AMD's crucial Sun win boosts Opteron prospects

One year ago, Advanced Micro Devices Inc. (AMD) President and Chief Executive Officer Hector Ruiz stood on stage at Comdex with former Guns 'N Roses lead guitarist Slash and exhorted the technology industry to prepare for his company's new hybrid processor technology that combined 32-bit and 64-bit capabilities. At the time, AMD's financial picture was clouded with layoffs and financing efforts, and many industry analysts and observers were skeptical about AMD's ability to introduce the chips on time and to generate interest among technology buyers.

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One year later, Ruiz this week joined Sun Microsystems Inc. Chairman, President and Chief Executive Officer Scott McNealy on stage at Comdex to tout the company's largest victory to date for its AMD64 technology: a commitment from Sun to use Opteron in a wide range of low-end servers and to collaborate on future technology development.

The momentum behind AMD and the Opteron processor is at its strongest point as the year winds down, as the combination of Sun's Solaris operating system and Opteron will give users an interesting choice when deciding what type of low-end server to buy, executives and analysts said Wednesday.

Sun once dominated the server market with systems based on its Sparc processors and Solaris operating system, but has been losing ground to servers from Dell Inc., Hewlett-Packard Co., and IBM Corp. that use less expensive processors from Intel Corp. and either Microsoft Corp.'s Windows operating system or Linux.

However, many corporations are still running important back-office applications on Solaris, and the ability to run a complete Solaris environment across all their servers will be very attractive to Sun's existing customers, said Souheil Saliba, vice president of marketing and strategy for Sun's volume systems products group, at a conference for analysts and the press at Sun's Burlington, Massachusetts, offices Wednesday.

And for customers who need an operating system on their low-end servers that goes beyond the capabilities of Windows or Linux, the option to purchase a low-cost server with an "industrial strength version of Unix" will help drive new customers to Sun, said Kevin Krewell, senior editor of the Microprocessor Report in San Jose, California.

The first Sun Opteron servers will be two-way and four-way servers, and will appear in the first quarter of 2004, Saliba said. The Santa Clara, California, company has plans to bring Opteron to a complete line of products from workstations to servers with eight or more processors, and has developed road maps that look out three to five years, he said.

A full production version of Solaris for the AMD64 instruction set is expected around the middle of next year, said John Loiacono, Sun's vice president of operating platforms, at the event Wednesday. Until then, Sun will offer either SuSE Linux AG or Red Hat Inc.'s version of Linux that have been ported to AMD64, which adds 64-bit extensions to the 32-bit x86 instruction set that runs most of AMD's and Intel's processors.

Sun's backing now gives AMD the support of two of the four major U.S. server vendors, with IBM announcing its support at the Opteron launch event last April. IBM's eServer 325 has been targeted at the scientific and high-performance computing community, while Sun's upcoming servers will give AMD a toehold in the large enterprise server rooms from which it has been mostly shut out thus far, said Dirk Meyer, senior vice president of AMD's computation products group.

For the moment, Sun will continue to sell its Sun Fire servers based on Intel's Xeon processors because certain customers are more familiar with Intel's technology, and a version of Windows for Opteron is not expected until next year, Saliba said. But if the Opteron servers can offer equal or greater performance than the Xeon servers at an equal or lower cost, Sun will have to look at standardizing its x86 servers on that chip, he said.

Now that AMD has secured the backing of two prominent server vendors, the Sunnyvale, California, company's attention shifts to Dell and HP. Neither company is likely to build Opteron servers any time soon, since each company would need the Opteron version of Windows to sell enough units to make their participation worthwhile, Brookwood said.

HP's situation is further confused by its strong partnership with Intel in designing and marketing the 64-bit Itanium 2 processor, and its relationship with AMD in selling Athlon 64 and Athlon XP desktop and notebooks, Brookwood said.

Both Sun and AMD hope their partnership can right their struggling ships. Both companies are unprofitable despite severe cost-cutting and the beginnings of a turnaround in hardware demand, and need new sources of revenue.

In many ways, Sun and AMD's partnership is an ideal coupling, Krewell said. Neither company is especially friendly with Intel, which has strong relationships with Sun's competitors and processors that compete against AMD in PCs and Sun in high-end servers, he said.

"I'm not sure who said it, but the phrase 'the enemy of my enemy is my friend' certainly applies here," Krewell said.