AMD's 64-Bit Gambit
If you're AMD chairman Hector Ruiz, you've got only one response to Intel's competitive parry: Bring it on.
"If I'm a VAR, I want to sign on with the guys who conceived this from day one to be a long-term strategy, not a defensive strategy," Ruiz says. "The
additional competition will just strengthen the [64-bit] ecosystem, and it's a great time for VARs to get involved."
Ruiz has reasons to appear cocky. With his AMD64 architecture and its flagship Opteron CPU, he beat Intel to the punch in creating the category of 32/64-bit processors powered by 64-bit instruction-set extensions.
Then he convinced Tier-1 vendors IBM, Hewlett-Packard and Sun to snap up Opteron for use in enterprise-class servers--a vote of approval that has, in turn, sowed serious demand further down the reseller food chain.
"That has put a stamp of credibility on the platform that's difficult sometimes for the channel to provide on its own," says Gary Bixler, the AMD executive Ruiz has charged with managing the Opteron brand.
Moving forward, though, with Intel no longer content to play catch-up, the next act for Ruiz and Bixler may be tougher.
Consider that Intel's recently launched Xeon is fitted with its own set of 64-bit instruction-set extensions. Intel is also reportedly readying additional architectural enhancements, which could make Xeon more attractive to VARs in a head-to-head price/performance battle with Opteron.
So what's a VAR supposed to do?
"There are two schools of thought," says Ann Fried, chairman of Microway, a Plymouth, Mass.-based systems builder that makes both AMD and Intel servers. "One is that Opteron has a pretty solid foothold. Another is that if it says "Intel' on it, people will buy it. So my reaction is one of ambivalence."
"Now that Intel has answered AMD, how the chips are going to fall is anybody's guess," she adds. "But you've got to say it's going to impact AMD's market share because of people's loyalty to Intel."
For VARs, this latest battle between AMD and Intel is a good news, bad news story. Resellers who have put all their chips in AMD's corner might be forced to support Intel's technology if customers demand it. For Intel-centric VARs, though, the new Xeon plugs a major gap. As for resellers who build both companies' boxes, they may simply have to adjust their product mix.
"Certain apps will be best for Opteron, others for the new Xeon," Fried says.
Without a crystal ball, though, it's difficult to divine precisely what the early 2005 VAR landscape will look like.
"Intel is keeping up and is responding appropriately," says James Cunningham, server sales engineer at Bass Computers, a Houston-based systems builder that markets both AMD- and Intel-based machines. "But AMD is making all the right moves."
While VARs can change their system mix to go with the chip flow, one thing that'll be hard to do is compete against big-foot, Tier-1 vendors. With HP, IBM and Sun already on board the Opteron bandwagon, it's good new for resellers that Dell has to date demurred on AMD, deciding instead to remain an Intel-only house.
"[AMD is] the big hope of all of us systems builders," agrees Shawn Harty, president of NTSI, a Lowell, Mass.-based provider of workstation solutions that is firmly in the AMD camp. "We really can't compete with Dell in an Intel market. We need a solution that's higher-end and customizable, and that's where Opteron fits in."
Certainly AMD would be happy to sell Opterons to Dell, but it recognizes that VARs don't concur. The way Bixler sees it, the channel is "in disbelief" that Dell hasn't jumped in with Opteron.
"This is the biggest opportunity that Dell has ever missed," he says. "For the first time in a long time--if not ever--the channel can deliver something that Dell can't."
Dell Rumor?
But whether that will remain so is anybody's guess. In June, Tai Nguyen, a semiconductor analyst at Bala Cynwyd, Pa.-based Susquehanna Financial Group in San Francisco, issued a research report saying Dell was poised to introduce Opteron boxes. His prediction, which spread throughout the industry like wildfire, was firmly denied by Dell.
Nguyen is standing by his report. "They've [Dell] gone out to ODMs [original device manufacturers] in Taiwan and had motherboards made for the server market," he says. He predicts Dell will publicly adopt Opteron in the fourth quarter of this year.
Just as firmly, however, Dell says the report is erroneous, noting that it has recently introduced workstations based on the new Intel 64-bit Xeon and will soon debut new servers based on that part.
"We have plans for systems based on Nancona [the code-name for the new 64-bit Xeon]," a Dell spokesperson says. "We have no plans to introduce Opteron systems."
