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Justin Jaynes
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I graduated with a BSEE from NCSU. Following technology companies and developments is a hobby of mine when I have free time. A few years ago I started investing, and have tremendously enjoyed it. I try and share a unique view from an engineering vice an investor standpoint, and enjoy learning... More
  • Verizon And Advanced Micro Devices Collaborate On Microserver Cloud Implementation 10 comments
    Oct 7, 2013 9:33 AM | about stocks: VZ, AMD

    Today, a collaboration was officially announced between Advanced Micro Devices (NYSE:AMD) and Verizon (NYSE:VZ) in a joint venture to increase Verizon's cloud services infrastructure.

    Gives Credence To Microservers

    Here is an article on ZDnet which briefly explains the differences between traditional and microservers. Microservers are the relative new comer in the network world.

    According to iSuppli, microserver forecast is expected to grow exponentially over the next few years, tripling from ~400k shipments in 2013 to ~1200k shipments in 2016. Although there are certain niche workloads that are better served by microservers, these nich workloads are growing quickly as the world becomes more connected through the use of smart devices.

    Implications

    Last week a video aired on CNBC stating that Verizon worked directly with AMD to build custom hardware in an effort to save cost. At that time, I only posted the video as a Stock Talk because I did not have enough information to write a full article.

    Image taken from CNBC Video Clip, posted on Yahoo! Finance:

    (click to enlarge)

    What became apparent today is that AMD worked with Verizon by giving Verizon access at lower levels to AMD's IP, allowing Verizon tailor software and hardware to AMD's hardware, providing a more stable, predictable, and secure cloud network.

    Implications cited included a potential impact to companies such as Hewlett-Packard (NYSE:HPQ) or Cisco (NASDAQ:CSCO). Companies such as HP typically sell hardware to these clients, so this announcement represents a shift in revenue away from traditional server vendors. Noteworthy is that the AMD/Verizon announcement came on the heels of a similar announcement AT&T, although the hardware powering AT&T's infrastructure has not been announced. The big shift here is that larger companies are leaning toward designing custom hardware in an effort to cut costs.

    The Question Is Will The SeaMicro Servers Use AMD or Intel Chips?

    SeaMicro's current microserver offerings currently feature a mix of both Intel (NASDAQ:INTC) and AMD chips. In an interview with VentureBeat, it was unclear as to which chips would power the Verizon servers.

    SeaMicro used Intel Atom chips before AMD acquired it, and it still offers several models with Atom chips. But the new SeaMicro SM15000 will use AMD Opteron chips, Feldman said. That's a blow to Intel, which has the leading market share in chips for micro servers. Intel has announced a number of its own new products in micro servers, but there is always a danger that low-end micro server chips could undermine Intel's high-end enterprise server chip business. So Feldman believes that Intel will be cautious about charging into micro servers.

    So based on this comment, I do not think it can be unequivocally stated that these servers will be Opteron powered, but it sounds highly likely. Given that AMD has also given Verizon lower level access to AMD IP in order for Verizon to design custom hardware, I think it is even more likely the servers will use Opteron.

    Conclusion

    For further reading, in addition to the VentureBeat article linked to above, I recommend an article on the Wall Street Journal as well.

    In the press release it was stated that the efforts between AMD and Verizon spanned 2 years. This demonstrates the length of time it takes between when custom projects begin between AMD and a partner. Given the uncertainty of AMD's custom-business model, further design wins should denounce some of the FUD surrounding the new business model. It demonstrates that the fruits of labor will not be immediately evident, but also that big announcements could come at any time.

    Given this microserver announcement and the console ban being lifted in China, an analyst from FBR has raised his price target on AMD.

    Best case scenario for AMD is that this deal is utilizing Opteron server chips, leading to higher margins and an overall larger impact on bottom line. But regardless of chips used, in the article on the WSJ, Seamicro does disclose that Verizon is its largest deal ever.

    Disclosure: I am long AMD, INTC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Additional disclosure: I am long both shares and options in AMD. I actively trade both my INTC and AMD positions, and may add or liquidate shares or options at any time.

