressive in pricing, but it will be awhile before we see the true industry impact."

Microsoft repeated its commitment to 64-bit computing adding that a beta version of Windows Server 2003 will be available in mid-2003 but not by Thursday. IBM, which will build an Opteron-based server platform, also pledged to use the technology in its super-computing on-demand community. Fujitsu-Siemens announced it plans to offer a high-end line of graphic workstations based on Opteron.

"These things are kind of chicken and egg situation, where no one wants to use technology that no one else is using," he said.

AMD's way of fighting that battle was to approach 2-way systems first.

"The 2-way systems are where partners are now," AMD Senior Branding Associate John Crank told internetnews.com. "What you find is that the infrastructure is quicker to market in a 2-way environment than in a 4-way and 8-way one."

AMD is still planning on releasing 1-way and 8-way versions of its chip in the second quarter of 2003. Part of that is reflected in its gutsy new numbering scheme. The first digit in the model number communicates scalability, and represents the maximum number of processors supported by that model number

The company said its other strategy is coining the term "AMD64-bit" replacing x86-64 as the scalability identifier.

"It's not just an AMD thing," Crank said. "This establishes a whole brand new design category for ISVs to count on."

UBS Warburg analyst Thomas Thornhill says the success of Opteron is really going to be not so much a question of performance at this point in time but of the ability of AMD to sustain that performance because the market is not static.

"There have been numerous cases of processors that have been introduced to market at a point and time where they offered performance advantage but never achieved critical mass to maintain the required reinvestment in R&D," he said.

Speed-wise, Intel will continue to hold the clock-speed advantage. Its Xeon currently peaks at 3.06GHz. However, AMD might well win the performance race -- it's shown estimated 32-bit benchmark results that show a 2.0GHz Opteron comfortably ahead of the 2.8GHz Xeon.

Another point of contention is that IT spending is not as wild as it once was and that companies will be reluctant to replace their systems just because the technology has improved.

"There are an awful lot of people concerned with making any real, substantial change in their server platform," said Meta Group analyst Steve Kleynhans. "There's always a perceived risk with moving away from Intel. This isn't due to anything AMD has done wrong, it's just the reality of today's marketplace. People are very risk averse and would rather do what they've been doing."

One area that Gartner Research fellow Martin Reynolds sees potential is in parallel servers and systems running Linux.

"When you put a cheaper processor into a $10,000 infrastructure, you can see savings. If it's going into a $600 box then it's not going to make that much of an impact," Reynolds said. "As for Linux, it will run great on 64-bit since there are so many 64-bit applications designed for Linux and there aren't as many licensing fees."

No one denies that AMD faces an uphill fight against Intel, but there has never been so much buzz surrounding an AMD server processor, nor such promise for truly competitive performance and scalability -- both for entry-level and midrange servers, and for four- and eight-way systems in the $10,000-and-up segment that today's Athlon MP has had to cede to Intel's Xeon MP and Itanium 2.

But how well AMD's "32-bit today, 64-bit tomorrow" strategy pays off is one matter that remains to be seen.

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