The Duel Over Dual

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In August 2005, Advanced Micro Devices invited about 30 channel partners to a demonstration at its Austin, Texas, headquarters. Technicians placed a box with one dual-core processor next to another with two single-core processors. They were running the same routines.

Jaws dropped as the dual-core machine scorched the two-processor machine, recalled Jason Voncordsen, general manager of Bass Computers, who was at the demonstration. "We were amazed because it was close to twice as fast," he says.

That presentation and others have been taken to heart by builders and resellers. In their ongoing battle with the titans of the computer industry, makers and marketers of generic "white-box" servers say dual-core processors have become a vital arrow in their quiver. Call it the duel over dual.

Just how big a dent have dual-core processors made in the server market?

Dual-core servers accounted for roughly 3 percent of x86 server sales and 6 percent of white-box server sales in 2005, according to IDC research analyst Jed Scaramella. Those numbers, however, represent only the first wave of a long multicore tide, vendors and analysts say.

Bill Carr, CEO of B3 Computers, a builder of white-box machines running Sun Microsystems' Solaris, says dual-core systems accounted for three-quarters of recent server sales. Scaramella notes that, while AMD rolled out its dual-core Opteron processor in April 2005, Intel didn't counter with the first of its dual-core versions of the Xeon chip until that September. Intel's transition of the Xeon line to dual-core technology during the next 12 to 18 months will jump-start the technology, IDC predicts. One reason: Intel's delay will give Dell, an exclusive Intel shop and the No. 2 server vendor by volume in 2005, a full dual-core lineup.

Although OEMs also will be riding the dual-core wave, i-Value.com analyst Christopher Gardner says makers and marketers of so-called "white-hot boxes"--low-cost but high-performance servers--have the most to gain. He compares the server business to that of cornflakes, where makers of low-priced store-brand generics have grabbed market share from cereal giant Kellogg's.

"Intel is really making the cornflakes," Gardner says. "You've got IBM and Dell and others packing it up and putting it in a pretty box. Those customers who are price-sensitive may not buy the higher-priced product."

The dual-core machines may give resellers of white-box servers entre to the coveted corporate market, long a stronghold of companies such as IBM and Hewlett-Packard. "You're going to see [white-box servers] in the corporate environment and not just in small businesses," Gardner says, citing Credit Suisse First Boston, which, for example, was very much on top of Linux and moved toward open-source software. "I think they'll recognize the opportunity here and jump on it," he says. "IBM and Dell are going to be pressured from a margin standpoint."

Strength in white-box servers will build as Intel and AMD move beyond dual-core technology to quad processors, says Rob Lineback, senior analyst at Scottsdale, Ariz.-based IC Insights.

"Next year, we'll be waiting for the quad-core processors to be rolled out," he says. "On the road map, there are even eight-core processors further out."

Until now, OEMs have dominated the server market, with the top five vendors--HP, Dell, IBM, Sun and Fujitsu/Siemens--accounting for almost three-quarters of the 7.6 million servers shipped, according to research firm Gartner. But those figures tend to undercount the fragmented white-box market, Voncordsen says.

"My guess is we're probably underestimating how big this is," adds Rob Enderle, principal analyst at the Enderle Group.

NEXT: Increasing the white-box oppportunity.