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Analyst Report: AMD Wins Google

Is Google going gaga for AMD? A research report by Morgan Stanley claims it is.

"Based on our various research efforts, we believe that most of Google's near-term server purchases will use AMD's Opteron for the first time," wrote equity analyst Mark Edelstone in a research note. "We expect leading OEMs, such as HP, Lenovo, Sun, Fujitsu Siemens, and NEC to continue to increase the number of enterprise SKUs [stock keeping units] available in the market."

If the Morgan Stanley report is accurate, it would be an enormous win for AMD.

When asked to comment on the report, the chipmaker's statement was essentially a lateral toss.

"That report was speculation and we can't preannounce [potential customer] purchases," Pat Patla, director of servers and workstations for AMD, told internetnews.com. Patla noted that Google hasn't confirmed any development.

Google was equally non-committal in a statement e-mailed to internetnews.com:

"Google continually evaluates the price and performance of its computing infrastructure to guide purchasing decisions. We typically do not disclose details about our various supplier relationships."

The Morgan Stanley report said the equity research investment firm believes Google has 200,000 servers. Further, Edelstone noted a move to AMD for future purchases would "help AMD to enjoy a significant sequential increase in its server business in the first quarter."

A switch to AMD would not only be a loss of sales for rival Intel, but an enormous PR boost for AMD. Not only is Google a high profile customer of Intel, but its CEO Paul Otellini sits on the its board of directors.

Last October, Sun and Google announced a partnership agreement having to do with software distribution and development that also led to speculation Google would be making big hardware purchases from Sun , which has a number of AMD-based servers in its product line.

At the time of the announcement, Sun president Jonathan Schwartz said in his blog that "Google's acquiring a growing array of Sun products and technologies for their business."

But Google also mainly builds its own servers. Edelstone's report said recent research leads him to believe Google  has already started buying AMD Opteron processors.

AMD  has seen its server market share numbers rise considerably the past quarter. Mercury Research reported in January that AMD-based server shipments rose to 21.4 percent for the fourth quarter of 2005, a jump from the 17.7 percent estimate Mercury had for AMD in the previous quarter.

AMD's Patla said several research firms have estimated AMD now has a forty percent share of the four-way server market in the U.S.

At its Intel Developers Forum last August, power conservation and performance per watt was a recurring theme that is likely to be talked up at the same event next week in San Francisco. At the August IDF, Google Fellow Urs Holzle joined Otellini on stage to underscore the threat of increasing power costs.

"Power costs could soon dwarf hardware costs," warned Holzle.

"Every Google service sees continuing growth in computational needs," Holz continued. "The more computation required per query drives up our computational needs and it's too big for a single machine. Multi-core CPUs gets us extra throughput running processes in parallel and it's changing the power picture because it requires much less power than adding a new CPU."

In his report, Edelstone said "we believe that the compelling performance per watt attributes of Opteron is what drove the Google design win."



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