Advanced Micro Devices Inc. overpromised and underdelivered on its last big product launch. It is determined to reverse that pattern this week, with a new chip dubbed Shanghai.The new member of AMD's Opteron product line, which serve as calculating engines in server systems, is a successor to a chip called Barcelona that was late to market when announced in September 2007 and had early technical problems. AMD's missteps with the Opteron family -- which commands higher prices and profit margins than chips for personal computers -- contributed to big losses for the company this year and helped rival Intel Corp.
So AMD executives said little about Shanghai until customers had tested it. The verdict, so far, seems to be thumbs up.
"We knew the performance results would be good, but they exceeded our expectations," said Paul Gottsegen, a vice president of marketing in Hewlett-Packard Co.'s server business.
Sally Stevens, director of platform marketing at Dell Inc., estimated that Shanghai delivered about 37% better computing performance per watt of energy consumed -- an important issue for customers worried about power bills. Dell, H-P, Sun Microsystems Inc. and International Business Machines Corp. say they plan to offer systems using Shanghai.
The Shanghai chips, which come in initial models that draw 75 watts and list from $377 to $2,149, can be plugged into systems that use AMD's Barcelona version with no hardware modifications. Both chips offer four processing units; the biggest technical benefits come from AMD's use of an advanced manufacturing process that creates smaller transistors that switch faster and use less power.
But AMD, which is hosting a meeting for analysts Thursday at its headquarters in Sunnyvale, Calif., still faces stiff headwinds. For one thing, Intel has been creating circuitry with similar dimensions for a year.
Aided by its own new products, Intel's 80.8% share of shipments of chips for PCs and servers in the third quarter is up more than four percentage points from the year-earlier period, according to the market researcher IDC, though AMD managed to boost market share in servers. Intel also next year is delivering the server version of a long-awaited design called Nehalem that it plans to introduce for desktop PCs on Monday.
A more pressing issue is the economy, which has raised questions about whether companies will curtail computer purchases. The concerns have hurt AMD's stock, which ended October at $3.50 a share -- far below its 52-week high of $13.27 in November 2007 -- and has subsequently slid further. The stock traded at $2.57, down 13%, in 4 p.m. composite trading Wednesday on the New York Stock Exchange.
"There is a lot of dread about the fourth quarter and first half of 2009," said Shane Rau, an IDC analyst.
But AMD's new chips are particularly suited for a task called virtualization, which allows customers to do more work with fewer servers and is expected to grow in popularity during the downturn. AMD previously eased some investor concerns with a deal to save money by spinning off its manufacturing operations to a new joint venture.
The company this week also is discussing moves to spur new uses for another class of chips -- called GPUs, for graphics processing units -- that are now mostly used with computer games or other specialized applications. The company on Dec. 10 is distributing a new driver program and other software to help further exploit GPUs, along with software for formatting video files faster. AMD also is unveiling new GPU hardware to be used along with server systems.
