The processor market is more fragmented than the hard drive in your mother's computer. The players in this industry are only slicing the pie in ever-thinner slices, too.
The latest example comes from Advanced Micro Devices (NYSE: AMD), which cut the recently introduced high-end server chips in half, added a few nifty power-saving features, and sells the end result as a special-interest product for cloud computing projects. The new products, known as the AMD Opteron 4100 series, will mostly show up in custom-built servers that are meant to serve up large clusters of virtual servers.
AMD has named a few hardware partners, but the end users in this narrow sector typically don't talk much about their hardware choices; if Rackspace (Nasdaq: RAX) or Amazon.com (Nasdaq: AMZN) were to install Opteron 4100 chips in their cloud server farms, we'll probably never know about it. For the same reasons, single-system builder champs Hewlett-Packard (NYSE: HPQ), Lenovo, and Dell (Nasdaq: DELL) are not very likely to bring 4100-based servers to market anytime soon.
That doesn't mean that AMD is wasting its time, though. Sales are sales, even if nobody breaks them out in press releases and presentation slides; AMD is sure to ship these chips by the pallet to a range of anonymous customers and happily pocket the revenue. It's a smartly positioned product line with a tight, narrow focus, and all of it is priced to move. Intel (Nasdaq: INTC) will lose a little bit of market share in the server space to the 4100 series.
After several lean years, AMD is back in black and poised to perform, though the meat and potatoes of the company's strategy won't be served until next year. Buyers of this stock still need a healthy dose of patience. No matter how AMD slices up the total market, neither this wave of chips nor the next will ignite the rocket engines right away.
Or will they? Discuss the matter in the comments below.
