Let the chip war begin

AMD's Barcelona party kicked off Monday night in San Francisco, and the relief was palpable on many faces.

The company formally unveiled Barcelona, AMD's first quad-core server processor, a higher-performing version of its Opteron chip for server computers.

AMD executives, employees and partners seem ready to emerge from their bunkers after months hunkered down waiting for cover, in hopes the new chip will help it finally return to profitability.

Barcelona gives AMD that cover. "Barcelona was designed to win in four key areas: performance, investment protection, virtualization and energy efficiency," said CEO Hector Ruiz while onstage at the Letterman Digital Arts Theater inside LucasFilm's facilities.
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AMD's 'Barcelona' processor

Meanwhile Intel seems to be doing great after raising its financial outlook for the current quarter yesterday, citing stronger-than-expected demand for microprocessors and high hopes for the back-to-school shopping season. The announcement threatened to upstage a rival, Advanced Micro Devices, in its most important product announcement in years.

Intel, said it now expected revenue of $9.4 billion to $9.8 billion in the third quarter, up from its earlier estimate of $9 billion to $9.6 billion. The average forecast of Wall Street analysts calls for Intel’s revenue to be about $9.4 billion for the quarter, according to a survey by Thomson Financial.

The company also said it expected gross margin “in the upper end” of its forecast of 52 percent plus or minus several percentage points.

Intel’s margins disappointed during the second quarter, coming in at 46.9 percent, well below its forecast of 48 percent, because of lower average selling prices for its microprocessors.

After several consecutive quarters of losing market share, Intel in recent quarters has released a host of new multicore processors, including its first quad-core chip, while A.M.D. has suffered from pricing pressure and a short-term inventory glut. In July, A.M.D. reported a $600 million loss for the second quarter, its third loss in a row. The company is also still struggling to absorb ATI Technologies , the graphics chip maker it acquired last year for $5.6 billion.

But A.M.D., which has lately been gaining back market share as it works off inventory, is banking that its latest server chip will help it return to profitability. The new chip uses so-called quad-core technology, where four processors are placed on one piece of silicon, allowing greater performance and energy efficiency. A.M.D. executives said yesterday that they expected the company to have a strong second half.