As Intel Stumbles, AMD's Momentum Increases

If the news wasn't bad enough when Intel was forced on Monday to reshuffle its market-leading Xeon server processor line and its Itanium chip roadmap, it got worse Thursday for the chip leader when the latest market share numbers showed rival Advanced Micro Devices gaining additional ground in the third quarter.

AMD's share of the total x86 processor market grew to 17.6% in the third quarter, up from 16.2% in the second quarter, and 15.1% in the second quarter of 2004, according Mercury Research. Intel continues to control more than 80% of the market.

When counting only x86 processors used in servers, AMD saw its share grow to 12.7% in the third quarter, up from 11.2% in the second quarter, and up from about 5% in the second quarter of 2004.

Intel could see even more market erosion in the coming months, given the market momentum AMD is enjoying and the upheaval within Intel's processor portfolio, analysts say.

"Due to the cancellation of one of its flagship Xeon processors, we believe it could be difficult for Intel to recover its lost server market share until well into 2007," Chris Danely, an analyst with JPMorgan Chase, wrote in a report. "The product change calls into question Intel's ability to execute in the segment."Nathan Brookwood, an analyst with Insight 64, wrote that Intel might be hard-pressed to claim performance leadership with its Xeon product versus AMD's Opteron until 2009 at the earliest. "Of course, few IT buyers base their purchase decisions solely on performance," he wrote. "Some base their decisions on vendor reputation and past purchases, areas where AMD is at a decided disadvantage to Intel. [In] other factors, including power, thermal dissipation, and performance per watt … Intel's current line of server chips loses to AMD on all these measures."

Intel revealed on Monday that it is scrapping the Xeon MP platform it had scheduled for delivery in 2007, and will instead offer what it says will be a higher-performing platform that will for the first time eliminate the front-side bus mechanism used in virtually all Intel architecture processors. In its place will be a dedicated high-speed interconnection system that will be part of an associated chipset. In addition, Intel said it would be delaying introduction of the next generation of its Itanium 2 processor line that was originally scheduled for early 2006 until mid-2006.

Intel did not return phone calls on Thursday requesting a response to the latest market figures, or to further expand on its roadmap changes.

Ben Williams, VP of commercial markets for AMD, says the company plans to take fully advantage of any problems at Intel. "We believe we are going to continue to see share gains not only because of the acceptance of [computer makers] that are putting out additional platforms for multiple segments of the market, but because more and more commercial and enterprise customers are accepting AMD products and purchasing AMD products to run their datacenters and business applications," Williams says. "I think a lot of customers are getting tired of our competitor's roadmap continually rebooting and the showing of instability."

Intel's decision to begin transitioning away from its use of a front-side bus, which is used to move information on and off the processor, to a scheme that appears more in keeping with AMD's direct-connect architecture, has been a long time in coming, he says. "It's been very well known in the industry that a 20-year-old architecture, called a front-side bus, isn't the most optimal way to build systems any more to connect a system's I/O, processors, and memory," Williams says. "We have been saying that now since 1999."The latest market share numbers from Mercury Research come only a couple of weeks after market research firm Current Analysis reported that AMD-based desktop PCs are outselling Intel-based platforms in the domestic retail desktop PC market.

Toni Duboise, an analyst with Current Analysis, says that in the month of September, AMD for the first time sold more desktop PCs to the retail market in the United States than Intel. AMD had 52% of the market, while Intel had 46%. As recently as June, AMD's share was as little as 20% of that market. Duboise attributed much of the growth in the subsequent three months to the success Hewlett-Packard enjoyed with its AMD-based Media Center PC platforms, which accounted for 46% of all U.S. retail desktop sales in September.