But AMD's Ruiz isn't giving up hope. "We still feel like we need to continue working with them, because I believe that it's in the best interest of their customers for Dell to offer that solution," he says. "And we don't give up."
Aware of Intel's tremendous marketing heft--and the fact that Opteron no longer has the 32/64 hybrid arena all to itself, AMD and its VARs are moving swiftly to capitalize on their current momentum and snare new converts.
That's the tack NTSI is taking in serving its base of scientific customers. "We've already doubled our sales for the first half of this year," Harty adds. "We're hoping we'll get a strong increase for the second half, too."
For the most part, VARs know they've got to hammer away at the idea they can deliver something that the Tier-1 vendors can't. Microway's Fried, for one, says she has seen time and again that their sheer size sometimes works against them.
"There are many customers, particularly in SMBs and universities, that would much rather deal with a Tier-2 vendor," she says. "They don't want to go with a Tier-1. We understand how to be responsive in a very specific way."
There's another stumbling block, though. Servers are anything but a quick sell. They're a cautious buy, and potential customers usually perform detailed evaluations before they take the plunge.
"Given how new Opteron is and how it's a different architecture, it has taken a lot of seeding," says Kevin Knox, AMD's director of worldwide enterprise business development. "People want to try this stuff out before they go ahead and place orders."
To grease the skids, AMD has put in place co-op marketing programs under which it assists its VARs by providing loaner systems for customer accounts.
Some of those resellers are happy with the help they're getting. But others wonder whether AMD's cutbacks in late 2002--during which it pared hundred of jobs and later took a restructuring charge of $313 million--have impacted its efforts to support its partners.
Microway, for example, is ecstatic with what it has seen. "We get great support," Fried says.
Miami-based systems builder Honor International, which makes both Opteron and Pentium 4 machines, is also pleased.
"They're good in the sense that they've come in and explained the technology to us," says president Ray Rueda. "They've provided samples and seed systems."
In contrast, Sam Chu, CEO of Polywell Computers, a San Francisco-based systems builder, says customers are enthusiastic about Opteron, but he hasn't seen much support from AMD.
And Harty of NTSI, who remains a big advocate ("our traditional base of customers is just dying to buy more," he says), nevertheless gives AMD poor marks for support.
"The reality is we have one sales rep who covers the whole Eastern region up in Boston here," he says. "They had a big reduction in staff 12 months ago."
For AMD's part, Ruiz says he's committed to correcting any shortfalls. "Anytime anyone feels that way, we're incredibly disappointed," he says. "I wouldn't hesitate a second to put whatever resources were necessary to cover any perceived service issues."
Maybe more than any single factor, the slow process of porting codes over from 32 bits to 64 bits has placed a drag on the growth of the hybrid 32/64 market. Early adopters in high-technology segments have come on board quickly; other sectors have lagged.
The availability of 64-bit operating-system software has aided Opteron's advance in the traditionally slow-moving server space. Linux distributions that support the processor are available from Red Hat, SuSE and others. And 64-bit versions of Windows XP and Server 2003, currently in beta testing, are expected later this year. Because Linux has long been embraced by the server community, the fact that 64-bit Windows is still in beta testing hasn't really hurt things.
On the desktop where Windows dominates and Linux holds only about a 3 percent share, it's a different story. Opteron's cousin, the Athlon 64 desktop processor, isn't expected to take off in a big way until 64-bit Windows XP ships later this year. For its part, Intel hasn't officially announced a desktop competitor to Athlon 64, although it has said it will be ready to launch such a part--probably a P4-class Prescott fitted with extensions--once Microsoft ships its OS.
"The reality is, the transition to 64 bits will be gradual," says Jerry Braun, the Intel product manager in charge of its new Xeon. "It will start in niches where large, linear, flat-address spaces can be beneficial. Databases are an obvious example."
Scientific niches are another clear-cut target. "The strategy of Opteron has been to penetrate our strong beachhead, which has been high-performance computing," says Patrick Patla, Opteron marketing manager at AMD. High-performance computing encompasses applications areas such as research, geophysical modeling (oil and gas), computer-aided design and electronic design automation. "Now, you're starting to see our strategic partners bring out platforms that address the other parts of the market," he says.
