Struggling to rebound from a $574 million (£292m) loss in fourth quarter earnings it reported Tuesday, Advanced Micro Devices (AMD) has pinned its hopes for recovery in 2007 to its planned "Barcelona" quad-core Opteron server chip.

Intel's competing "Clovertown" quad-core Xeon chip has been adopted mainly for high-end research server platforms since it launched in November, hobbled in part by a lack of multi-threaded software needed to take full advantage of the new chip technology. But AMD hopes to sell its Barcelona chip to users ranging from managers of high performance computing centres to small and medium-sized businesses (SMBs).

AMD expects a bounce in revenue when it launches the processor by the middle of 2007 since many customers have delayed buying new systems until it comes out. The company hopes Barcelona will allow AMD to finally break into the low-end server segment, including one-chip and two-chip computers and tower PCs as well as rack mounted servers.

"We're not yet in the SMB segment; it represents for us a great volume opportunity since we have so little market share now," said Kevin Knox, vice president of AMD's commercial business.

AMD will also try to squeeze extra profits from denser chips as it transitions from 90-nanometer chip design to 65 nm, and from more efficient manufacturing as it changes from 200mm to 300mm silicon wafers.

In the long term, the company also expects a return on its investment in making chips with even smaller, 45-nm features, and on capitalizing on its 2006 acquisition of ATI to release a combined CPU (central processing unit) and graphics processor called "Fusion" by 2009.

In the meantime, AMD's success with Barcelona will be the quickest measure of its prospects. As the PC industry continues to see a change in customer demand from desktop to notebook PCs, AMD reported strong sales of its mobile processors and its top-end desktop chips. But sales of its workhorse Opteron server chip stayed flat, while revenues sank under the pressure of a price war with Intel.

However, analysts warn that the market may not be ready for quad-core processors, regardless of the vendor.

"We're concerned about this whole rush to multiple-core processors, as if the technology could be the saviour of AMD or anyone else. We're concerned quad-core computing is coming up too fast," said John Enck, a Gartner analyst. "It's basically an arms race between Intel and AMD, so we're at the point where there's more technology being offered, so they can keep up with each other, than we can actually use."

The increasing popularity of virtualisation is one sign of this glut of processing power, as many enterprises try to find extra work to justify expensive servers that are often running at just 15 or 25% utilisation, Enck said.