Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):
IBM to Expand AMD Chip Use As Intel Steps Up Counterattack
Summary: IBM will today announce five new servers that will use AMD's Opteron processor, including two new blade servers. While IBM was the first systems vendor to adopt Opteron, it did so only in high-end models, in contrast to Sun Microsystems and Hewlett-Packard Co. which adopted the chips thoughout their server lines. The general manager of IBM's System X product line said that customers were requesting the AMD chips.
Comment on related stocks/ETFs: IBM (NYSE:IBM) lost server market share to Sun (NASDAQ:SUNW) and probably also to HP (NYSE:HPQ) during Q2, and actually saw declines in server revenue year over year. Part of the reason for that was likely IBM's failure to use AMD chips with better performance than comparable Intel chips. But now the two laggards in the server market, IBM and Dell (NASDAQ:DELL), are both adopting AMD chips more widely in their server product lines. Dell's announcement to adopt AMD chips was made on its May 18th conference call. That will increase the competitive pressure on the vendors who are using AMD chips already: HP (HPQ), Sun (SUNW) and Rackable Systems (RACK). IBM's expansion of AMD chip use is obviously incrementally positive for AMD (NYSE:AMD) and negative for Intel (NASDAQ:INTC).