Sidney

SAN FRANCISCO (MarketWatch) - Advanced Micro Devices Inc., buoyed by demand for its latest chips, said Tuesday that it expects growth for chips that power corporate servers and laptops to help the No. 2 microprocessor company to grow at twice the industry average for semiconductors.

At its analyst meeting in Sunnyvale, Calif., AMD (AMD) said it plans to capture 20% of the server-chip market by the end of 2006.

"We are a growth engine," said Chief Financial Officer Bob Rivet, who added that AMD can reach an operating profit margin of 18% to 24%, and gross margins of 51% to 57% next year.

Rivet said he expects market conditions to help AMD increase the average-selling price of all of its chips.

This year, AMD has built momentum in what is called the x86 server chip market. By the end of the third quarter, technology research firm Mercury Research said AMD's share of the x86 was up to 12.7% from 11.2% for the three months ended June 30.

AMD is riding the success of its Opteron dual-core chip that contains two processing engine on a single piece of silicon. This helps corporations curb energy costs, while also improving server performance.

AMD beat main rival Intel Corp. (INTC) to the market for dual-core server chips earlier this year, shipping them to customers such as Hewlett-Packard Co. (HPQ) and Sun Microsystems Inc. (SUNW).

In October, Intel began selling a rival chip, but at the same time, the world's largest chipmaker pushed back the release of another server chip platform originally set for early 2006, until midyear.

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Opteron 165 (2) @2.85 1.42 vcore AMD Stock HSF + Chill Vent II