The battle between Intel Corp and Advanced Micro Devices Inc for server market share heated up on Monday with AMD's release of a six-core Opteron server processor codenamed Istanbul.

But AMD's celebration may be short-lived: Intel is due to launch its own eight-core Nehalem EX chip in the first quarter of 2010.

Analysts say their back-and-forth will do little in the short term to affect the duo's market share.

AMD, which gained server market share when it launched its Opteron family of processors six years ago, has struggled to maintain an edge since its much larger competitor released its own 64-bit processor in 2004.

Istanbul will let AMD catch up and get a lot closer, but I don't think it will allow them to beat Intel, said Real World Technologies analyst David Kanter.

Intel is hard to beat on performance benchmarks and has developed a technique that allows each core to handle multiple instructions at once -- something AMD has not done -- and says is not always useful, Kanter added.

Intel and AMD have clashed in past years over performance and price, and squeezing as many cores, or processors, into a single microprocessor has been one way to boost benchmarks.

Intel now supplies about 89 percent of so-called x86 server chips worldwide, while AMD supplies the remaining 11 percent, according to IDC analyst Shane Rau.

Intel had dominated the server chip market, with a greater than 95 percent market share in the early part of the decade, Rau said. But AMD gained traction with the 2003 introduction of the Opteron and hit its highest market share - just under 26 percent - in the second quarter of 2006.

Its market share was cut in half a year later, as Intel switched to its Core architecture, and that loss was compounded when AMD was late with its Barcelona chip in 2008, Rau said.

Nehalem EX and Nehalem EP are extending our leadership in the server market and we are very confident of maintaining that platform leadership, said Intel spokesperson Nick Knupffer.

A SHRINKING MARKET

Intel and AMD are battling over a shrinking market. The x86 server chip market was worth $5.7 billion in 2008 but is expected to decline 22 percent to $4.45 billion in 2009, according to research house IDC.

Server shipments slid 26.5 percent in 2009's first quarter, the worst three months on record, but should begin to improve in the second half and recover in 2010, IDC said.

But AMD is intent on enlarging its footprint. Executives argue their chip offers better value in a difficult economy.

We're not in an environment like 1999 when the dotcom boom was going on and people were buying servers like they were going out of style, and no price was too high, said AMD executive John Fruehe.

Those days are long gone... Companies are trying to understand how they can cut back on their IT budgets.

AMD priced its new chip, in batches of 1000, between $455 and $2,649, depending on the number of sockets and other differences.

Intel has not said how much it will charge for its Nehalem EX chip, which will have eight cores and be aimed at the 4-socket market. But the six-core chip the Nehalem EX will succeed, the Xeon 7400, is priced from $1,100 to $2,700.

As long as both companies execute well, it's going to be a little bit like watching Roger Federer and Rafael Nadal play tennis: there can be some volleys that are going to go on for a very long period until one or the other slips or gets in a really great shot or something like that, said Insight 64 analyst Nathan Brookwood.

I love it when both players are going at the top of their game and right now the two companies are doing reasonably well in terms of coming forth with new products on predictable schedules, he said.

(Reporting by Clare Baldwin in San Francisco; Editing by Edwin Chan)

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