AMD Adopts HP’s Networking Solution & Server Technologies

AMD (NYSE:AMD) recently announced its decision to join hands with its long-time partner HP (NYSE:HPQ) to consolidate its data center offerings and improve virtualization. The move is slated to enhance its network capacity and improve performance. Since 2008, AMD has been trying to regain its share in the server market from arch microprocessor rival Intel (NASDAQ:INTC). The adoption of HP’s networking solution, the recent acquisition of SeaMicro, and the launch of bulldozer-based chips show AMD’s increased efforts to gain lost ground and gradually increase its server market share, which currently stands at 5.5%.

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Presently, AMD has twelve data centers, down from eighteen in 2009, and it plans to further bring down the number to three by 2014. It also intends to cut down its infrastructure by consolidating other network products likes servers and network latency so that the engineers can get higher utilization rates and quicker access to servers.

AMD will use HP 12500 and HP 5820 Switch Series to create a new private cloud data center, which is ideal for its heavy use of cluster and virtualization technologies. It also plans to deploy HP ProLiant BL465c G7 servers with AMD Opteron 6200 Series processors to improve computing power of private cloud, which performs up to 40 million engineering simulations per month. The server platform will support AMD’s business applications and services as well as the company’s virtualized environment. ^[1]

By adopting HP’s networking solutions and server technologies, AMD not only hopes to increase its network capacity and improve data center performance, but also reduce the environmental impact of datacenters by almost 50%. AMD already has a data center that it built in collaboration with HP’s Critical Facilities Services (CSF) team to meet constantly evolving business requirements with lower capital and operating costs. It plans to upgrade other data center sites with HP’s networking solutions in the near future.

Growing Server Market

Servers, which still offer potential for better margins, are growing significantly in the face of slowing PC market with the explosion of data and processing required online. In addition, the growth in cloud computing and server virtualization will result in greater sales of bigger, faster and higher-end servers. As per our estimate, the global server market is expected to almost double at the end of our forecast period, compared to the 2007 level.

With the anticipated entry of ARM based players, the improved virtualization and cloud center offerings could help AMD stay on track with the long-term goal of regaining its server market share.

We have a Trefis price estimate of $8 for AMD, implying a premium of 10% to the current market price.

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1. AMD Partners with HP to Improve Virtualization, Cloud Data Center Offerings, Cloud Times, April 30, 2012 [↩]