NEW YORK (CNN/Money) -
By most accounts 2003 has been a great year for Advanced Micro Devices. Consider the following accomplishments:
First, the Sunnyvale, Calif., semiconductor company beat market leader Intel (INTC: Research, Estimates) to the punch by releasing the first desktop-based 64-bit processor.
Second, Microsoft (MSFT: Research, Estimates) announced that it will base its 64-bit version of Windows XP on AMD's chip designs -- not Intel's -- exposing for the first time a fissure in the previously unassailable Wintel mountain. Third, AMD's stock price has nearly doubled in the last 12 months.
With that in mind, next year will have to be pretty spectacular to top the one AMD (AMD: Research, Estimates) just recorded. But some elements are aligning that could pave the way for a big 2004 for the company.
Sometime around midyear, Microsoft will release the 64-bit version of Windows XP and a service pack for the program that is expected to include some major security enhancements.
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Some of those features will be tailored for 64-bit chips, which means that they won't function fully with Intel's chipset on the desktop. To completely realize the security enhancements, the desktop computer must be running a 64-bit chip, and right now AMD is the only one selling those.
The announcement doesn't seem dramatic enough to beat 2003's gains, but it's quite a coup for the company. "Security is one of the top, if not the top, priorities for our customers," says a Microsoft spokesperson. As such, you can bet on Microsoft calling attention to its enhancements through marketing campaigns.
AMD will also likely promote its security advantages. "You'll see us and our partners out marketing this benefit," says John Morris, desktop product manager at AMD.
Intel used a similar marketing strategy when it introduced its Centrino mobile-computing platform. The company realized that the Centrino chipset's greatest strength was the lifestyle change it enabled, and smartly played that up in its campaign. Look for Microsoft and AMD to do the same with security enhancements next year. "Everyone has been hacked or knows someone who has been affected by a virus attack," Morris says.
Thus you'll be hearing a lot about "buffer overflow," a weakness that hackers love to exploit. While many security solutions put up walls at the server level (where both Intel and AMD have 64-bit solutions and Intel is the dominant player), buffer overflow affects desktop machines. Hackers take advantage of it to commandeer thousands of PCs to crash Websites.
Enhancements that guard against buffer-overflow attacks will provide peace of mind for consumers, and corporate IT managers will be interested in purchasing the technology to prevent their companies from aiding and abetting hackers.
"If your company has a lot of desktops, you might buy AMD to protect your infrastructure," says Rob Enderle, principal analyst at the Enderle Group. The 64-bit security enhancements are "enough to put AMD on the short list of corporate purchasing considerations," he says.
Intel is keeping mum on its plans to introduce a 64-bit desktop version of its Itanium processor, but don't look for the industry leader to take AMD's affront lying down. "I don't think [Intel's] in a hurry," says Shane Rau, an analyst with IDC. "They'll wait and see how AMD does, but they have their own road map in mind and they're sticking to it."
Should AMD and Microsoft's security message resonate with corporations and consumers alike, however, look for Intel to take a detour in 2004.
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