Rumors Of My Death Have Been Greatly Exaggerated
The title of this post is a quote taken from someone I admire greatly, Mark Twain. I am not referring to myself but of semiconductor giganticus Intel. It appears everyone has all but given up on Intel and proclaimed AMD the champ of chips. Indeed, AMD has captured a significant portion of the Intel compatible market over the last few years. But, in this battle of David and Goliath, one should not start the knockout count down just yet.
While AMD's stock has been totally decimated as of late, so have many other semiconductor stocks including Intel's. So, besides an economic downturn and dealing with tremendous manufacturing overcapacity, what is wrong with AMD? In three months it is down from nearly $45 to $17. Well, in order to understand this you need to meet AMD's best new friend. A friend like the friend you meet in prison. Someone by the name of Bubba. Here's the link to Bubba.
Now, I'm not sure which company has the best processor architecture and process technology. It might be AM, er, cross that out. It might be Intel or it might be IBM but it sure as hell ain't AMD. The best thing AMD has going for it is that they caught Intel at the right time and they are using IBM's process technology to manufacture their processors.
So, why did AMD fall so far so fast? Just at the same time people are squawking for Dell to dual source processors from AMD and Intel? Intel's super hot new Duo 2 architecture is hitting the market. And, Intel is likely to start a price war at some point if they already haven't. Intel is one of the most aggressive companies at defending their turf and they've got massively deep pockets to do it. So, should Dell be dual sourcing? I would say absolutely no way at this point. NO WAY. Clients may be asking for dual sourcing and the analysts may be writing up pretty papers for Dell to do so but that will likely pass. The cost to Dell is likely significant which is the reason they have not done so to date. 1) Dual design teams 2) More complex supply chain and procurement process. 3) Additional complexity in post sale support 4) Additional testing and quality assurance 5) A diluted marketing message 6) A loss of likely hundreds of millions in marketing dollars from Intel. There's likely other reasons but the costs need to be quantified versus the additional business at a time when Intel is back in the game.
The press says Dell is going to sell AMD systems. Dell is saying they will be selling AMD systems. I am saying they won't. What I believe we are seeing is Dell playing a game of poker with Intel. They want the best sourcing deal possible and sticking by Intel when others have bailed means they want another pound of flesh. Dell has leverage right now and they want to use it to their advantage. If Dell does source AMD chips, I would bet it is limited to server processors.
Intel was the king, is the king and will be the king for a long time coming. The King is dead. Long live the King.
Addendum. How timely.
While AMD's stock has been totally decimated as of late, so have many other semiconductor stocks including Intel's. So, besides an economic downturn and dealing with tremendous manufacturing overcapacity, what is wrong with AMD? In three months it is down from nearly $45 to $17. Well, in order to understand this you need to meet AMD's best new friend. A friend like the friend you meet in prison. Someone by the name of Bubba. Here's the link to Bubba.
Now, I'm not sure which company has the best processor architecture and process technology. It might be AM, er, cross that out. It might be Intel or it might be IBM but it sure as hell ain't AMD. The best thing AMD has going for it is that they caught Intel at the right time and they are using IBM's process technology to manufacture their processors.
So, why did AMD fall so far so fast? Just at the same time people are squawking for Dell to dual source processors from AMD and Intel? Intel's super hot new Duo 2 architecture is hitting the market. And, Intel is likely to start a price war at some point if they already haven't. Intel is one of the most aggressive companies at defending their turf and they've got massively deep pockets to do it. So, should Dell be dual sourcing? I would say absolutely no way at this point. NO WAY. Clients may be asking for dual sourcing and the analysts may be writing up pretty papers for Dell to do so but that will likely pass. The cost to Dell is likely significant which is the reason they have not done so to date. 1) Dual design teams 2) More complex supply chain and procurement process. 3) Additional complexity in post sale support 4) Additional testing and quality assurance 5) A diluted marketing message 6) A loss of likely hundreds of millions in marketing dollars from Intel. There's likely other reasons but the costs need to be quantified versus the additional business at a time when Intel is back in the game.
The press says Dell is going to sell AMD systems. Dell is saying they will be selling AMD systems. I am saying they won't. What I believe we are seeing is Dell playing a game of poker with Intel. They want the best sourcing deal possible and sticking by Intel when others have bailed means they want another pound of flesh. Dell has leverage right now and they want to use it to their advantage. If Dell does source AMD chips, I would bet it is limited to server processors.
Intel was the king, is the king and will be the king for a long time coming. The King is dead. Long live the King.
Addendum. How timely.
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