Intel Trumps AMD with a New Server Chip


Intel (INTC) has announced the launch of a highly powerful server chip, the Intel Xeon Processor 5600 series. The company reports that "the new processors deliver two new security features -- Intel Advanced Encryption Standard New Instructions (Intel AES-NI) and Intel Trusted Execution Technology (Intel TXT) -- that enable faster encryption and decryption performance for more secure transactions and virtualized environments, providing data centers with a stronger foundation for cloud security."

The chip array not only offers more power but, according to the company, uses less energy than an earlier version. The industry has expected a similar chipset from Intel's smaller rival AMD (AMD), but Intel was faster on the draw.

The launch is evidence that Intel continues to use its huge R&D budget to best AMD, whose viability has been called into question because of its debt load. Last November, Intel agreed to pay AMD $1.25 billion to cover global antitrust litigation between the two companies. That helped give AMD the capital it needed to shore up its balance sheet. Intel still faces monopoly charges by the European Commission and N.Y. State Attorney General Andrew Cuomo.

It's too early to say how these cases might be resolved. But for the time being, size still trumps legal problems. Intel's sales last year were $35 billion, and its operating income was $5.7 billion. The company has over $14 billion in cash on its balance sheet, so its ability to spend on research is extraordinary.

AMD had $5.4 billion in sales last year and net income of $644 million. Without the Intel payment, AMD would have lost money. And AMD still has a debt load of $4.2 billion. Intel will have to lose a lot more legal decisions before its ability to outspend AMD is compromised.