    Themes: long-ideas Stocks: VZ, AMD
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Comments (10)
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  • leechy
    , contributor
    Comments (97) | Send Message
     
    thanks for the lead :-) just felt like cheering AMD for their progress a bit when commenting on the news over there hehe cant wait for Kaveri and to see ARM GCN tabs in the wild....
    7 Oct 2013, 04:49 PM Reply Like
  • Intrinsic Value Asset Manag...
    , contributor
    Comments (195) | Send Message
     
    >>>"But the new SeaMicro SM15000 will use AMD Opteron chips, Feldman said. That's a blow to Intel, which has the leading market share in chips for micro servers."<<<

     

    Clear and to the point.... NO equivocation!
    7 Oct 2013, 10:06 PM Reply Like
  • Intrinsic Value Asset Manag...
    , contributor
    Comments (195) | Send Message
     
    >>>" But the new SeaMicro SM15000 will use AMD Opteron chips, Feldman said."<<<

     

    If AMD server head stating that the server in question will be using AMD's Opteron is not unequivocal.... what is?
    7 Oct 2013, 10:35 PM Reply Like
  • RandSec
    , contributor
    Comments (603) | Send Message
     
    There does seem to be something odd about taking 2 years on a project just to end up using standard product chips. A new equipment design project could take a year, but it looks like the basic SM15000 has been around for about a year already.

     

    Of course AMD-owned SeaMicro will use AMD chips if it possibly can. And it can. But 2 years also is about how long a customized chip design takes, as we saw with the games chips. Perhaps this is just the first shoe to drop, so to speak.

     

    For business reasons, I would expect a custom chip to be involved. That way, the customer buys something both better than, and also unavailable to, the competition. Owning something both designed for you and unique to you is much more attractive than just buying a box.
    8 Oct 2013, 07:51 AM Reply Like
  • Justin Jaynes
    , contributor
    Comments (3154) | Send Message
     
    Author’s reply » @Rand - shortly after writing I contacted AMD - AMD confirmed for me that there will be a mix of AMD and Intel silicon - not quite sure if the chip itself is custom, but there is (I think) some unique hardware aspects to it.

     

    http://bit.ly/15T7H0R

     

    I have very little information, except that both AMD and Intel silicon will be used. The article I've linked to on the register is a good read.
    8 Oct 2013, 08:30 AM Reply Like
  • RandSec
    , contributor
    Comments (603) | Send Message
     
    There are many references with a surprising range of topics: apparently journalists were aware of the story before the announcement. First is a well-produced video talking about the Verizon cloud concepts, saying that "they" (probably both Verizon and AMD) had re-designed the cloud datacenter, and filed patents on the work:

     

    -- http://bit.ly/GJm10G

     

    Patents may be as good as a custom chip against competition, but there still may be a chip:

     

    "AMD and Verizon co-developed additional hardware and software technology on top of the SM15000 server to improve performance and reliability as needed for enterprise-level service level agreements."

     

    -- http://bit.ly/19aVT7i

     

    "That architecture, says Feldman, also provides better security because each virtual machine is partitioned from every other on the server."

     

    -- http://bit.ly/GJm10H

     

    "Strict traffic isolation, data encryption, and data inspection with full featured firewalls that achieve Department of Defense and PCI compliance levels"

     

    -- http://vz.to/GJm10I

     

    While "virtual machines" obviously are software, hardware support for "strict traffic isolation" could make a lot of sense.
    8 Oct 2013, 10:49 AM Reply Like
  • Justin Jaynes
    , contributor
    Comments (3154) | Send Message
     
    Author’s reply » @Rand - there is also other articles - I can't remember which one, but a lot of the custom work seems like it is also in the load balancing aspects and firing up more quickly. I agree, it's exciting, and I think the street is not pricing it in accurately.
    8 Oct 2013, 10:56 AM Reply Like
  • RandSec
    , contributor
    Comments (603) | Send Message
     
    It may be useful to go back to the June interview video with the AMD semi-custom business VP about the development process:

     

    -- http://engt.co/1gnCQvH
    8 Oct 2013, 01:53 PM Reply Like
  • Justin Jaynes
    , contributor
    Comments (3154) | Send Message
     
    Author’s reply » @Rand - thank you! I had looked for that video before - I had read about the development of the consoles, and watched that video, and that video had some quotes that I was trying to find in writing.
    8 Oct 2013, 01:56 PM Reply Like
  • RandSec
    , contributor
    Comments (603) | Send Message
     
    @Justin Jaynes: I have seen it, but I guess your point is in the last (throwaway?) sentence:

     

    "[...] the SM15000s bought by Verizon use a mix of AMD Opterons and Intel Sandy Bridge-era Intel Xeons."

     

    That sounds a lot like what we read on the SM15000 descriptions, which the theregister.com journalist no doubt also just read. But I do not recall Verizon saying that. And we expect AMD to be essentially non-committal about custom project details, repeating only the public description. So none of this is really convincing.

     

    Certainly Verizon COULD use Intel; the question is whether they actually WILL, an which issue probably does not take 2 years of research to resolve. And neither Verizon nor AMD would gain from throwing it in Intel's face.
    8 Oct 2013, 09:43 AM Reply Like
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