BEIJING, Jan. 23 (Xinhuanet) -- Sun Microsystems Corp. and Intel Corp. announced a deal for Sun to use Intel chips in some of its computer servers, a setback for rival chip maker Advanced Micro Devices (AMD), media reported Tuesday.

    Under the deal, Sun will use Intel's Xeon chip in some servers starting late in the first half of this year. Sun will continue to sell machines using AMD's Opteron server chip, as well as those using its own Sparc processor, according to the two firms.

    "To us, this is an historic moment," Jonathan Schwartz, chief executive of Sun, said Monday, "This is an enormous expansion of market potential."

    By doing so, Sun will be able to offer servers based on a range of chips, following a strategy adopted by Dell, IBM. and Hewlett-Packard (HP), three rivals to which Sun has lost considerable market share in the last several years, media reported.

    The deal comes at an opportune time for Intel as well.

    "We're coming together at a time when both companies have great momentum," Paul S. Otellini, the chief of Intel, said, "And I've always believed that momentum breeds momentum."

    Some analysts, however, agreed that the Sun-Intel deal will probably hurt AMD much more than it will help Intel.

    "Up until recently, AMD was consistently gaining share in most all markets, while Intel struggled," an analyst with Stifel Nicolaus, Cody Acree, said in a research note, "Now Intel has missed the last two quarters, Sun appears to be steadily improving, and now Sun is giving Intel obvious market share."

    (Agencies)