Just two days after Intel (Nasdaq: INTC ) announced that it had landed a deal with Sun Microsystems (Nasdaq: SUNW ) to begin supplying microprocessors to its servers by the end of the year, CNET News is reporting that Google (Nasdaq: GOOG ) will also begin using Intel server components in high volume.
In addition to providing yet another blow to Advanced Micro Devices (NYSE: AMD ) , the deal is noteworthy for the method in which Intel landed Google. According to Pat Gelsinger, a co-general manager of Intel's Digital Enterprise Group, his team has "been maniacal" in designing a custom board for Google. Among many other factors, the designers had to deliver lower power, cooling, and memory costs, and better server performance.
This victory serves notice that Intel has responded to AMD's competitive challenge, which seems to have peaked last year, when the smaller chipmaker snared some of Dell's (Nasdaq: DELL ) business away from Intel. It should also help Intel increase the percentage of components it sells to the other leading server manufacturers, such as IBM and Hewlett-Packard.
Moreover, to the extent that Intel has configured an innovative solution to the power and cooling problem, it could also win more business from large companies that purchase servers in high volume, such as Yahoo! (Nasdaq: YHOO ) and Microsoft (Nasdaq: MSFT ) .
These companies operate huge data-server farms, and the amount of energy they consume is so extraordinary that they have been desperate to address the problem. Google's decision to switch some of its business to Intel tells me that the chipmaker's "maniacal" team has fashioned at least a partial solution to this problem, in a manner that other large companies could find appealing.
AMD will undoubtedly respond. It will be interesting to see whether its forthcoming quad-core Barcelona processor -- which is expected to have 40% better performance than Intel's Clovertown processor -- is also more energy-efficient.
If so, the ball will again be back in Intel's court. But my guess is that, with a maniacal grunt worthy of Maria Sharapova, Intel will respond emphatically.
Intel's inside the Fool:
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