Google Switching to Advanced Micro Devices, Morgan Stanley Says
2006-03-01 17:21 (New York)

By Ian King
     March 1 (Bloomberg) -- Google Inc., which operates the most-
used Internet search engine, is switching its servers to run on
Advanced Micro Devices Inc. chips instead of those made by Intel
Corp., according to a Morgan Stanley report.
     Google, which has more than 200,000 servers, has started to
buy Advanced Micro's Opteron processors with almost all new
purchases, Morgan Stanley analyst Mark Edelstone said in the
report published yesterday. He raised his earnings estimates for
Sunnyvale, California-based Advanced Micro.
     ``Most of Google's near-term server purchases will use AMD's
Opteron for the first time,' Edelstone said. Google ``will help
AMD to enjoy a significant sequential increase in their server
business in the first quarter.'
     Winning Google as a customer may help Advanced Micro beat
analysts' estimates this quarter, San Francisco-based Edelstone
wrote. The switch may also come as a blow to Intel Chief
Executive Officer Paul Otellini, who sits on Google's board.
Advanced Micro, the No. 2 maker of computer processors behind
Intel, last quarter took more than 20 percent of the market for
the first time in more than four years.
     Edelstone, the No. 2 ranked chip analyst by Institutional
Investor magazine, raised his estimate for Advanced Micro's
first-quarter profit to 33 cents a share from 31 cents. He raised
his 2006 estimate by 10 cents to $1.70 per share.
     Shares of Advanced Micro rose $1.40, or 3.6 percent, to
$40.07 at 4 p.m. in New York Stock Exchange composite trading and
have gained 31 percent this year. Intel rose 20 cents to $20.80
on the Nasdaq Stock Market.
     Google spokeswoman Sonya Boralv said she wasn't able to
immediately comment on the Morgan Stanley report.

                           Market Share

     Google, based in Mountain View, California, uses a type of
server computer that is based on a standard PC chip to process
Internet search enquiries. Advanced Micro, Intel's only major
competitor for those types of microprocessors, had 21 percent of
the market in the fourth quarter, up from 18 percent in the
third, according to Cave Creek, Arizona-based Mercury Research.
     Santa Clara, California-based Intel's market share last
dropped to less than 80 percent of the $32 billion market in the
third quarter of 2001.
     Advanced Micro wooed computer makers to purchase its Opteron
server chip by adding the ability to process data in bigger 64-
bit chunks. That was ahead of Intel's Xeon, which was given that
capability more than a year later. Advanced Micro says its chips
use less power than their Intel counterparts, enabling companies
that run large numbers of servers to save money.

--With reporting by Jonathan Thaw in New York. Editor: Sondag.

Story illustration: To graph the share performance of Advanced
Micro and Intel click with on {AMD US <Equity> COMP <GO>} and
enter Intel's ticker, `INTC US <Equity>' in the lowest yellow
box. For a breakdown of Advanced Micro Device's sales by region,
see {AMD US <Equity> DES 7 <GO>}.

To contact the reporter on this story:
Ian King in San Francisco at (1) (415) 743-3548 or
ianking@bloomberg.net.

To contact the editor responsible for this story:
Emma Moody at (1) (212) 617-3504 or emoody@bloomberg.net.

[TAGINFO]
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AMD US <Equity> CN

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