AMD Looks to Redefine the Game

If I was a flower growing wild and free
All I'd want is you to be my sweet honey bee.
And if I was a tree growing tall and green
All I'd want is you to shade me and be my leaves.

-- From All I Want Is You by Barry Louis Polisar

Advanced Micro Devices (NYSE: AMD  ) just released an impressive array of new chips, tuned to a variety of special needs. Will they be enough to overcome Intel's (Nasdaq: INTC  ) high-performing Nehalem processors?

The new Opteron EE product line -- EE stands for "Extremely Efficient" -- caters to tightly packed data center environments where low power draws matter more than straight-up high performance. The EE series will run as fast as a standard Opteron chip, but within a 40-watt power envelope. The previously most efficient Opteron would draw up to 55 watts of power while doing the same work, and a standard model needs up to 75 watts.

These hefty processor-level improvements translate to about 13% lower power for a whole, power-optimized system. That makes the product very attractive to cloud computing shops and other dense environments. Sometimes, more processors per square foot of data center and per megawatt-hour of electric power feeds yield better returns on investment than higher performers with heavy power needs.

The EE won't beat Nehalem in most head-to-head benchmarks, but as you can see, that's not the point. Give Intel the single-processor absolute performance crown for a while -- and focus on taking market share in the massive-multiprocessor arena. I expect to see blade servers built around these chips by Hewlett Packard (NYSE: HPQ  ) , IBM (NYSE: IBM  ) , and Sun Microsystems (Nasdaq: JAVA  ) -- or Oracle (Nasdaq: ORCL  ) , as that company might be known in the near future.

Perhaps the best feature of the Opteron EE is that it should be a full-featured drop-in replacement for any other Opteron chip. These puppies are sorted out from the rest as part of the manufacturing and testing process -- some chips can run at higher clock speeds, while others draw less power at a certain speed. This lineup is the byproduct of high-quality manufacturing.

No word on the street price yet, but the not-quite-as-impressive Opteron HE product line sells for nearly twice the price of a non-HE chip at the same speed. I'd call this a high-margin return on a relatively low-cost investment, and there's a clearly defined market for these low-power chips.

If I were an IT director with densely packed server racks, I'd want a few of these beauties -- even if I were also buying Nehalem servers for my high-performance needs. AMD is back in the data center game for real. Now, let's see if it can parlay that into stronger margins and actual profits. Stranger things have happened.

Further Foolishness:

Intel is a Motley Fool Inside Value recommendation, and the Fool owns shares and covered calls of Intel. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Anders Bylund owns shares in AMD, but he holds no other position in any of the companies discussed here. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.


Read/Post Comments (4) | Recommend This Article (11)

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  • Report this Comment On April 24, 2009, at 6:01 PM, SnarfJabroni wrote:

    Shamless, Anders, shameless. Any time I see a Motely Fool new article positing whether AMD has "turned the corner" or "redefining the game", or waht have you...there is NO question who is behind it. Your perpetual pumping of this company hasn't worked yet....let me ask you, do you actually cover any OTHER company? http://www.fool.com/investing/value/2009/04/22/amd-turns-a-c...

  • Report this Comment On April 24, 2009, at 8:21 PM, jac2009 wrote:

    Anders -- Let me be more specific. You really don't seem to understand the particulars of the semi industry. As an 18 veteran of Intel having left in 2001 I know something about it, I have been consulting for the broader for the last 8 years for companies like Cisco, NetApp, IBM, Sun, SanDisk, Seagate, etc.

    First, you note the watt performance of this new chip is better than previous generations. This is part of the typical process improvement that take place in the semiconductor fabs (manufacturing parts) of ALL semiconductor companies. Further ALL semiconductor companies are focused on improving the power envelope of devices they produce for that get designed into consumer and commercial computing system devices.

    However, you miss THREE key things:

    a) Intel has a generation+ advantage in fab process technology vs. AMD which gives them a better opportunity to lower power requirements and improve yields

    b) You don't provide a comparison to Intel's current or future (publicly announced) roadmaps which are focused on reducing power consumption in the data center,

    c) You note that AMD is "sorting" for the lower power chips, which usually means they need to carefully sort all the die on a silicon wafer (die = the thing that goes into a microprocessor package) to find the ones that deliver the benefit you note. In the industry having to do this kind of sorting typically means they are not finding a lot of them through the normal automated process.

    Probably the BIGGEST miss of all however is a business one -- building complex products like microprocessors, requires tremendous capital (ability to design and build in VOLUME) and expertise (technical, business). AMD lacks both. Intel has both. If you are an investor, would you give AMD more money? If you were a hot shot microprocessor designers or marketer would you work for AMD? The answer is obvious.

    When is Motley Fool going to find commentators that know what they are talking about when in comes to technology in general and semi's specifically. MF, you need someone on staff that knows the IT industry top to bottom. You apparently don't have anyone.

  • Report this Comment On April 26, 2009, at 10:19 AM, ftkelly wrote:

    In the interest of disclosure, I have roughly equal amts of money invested in both Intel and AMD. It has become rare to read about AMD achievements, and for sure, they have given plenty of reason for questioning their viability over the years. They have also proven themselves to be a scrappy and resourceful competitor, and counting them out might suggest a motivation burdened with a need to be on the winning side even to the exclusion of innovation and improvement, much of which AMD has shown over the years. This "rooting" for Intel reminds me of NY Yankee fans in the 1950s - they might be the best act in town for now, but they are not the only act and they wouldn't be very good at all without the competition.

  • Report this Comment On April 26, 2009, at 11:11 AM, TEBuddy wrote:

    Seem to have some deeply biased commenters here. AMD beats INTEL plain and simple on performance per watt. YOU CANNOT DISPUTE THIS. You want comparables, OK, AMD 40 watt, INTEL 100watt, no so comparable now is it.

    MR 18 years in Intel has no clue what hes talking about either. Intel is pushing the manufacturing envelope and taking 3 ticks and tocks to perfect them to get something out of it other than more chips per wafer and increase margins. Sounds like he has years of consulting about managing. I have some time working in design and fabrication/production and understand the labors AMD goes through to make their products better. Everyone does sorting, I would test every single chip on the wafer prior to dicing, but these guys have to do it post packaging to assure any reliability I'm sure.

    I don't beat on INTEL, I own shares in both now since AMD tanked they are incredibly undervalued. INTEL has a better business, but AMD has better engineers in my opinion and can produce an entire package better than Intel can from chipset to cpu to gpu.

    I have a 45 watt Dual core desktop from AMD now, it runs awesome, 2.5Ghz speedy and ever so cool. I also have an Intel laptop because they win there in low power at 25 watt 2.3Ghz dual core. Each have the same graphics AMD HD3470 and the desktop is faster than my laptop in everything.

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