Intel is working hard to fend off the upcoming challenge from Barcelona, AMD's soon-to-be-released quad-core server chip. AMD is positioning it as the industry's first "native" quad-core, which means it was designed from the ground up to fit four processors onto a single piece of silicon. In contrast, AMD points out that Intel's existing quad chips cram two dual-core devices into a single package. (Intel CEO Otellini has famously argued: " "I think you'd be misreading the market if you think people care about the packaging.")

	(click image for larger view) Server chips, both dual- and quad-core, will continue to bear the Xeon brand name. view the image gallery

Right now, Intel's head start in quad core is reaping benefits. At the Spring Analyst Meeting, Otellini said the quad-core Xeons are being snapped up, particularly in a configuration known as DP, for dual processor. This "DP" refers not to the internal configuration of the chip, but rather to the number of sockets in the server. So, if there are two sockets on a server motherboard, and each socket houses a quad-core processor, the end result is a mightily powerful, eight-processor server.

"In the first quarter of this year, the quad core version of our DP servers out-shipped our competitor's DP line entirely," said Otellini. "And quad continues to grow as a percentage of our DP shipments. Why? Because quad-core DP is the sweet spot for server deployment. Think of it as a very cost effective eight-way machine: Two processors, each of which has four processors on it."

If you can't grown revenues solely by selling more stuff or by commanding higher prices (and, with microprocessors, the latter is difficult for all but the most powerful chips), the way to help boost your bottom line is to cut costs. That's precisely what Intel is doing. The paring will proceed throughout the year, according to the presentations made by Otellini and chief financial officer Andy Bryant at the Spring Analyst Meeting.

	(click image for larger view) Cost cutting is a significant element of Intel's financial strategy. view the image gallery

As an Otellini PowerPoint summed up the strategy: "Lower cost structure and focus on designing for costs increases our competitiveness in current and new markets;" and "Result: Bottom line growth exceeds top line growth for 2007/2008."

Bryant's presentation encapsulated Intel's management of its finances as "Good progress, more to do." His handouts noted that Intel's capital spending will dropped more than $250 million, or approximately 5 percent, in 2007 compared to 2007. (However, overall capital spending will still be a hefty $5.5 billion.)

Such tight controls means Intel must be very focus on execution as it works to roll out so much new technology, because building processors isn't getting any cheaper. "The cost to bring a leading [edge] product family to market is about $3 billion," Bryant said during his talk.

Intel's cost controls also involve reducing its internal headcount. In April, Intel reported it had reached its goal of reducing its workforce from 103,000 employees to 92,000. "That will continue to drop," Otellini said at the Spring Analyst Meeting.

Otellini didn't provide a precise number. However, recent reports indicate that Intel is trimming 1,000 workers from a chip factory in New Mexico, which is about to undergo renovation.