"But AMD has no credibility in the market at this point. If they do deliver the Hammer core in 2002, they have a long way to go to establish themselves."
Stutter Step In Servers Won't Help AMD
By Tom Murphy -- 12/17/2001
Electronic News
Last Monday was supposed to be the day when Advanced Micro Devices Inc. (AMD) launched its value Duron processor brand into the server market. However, the Sunnyvale, Calif.-based company pulled back on the launch and suspended it for an indefinite period, saying that its Athlon MP brand of processors is currently serving the needs of its customers.
Will the pullback of Durons for servers hurt AMD?
AMD is recalcitrant to state exactly how many customers it has or how many design wins it has achieved in the workstation, server and multiprocessing markets for its x86-compatible processors, but those markets have key significance for the company in 2002 and beyond.
AMD Athlon processors are well established in the consumer-focused PC market, a track record, some experts say, that improves the further away it gets from the United States. Indeed, the evidence is out there that Athlon processors have better market penetration in the Asia/Pacific region than they do in their home country.
But AMD executives said their key strategy this year is to maintain the 21 percent market share in the desktop PC segment and then flank chip giant Intel Corp. in both the mobile PC and multiprocessing markets for servers and workstations.
But AMD is finding the workstation and server markets to be a whole different ballgame than the desktop space, where at least one of the company's key value propositions — low cost — is not necessarily a factor. However, AMD could find it essential to establish its credibility here because in 2003, it will launch its Hammer processors into the very high-end PC and workstation markets, where credibility and long operating time are key.
"The performance of Hammer should be impressive," said Nathan Brookwood, an analyst for Insight 64 in Saratoga, Calif. "But AMD has no credibility in the market at this point. If they do deliver the Hammer core in 2002, they have a long way to go to establish themselves."
One of the key reasons for the pullback of the Duron for workstations and what AMD calls appliance servers could be that the chip was not qualified, Brookwood said. Workstations and servers have certain performance parameters that don't necessarily transfer from the PC world.
The qualification of a processor takes a tremendous amount of money, Brookwood said, and therefore someone at AMD most likely figured out that taking the Duron processor through the qualification process might not produce enough return-on-investment to make it worthwhile.
But while the Duron was pulled, AMD has yet to establish itself in the server market with its Athlon MP processor.
"Unfortunately, since the AMD Athlon MP was only recently launched in June, we are not able to quantify our success in terms of volume units sold in the market," an AMD spokesman said. "AMD plans to introduce additional model numbers of the Athlon MP per our road map."
That leaves AMD with all of 2002 to establish itself in this market. The company's upcoming Hammer core, due for release late in 2002, will represent its state-of-the-art technology and is supposed to give it an edge in its performance battle with Intel's Pentium 4 processor. The company has to appease a particularly fickle market since servers don't see the same type of volumes as PCs, and it has to convince OEMs that they have a definite advantage in using its processors. AMD has to convince server makers to use its processors over those made by Intel, which already has a track record in the market and third-party support from chipset vendors.
In order for Hammer to make a hearty debut in workstations and then start making its way down to PCs, AMD would do well to establish itself first with its Athlon and Duron brand. The pullback of the Duron by AMD sends the wrong message to that market.
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