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AMD Goes Green

Having written a few thousand hype-filled press releases in my time, I'm somewhat skeptical of any announcement that:

(a) comes from a consortium, and .

(b) promises sweeping change, but .

(c) depends on others to make the promised changes occur.

With that, I refer you to the so-called "Green Grid." Announced yesterday by Advanced Micro Devices (NYSE: AMD  ) , Sun Microsystems (Nasdaq: SUNW  ) , and IBM (NYSE: IBM  ) , this initiative is aimed at lowering power consumption in data centers by making servers more energy-efficient.

It's an excellent idea, to be sure. Servers housed in a data center consume power for every processor they use to crunch data. That, in turn, creates heat. Lots of heat. That's why those IBM commercials set in server rooms always have guys in lab coats. They're freezing their unmentionables off because of the heavy dose of air conditioning required to keep hundreds of servers from melting on top of each other.

Moreover, a sponsored survey of 1,200 IT professionals conducted last November found that 83% rank data-center cooling and power their top priority, yet only 20% said they have a plan in place to address the issue. The Green Grid initiative has even earned support from the Environmental Protection Agency and the Alliance to Save Energy.

Now, here's the problem: The tech industry is well known for wrangling over standards, and the real forces of change in this effort are server makers, says Jim McGregor, a principal analyst at industry researcher In-Stat. When I interviewed him for this story, he said that volume suppliers such as Dell (Nasdaq: DELL  ) , Sun, and HP will have to agree to new design standards that could significantly alter the way servers are made. The odds of that happening aren't good, because standards lead to sameness and commodity pricing.

The alternative, McGregor says, is for AMD to lead the market and enforce standards. But it's never had success in such an endeavor. And that's why this news matters to you, Fool. AMD has only recently transformed itself into a technology leader. As wonderful as that is and will continue to be for some time, Intel (Nasdaq: INTC  ) has the cash to reclaim the throne. Its forthcoming Woodcrest chipset is an important first step.

Deflecting such an attack will require AMD to establish pockets of market dominance, where the business case matters more than the bits and bytes -- witness Intel and its emergence in mobile computing via the Centrino chipset. The Green Grid offers a similar opportunity to AMD. How the company takes advantage of it, and whether it translates into cash at any time in the next five years, is anyone's guess. Better stay tuned, AMD investors.

Both Dell and Intel are Motley Fool Inside Value selections. Get anall-access passto Inside Value to find out which other stocks are helping chief advisor Philip Durell beat the market by nearly 4%. You'll also receive instructive lessons on valuation and company analysis. Give Inside Value a try; it's free for 30 days.

Dell is also aMotley Fool Stock Advisorrecommendation.

Fool contributorTim Beyerswonders when AMD will provide a processor for Macs. Not soon, probably. Too bad. Tim didn't own stock in any of the companies listed in this story at the time of publication. You can find out which stocks he owns by checking Tim's Foolprofile. The Motley Fool has an ironcladdisclosure policy.

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