Sun shines on Intel's future

During that period, Dell started using AMD chips, Apple started using Intel chips and perhaps more significantly the leadership at Sun Microsystems changed - with Scott McNealy ceding his consistently anti-Wintel position to Jonathan Schwartz.

There are some new realities in the X86 business. The rise and rise of AMD's Opteron forced Intel to re-assess its microprocessor plans over two years ago. The guys who run servers at big businesses and corporations were the pull factor in the adoption of the Opterons but it could be argued that AMD itself failed to take advantage of the 18 month to two year lead it had over Intel on the server front.

Intel has always had many advantages over AMD - principally in terms of financial and manufacturing clout - when you're building fabs, the two are practically synonymous. While AMD is only now building up its 65 nanometre products, Intel declared just a week ago that it was ready to make chips at 45 nanometres. Some argue that there will be way too much capacity when three 12-inch fabs producing 45 nanometre chips come online during next year, but sheer volume is not the only consideration here. Technology is the force that drew big business to the Opteron and that remains true for 2007 and 2008. While it's likely that AMD's products will be able to once again compete successfully with Intel in Q3/Q4 this year, nothing stands still in the CPU business.

Intel also has the clout to strike big deals with Sun, especially so now that McNealy's influence has waned. We can safely forget the RISC versus CISC wars now - Intel told us as long back as 1991 that it wanted the workstation market and it wanted to take it from Sun. We won't mention the Itanic much here - that doesn't seem in the slightest bit relevant to any Sun-Intel discussion any more.

What AMD has successfully done is to provide a meaningful alternative for the tier one vendors in terms of providing a second supplier which allows them to bargain with Intel more effectively. It could be said that in this process the chief sacrificial victim for AMD is its once powerful relationship with the distributor and re-seller channel. But gone are the days of Intel Inside, provided AMD can play catchup fast and once more provide some compelling technology to give Chipzilla a run for the money.

We do not yet know the terms and conditions of the Sun-Intel deal to be announced, and we may never know them. But AMD must be wondering how much the deal will affect its relationship with Sun over the next 12 months. The problem for both Intel and AMD is that the tier one vendors now have choice, and barring a catastrophe for the CPU manufacturers, that puts the cart where it should be, behind the microprocessor workhorse. µ

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