Sun said the Intel-powered servers will “complement” its popular server offerings for corporate and telecommunications customers, which now are powered by AMD chips exclusively. Sun will start using the Intel chips in the first half of this year.
The companies also said Intel will distribute and support Sun’s server operating system, called Solaris, which competes with a version of Microsoft Corp.’s Windows software. Intel is a longtime partner of Microsoft.
Sun is trying to boost its presence in the server market by teaming up with the world’s largest maker of server chips. According to the latest server market-share figures from market researcher IDC, Sun claimed fourth place in worldwide server revenue.
At a press conference, Sun Chief Executive Jonathan Schwartz said running Solaris on AMD technology exclusively “misses the majority of the marketplace.”
“We’re excited about Intel’s long term Xeon road map and the performance we’re seeing with Solaris and Sun Java on the Xeon platforms,” Schwartz said.
Although Sun will still use AMD server chips, the agreement gives Intel a foothold with a Silicon Valley hardware maker that had long been a vocal supporter of AMD’s server chip technology.
AMD shares fell as much as 2 percent in Wednesday trading, while Sun and Intel shares were little changed.
Intel has been winning over more customers with a new chip architecture it unveiled this summer. The company unveiled its new Xeon server chip in mid-2006 in a bid to win back business it lost to AMD in the server market since 2004.
Apple Inc. switched to Intel chips last year. Before Monday’s announcement, Tim Luke, semiconductor analyst at Lehman Bros., said the Sun deal won’t yield a “major impact” on Intel’s overall sales.
However, Luke said the deals give the market the perception that Intel’s improving its competitive position in the server business after AMD gained market share and took over the technological lead in the market in 2005.
IDC said that during the third quarter of 2006, Sun had server revenue of $1.3 billion, or 10 percent of the market’s total sales, up from 8.9 percent in the same period of 2005. The report showed that Sun trailed larger rivals International Business Machines Corp., Hewlett-Packard Co. and Dell Inc.
Sun’s deal with Intel is seen as helping Sun capitalize on its recent share gains.
“We’re looking at this as a way to offer differentiated products,” said John Fowler, an executive vice president at Sun.
Luke estimated the pact between Intel and Sun could cause AMD to lose between $50 million and $75 million worth of its estimated total 2007 sales of $5.6 billion.
Since September, AMD has cut prices on some of its Opteron server chips by as much as 47 percent.
Sun has been a big vocal backer of AMD the past couple years.
Sun started shipping servers using AMD chips in early 2004, ending a relationship it had with Intel that dated back to the late 1980s. AMD’s success in the server-chip market has helped it take overall market share from Intel in the so-called x86 microprocessor market.
Citigroup analyst Glen Yeung estimates AMD ended 2006 with 23.7 percent of the market for PC and server chips, up from 16.1 percent in 2004. Those gains came at the expense of Intel.
An AMD spokesman declined to comment on whether the Sun-Intel alliance may stunt some of its market share gains. “We’ve always been advocates for choice,” said spokesman Phil Hughes.
Industry watchers claim AMD’s stale product line-up and Intel’s resurgence is slowing AMD’s momentum. Last summer, Intel rolled out new chips for PCs and servers. AMD plans to release a new server chip in mid-2007, which Sun plans to use.