"When we look at where we're headed, it's the mainstream enterprise," AMD's Knox agrees. "That's Windows, SQL Server, Oracle, DB2--those types of applications are going to take us into the mainstream." He admits, however, that those apps won't kick in until 64-bit Windows is fully validated.
Once 64-bit Windows hits, AMD resellers intend to aim at the SMB market. "As soon as the software can take advantage of the chip, we'll see corporations move to it," Honor International's Rueda says. "There's a lag between the hardware and the software, and it's going to be at least six [more] months."
The rebounding economy may also help to accelerate the 64-bit transition. "Most of our channel partners are looking for a pretty strong finish to the year," AMD's Bixler says.
While VARs are praying for a continued rebound, that already seems to be happening for AMD. In little more than a year since its introduction in April 2003, Opteron has already carved out a share of nearly 5 percent of the 7.5 million-unit market for workstation and server processors, according to semiconductor analysts Mercury Research in Cave Creek, Ariz.
Although the cautiousness of the server market continues to cast a long shadow, Mercury principal analyst Dean McCarron has concluded that AMD is clearly doing well.
"For AMD to get the market share and the design wins--three of the top four OEMs--that they have, it's definitely a credible accomplishment on their part," he says.
AMD's success certainly prompted Intel to change its tune with the new Xeon--code-named Nancona--it unveiled in June. The 64-bit extensions it uses, called EM64T, are compatible with AMD's.
Rather than forcing ISVs to choose between differing extensions, Nathan Brookwood, principal analyst at Insight64 in Saratoga, Calif., is happy Intel kept the hatchet buried. "Intel deserves a lot of credit for deciding to be compatible with AMD, rather than doing its own thing," he says.
Still, Intel can't avoid sending out the subtle message that it has endorsed AMD's technology. "A year ago, Intel said, "Who needs 64-bit X86s?' Now they're saying, "You need it, and we've got one,'" Brookwood points out. "In that regard, it has cemented the perception of AMD as being technologically astute. It's clearly the first time I know of where Intel has had to go off and be compatible with something AMD did, rather than vice versa."
For Intel, that may rankle some. Xeon manager Braun thinks AMD is putting an awful lot of emphasis on 64-bitness. "Our side of that story would be that it's not a differentiator," Braun says. "A balanced platform is a lot more than adding 64-bit extensions to an architecture. It has to do with supporting faster memory, faster buses and faster I/O paths."
Those faster system-side technologies include the new PCI Express point-to-point interconnect, which Intel is introducing as a means of boosting I/O speeds, and next-generation DDR2 memory.
Braun says putting those technologies together will drive an overall increase in performance that's not just due to the speed of the processor.
Intel's intention to shine the spotlight on its external enhancements rather than the 64-bit extensions is evident in the nomenclature it uses for its new part. Nancona keeps the "Xeon" moniker of its prior 32-bit cousins. The only difference is the extended designation, "Xeon with 800-MHz system bus." (Intel says it's sticking with Xeon to add value to an already strong brand name.)
"It's an extension to the existing architecture," Braun says. "There's an extended register set. There are paths within the processor that are 64 bits and some that are 32 bits."
It's too early to tell how the new Xeon will be received. Analyst McCarron believes it will gain most of its adherents from existing users of 32-bit Xeons, rather than by stealing away potential Opteron customers. He also notes that Opteron is particularly strong when it comes to four-way servers. Here, there's an additional technical wrinkle: four-way Opterons compete with a separate Intel part dubbed Xeon MP. That device has yet to be updated with 64-bit extensions.
Microway's Fried agrees that four-way Opteron servers are a particular sweet spot VARs should be attentive to.
For the VAR looking ahead to mid-2005, rumblings that Intel may have only begun to fight back against AMD remain in the air. Several resellers who declined to be named say they have been briefed about an Intel plan to add its own on-board memory controller to a future Xeon. Intel's Braun declined to comment on the company's product plans, noting only that it will continue to emphasize platform-level features.
An on-board controller would enable Intel to effectively claim the same chip-levels as Opteron. That could reposition the marketing battle between the two from today's platform dance into an old-style microprocessor dust-up.
Sticking to his competitive guns, AMD's Ruiz is ready for anything Intel plans to dish out. "We're here for the long run," he says, "and we're not going away."