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Forget market share, Opteron is a market cap maker

Billions in emotion

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IBM's story is the hardest to classify of all because of the company's myriad product lines. IBM's fortunes bob up and down from quarter to quarter on the back of strong mainframe sales during one period or weak services revenue during another. But again, you'll note that IBM has been a half-hearted Opteron supporter and has a slightly negative dip in its share price over the past two years.

While HP pumped out Opteron gear, IBM battled to defend its massive Xeon server chipset investment. Granted, IBM has still done well in the server market in the past 24 months, but it hasn't benefited from the buzz tied to Opteron. Investors are just as emotional as anyone else, and buzz can count for a lot.

The most obvious have-nots in our game are Intel and Dell.

Intel has been forced to deal with the reality that it's not living in a 90 per cent market-share world any longer. In fact, Intel's x86 chip share could slip to 60 per cent when all is said and done.

Investors have crippled Intel's shares due to the increased competition from AMD, and the company is now firing workers and selling off businesses to deal with the situation.

Dell too missed out on the Opteron boat and saw its server sales tumble from close to double-digit growth every quarter to almost no growth at all. Opteron backers such as Sun and Rackable Systems have munched away at Dell's revenue. (We've added RACK to the chart here.)

Investors rightly punished Dell for its miscalculation. Management kept demanding that customers were not asking for Opteron. Shareholders kept selling. So, in the last couple of months, Dell finally decided that it might need to ship AMD systems – and a lot of them – quick.

Dell's fall has been particularly embarrassing because it was the only major server vendor to have survived the dotcom bust in style. While HP, IBM and Sun struggled, Dell hummed along with double-digit growth. Then it missed out on the hottest processor in years and saw its business and share price dwindle.

(We've thrown SGI into the chart just for giggles. We don't need to spend time explaining why betting on Itanium in an Opteron world pushed SGI toward bankruptcy.)

Again, this is one of those uncomfortable exercises where any shred of dignity our thesis has could be erased in a month's time. Investors are fickle. Customers are fickle. Vendors are fickle. The have nots may turn into the haves given a change in the weather.

But it's for that very reason that we think the thesis is right. Sales and market share gains aren't the whole Opteron story. It's the Opteron afterglow that has helped out the vendors that were brave enough to back the fledgling chip. The emotions tied to picking a winner put a rosier hue on the already solid moves companies such as HP and Sun were making. Similarly, being tied to a then loser for irrational reasons crushed companies such as Dell. ®

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