IBM may launch AMD-based servers

Deal would be AMD's biggest move yet into corporate market

IBM is to unveil a new line of front-end network servers using dual Athlon processors from AMD, according to a report in industry journal Electronic Buyers' News. The move would be AMD's most significant move yet into the market for enterprise PCs, servers and desktops, now dominated by Intel, the world's largest chip maker.

AMD declined to comment on the report.

Sun Microsystems is building AMD chips into a low-cost front-end server, but it uses the older K6-II processor. Other PC manufacturers, such as Compaq Computer, NEC and Micron Electronics, have already begun selling Athlon- and Duron-based workstations and business desktop PCs.

AMD has found success in the consumer market with Athlon, introduced in 1999, but so far has failed to make significant inroads with more lucrative enterprise buyers. The company is pinning its hopes for the corporate market on a next-generation family of chips called Hammer, due at the end of this year.

The company has worries other than its market share, however. Robertson Stephens said on Friday it lowered earnings estimates on AMD because the slowdown in the personal computer market has spread to AMD's non-PC memory business.

"Intel last night in its pre-announcement conference call indicated that the slowdown seen over the last few quarters in the PC market now has spread to its non-PC related businesses -- namely, server, cell phone, and networking products -- across all sectors and geographies," analyst Eric Rothdeutsch said in a research note.

Rothdeutsch cut the estimate for 2001 to $1.50 from $1.90 per share, and cut the 2002 estimate to $1.90 from $2.15, because of AMD's large exposure to flash memory predominantly used in cell phones, he said.

AMD shares closed down $2.70 to $23.30 in New York Stock Exchange trading on Friday. The stock's 52-week range is between $13.5625 and $48.50.

Reuters contributed to this report.

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