Woodcrest, the first of several next-generation processors scheduled to debut in the next few months, is expected to help Intel regain its footing in a server market that is increasingly focused on higher performance with lower power demands.

Woodcrest is designed to run applications with less power, as each core in a multicore system will handle a larger number of instruction sets simultaneously. An added feature, designed to boost performance and reduce power consumption, is a shared Layer 2 cache that is allocated dynamically according to the needs of each core.

All the major server vendors, including Dell, HP and IBM, plan to introduce servers based on the new Xeon today.

Market observers are hailing the release of the Woodcrest chip as a significant development for Intel as its technical specifications match the specifications of AMDs Opteron competitively. The release is also good for enterprise buyers, for matched competition between the two outfits should likely see competitive prices now being offered, particularly as Intel tries to regain some lost ground.

AMD has been steadily chipping away at Intel's domination of the x86 market and in April it cited numbers from Mercury Research which said that it had increased its share of the market from 16% in the fourth quarter of 2005 to 22% in the first quarter of this year. Intel holds most of the remaining market.

Painfully for Intel, AMD's biggest gains have come at the high end. According to Gartner, AMD accounted for 29% of all four-socket server shipments in the first quarter of this year, compared with less than 1% in 2003. Intel held about 53% of the four-socket server market in the first quarter.

A major reason for AMDs gains has been its Opteron's Direct Connect Architecture, which enables the chip to perform better with lower power consumption. The Direct Connect Architecture links the CPU directly with memory, I/O and other CPUs, and eliminates traffic bottlenecks that can occur when moving data on and off the processor via a front-side bus, which Intel's Xeon chip uses. In addition, Opteron's on-chip memory controller gives the CPU a boost when transferring data between the processor and the rest of the system, analysts say.

According to analysts, Intel's new architecture should now help Intel erode some of Opteron's edge by doing more work with less power.

In addition to Woodcrest, Intel's Core architecture processors for the desktop, code-named Conroe, and for mobile computing, code-named Merom, are also scheduled to begin shipping over the next few months.

Market observers say that for the first time in a couple of years, Intel must be feeling good about having got out a product in the server space that is functionally comparable to what AMD has to offer. And yet, Intel cannot afford to sit back and relax for AMD won't be standing still either.