Startup Ruffles AMD's Server Plans

SAN FRANCISCO (05/03/2000) - U.S. semiconductor maker Advanced Micro Devices Inc.'s (AMD's) server plans have been dealt a minor blow thanks to a recent change in plans by startup chip vendor HotRail Inc.

HotRail had been developing a chipset for AMD that might have enabled the Intel Corp. rival to offer its Athlon processor in two-way and four-way servers as early as the end of this year. A chipset is a collection of chips that surround the main processor in a computer.

HotRail had a change of heart about its work for AMD late last year. Spying a greater opportunity in the networking market, the company shifted its focus to developing chips that can be used in networking equipment to reduce data bottlenecks on the Internet, Rick Shriner, HotRail's president and chief executive officer, said in a phone interview yesterday.

"I think both markets offer a lot of potential," Shriner said. "I also think that one (market) is more available and moving faster than the other, and we obviously chose the one that is moving faster."

The chipset that HotRail was developing for AMD was very similar to the product the startup wanted to use for networking devices, so it was little effort for the company to change its plans, Shriner said.

HotRail unveiled two products Monday that stem from the work the company had been doing for AMD. The HotRail Channel is a device that can transmit data between two networking chips at up to 16G bps (bits per second), according to HotRail officials. The SkyRail Link is a device used to connect switches or routers up to 30 meters apart, and operates at 2.5G bps or 3.125G bps, the officials added.

HotRail hopes to sell its chips to networking and communications vendors such as 3Com Corp., Lucent Technologies Inc. and Cisco Systems Inc., The company expects to announce "a couple of significant customers" in the next two to three months, he added.

Yesterday AMD played down the impact of the fallout with HotRail. The company expects to release a chipset of its own making by the end of this year for use in two-way Athlon servers, said Bryan Longmire, an AMD manager, in a phone interview yesterday. The company plans to support four-way and even eight-way systems by the end of 2001 with the release of a successor to its Athlon chip codenamed Sledgehammer, he added.

"AMD has had plans of its own all along," Longmire said.

In the near term, AMD's main focus is on desktop PCs, not servers, noted one analyst. While AMD may have benefitted from HotRail's chipset in the longer run, the larger company probably had more sense than to pin its hopes on a startup, said Hal Feeney, an analyst with Pathfinder Research Inc.

"I'd highly doubt that a company of AMD's size had a business plan in place that depended on a startup company," Feeney said in a phone interview yesterday.

HotRail, in San Jose, California, can be contacted at +1-408-467-4451 or on the World Wide Web at http://www.hotrail.com/. AMD, based in Sunnyvale, California, can be reached at +1-408-732-2400 or on the World Wide Web at http://www.amd.com/.

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