AMD vs. Intel: price cuts (and AV vs. TCO)

Call 411 for 4/11's IT Blogwatch: in which AMD cuts prices to compete with Intel. Not to mention anti-virus vs. The Chosen One...

Dan Nystedt reports:

Advanced Micro Devices Inc. (AMD) announced further price reductions on some of its best desktop PC microprocessors on Monday, a sign there is still no end in sight to its price war with rival Intel Corp. It's great news for users, who have been treated to improved microprocessor technology and better deals over the past year as the two giants slug it out. Signs the price war was cutting into profits at the companies had given rise to fears the price war may be nearing an end, but the AMD move indicates that's just not so.

AMD slashed prices on its top-of-the-line desktop PC microprocessors to US$799 per pair for the 3GHz version and US$599 for a pair for the 2.8GHz version, from US$999 and US$799, respectively ... In addition, AMD lowered three of its dual-core offerings for the desktop to below $100 each.

The new price list shows AMD isn't about to back down in this price war despite the obvious impact on its finances ... Both Intel and AMD have reported worse finances as a result of their market-share battle. Intel's revenue in the fourth quarter of last year fell 5% year-on-year to $9.7 billion, while its net profit plummeted 39% to $1.5 billion. AMD said its revenue in the fourth quarter was $1.37 billion excluding the ATI operations, with operating income of $63 million, down from operating income of $272 million a year earlier.

Jon Stokes adds:

These price cuts are AMD's way of fending off Intel's faster, but more expensive, Core 2 Duo line until the company brings out its quad-core Barcelona part later this year. Right now, Intel chips based on Intel's Conroe architecture are cleaning up the benchmarks, a fact that's nowhere more apparent than with the recent launch of Intel's new Core 2 Extreme QX6800. An "Extreme" price of $1,200 gets you uncontested dominance in benchmark bakeoffs, but of course for users who don't need bragging rights the less costly QX6700 is almost as good.

AMD's price cuts might also be timed to preempt a rumored round of Intel price cuts that's supposed to hit on April 22. If the Inquirer is to be believed, the Intel cuts will be limited to the mid-range of the desktop line, and will be similar in scale to the AMD cuts.

Mac Beach wears heart on sleeve:

I'm a fan of anything that isn't Intel. Not because I hate the company, or love AMD, but because I hate having only one vendor to chose from for anything. So there is never any bad news in struggles such as this as long as the smaller company doesn't get put out of business, or frozen out of access to markets by (what should be) illegal deals with Dell, etc.

My guess is that eventually US companies like Intel and AMD will play a smaller role, possibly to the vanishing point, in micro-architecture. Inertia has kept us (no you) thinking that the central processor matters all that much. In fact, by making only tiny incremental changes to the xxxxxx86 instruction set, register configuration, etc., Intel has rendered itself less important as an "innovator" (ooooh I hate that word for some reason). AMD couldn't even exist if the "Intel standard" wasn't so stagnant. But it is, and nobody, at least nobody here in the US, seems to mind all that much.

Microsoft props up Intel and Intel does its best to prop up Microsoft, though it would rather be free of this dependency I suspect. What we have here is not a healthy technical economy, but internationalization will eventually fix that ... Does Microsoft want to come out and play? Does Intel? They'd be foolish not to be thinking about it. Our country will be foolish to not be prepared for it.

Eric Savitz runs the numbers:

It continues to be party time for Intel (INTC) shares. With Advanced Micro Devices (AMD) in financial trouble and cutting back its capital spending, the thinking on the Street is that a) Intel’s strategy for crushing AMD seems clearly to be working and b) AMD may find itself in no position to be as aggressive on price as it has in the recent past. In other words, AMD’s troubles are extremely happy news for Intel.

...

Sumit Dhanda, an analyst at Bank of America, this morning reiterated his Buy rating on the stock, though he asserted that first quarter sales likely finished at or marginally below the mid-point of the company’s guidance, which would mean about $9 billion.

...

Merrill Lynch’s Joe Osha this morning asserted that there is “short-tern upside of up to 10%” in Intel shares as a result of AMD’s troubles. Osha says he doesn’t see much upside to Q1 guidance, but that “Intel’s outlook for the second quarter could feature better top-line growth than our current model indicates” His current model shows a 1% sequential increase at the top line in the second quarter.

...

Intel today is up 54 cents at $20.64; yesterday the stock gained 52 cents; the shares are now up five straight days, and the eighth in a row without a down day, for a cumulative gain of $1.81, or 9.6% since March 28.

Eric Buscemi reminds us of recent history:

AMD seriously bypassed Intel, beating it to market with a 64-bit processor. However, Intel, as usual, waited for the market to broadly adopt 64-bit processors and then jumped in with both feet.

...

In Intel's most recently reported quarter, demand for microprocessors was strong. The presumption that AMD with a strong product portfolio and slower PC desktop growth would mean tough times for Intel, appears not to be the case. Increased demand for notebooks and the use of dual-core processors has created a big uptick in the consumption of microprocessors. While per-unit pricing for dual-core processors is considerably less than the traditional single-core processor, the new fabs that Intel has constructed to manufacture these chips allows Intel to produce product for considerably less and make more money -- a luxury that AMD does not have.

It is time to start getting back into Intel in a big way. AMD, once again, showed a ray of hope that it would be able to compete against the chip giant, but once the market moved full force in its adoption of 64-bit processors and Intel was able to put its capital to work to build state-of-the-art chip fabs, the battle was over.

...

My advice -- Get back into Intel; avoid AMD.

Wolfgang Grüner delves deeper:

Why is it that AMD is suddenly facing such market pressures? Is it a homemade problem or is it the renewed strength of Intel? According to the analysts we talked to, it may be a combination of both ... AMD did not have the volumes available to supply enough processors to all of its customers during the Christmas quarter and gave the larger customers such as Dell preferential treatment.

...

AMD appears to be facing several problems right now that, in combination with a strong Intel, will not be easy to solve. Alienating some of your customers is the one side of the story, technology the other ... AMD will have to regain technology leadership as soon as possible.

...

On the high-end, the new Barcelona quad-core cannot be introduced a minute too early. The Opteron provided the foundation for AMD’s recent advantage in the market originally and it is likely that AMD will once again introduce products from top to bottom to attack Intel ... if Barcelona is really as good as AMD claims and it is good enough to hand the undisputed performance crown to AMD, then AMD would look a whole lot better almost immediately ... The company with the slower processors will always have to discount their chips, while the company with the competitive advantage can get higher margins from its products.

...

AMD has not talked about its upcoming Kuma dual-cores and Agena quad-cores for desktop systems much, but they are apparently on track for a mid to late Q3 introduction. Meanwhile, Intel is preparing its 50-series of Core 2 Duo processors running on FSB1333 and DDR3-800 memory platforms.

But Technician has a different viewpoint:

I think with the need for cash, AMD was hoping Microsoft releasing Vista (Biggest upgrade in 7 years) would create high demand for new PC's and they could sell product as demand exceeded supply. The demand for Vista didn't drive demand as expected.

Vista failing to launch put AMD in tight competition in a smaller market due the lack of demand for Vista. AMD didn't sell to Apple. Intel did. Mac's are selling where Vista is getting so-so response so Intel is selling the new chips into markets AMD is not in. If Intel didn't sell to Apple, and had to cut prices, AMD would be in an even worse position due to the low demand for new Vista machines.

Here's RzUpAnmsCwrds with a tip:

The real best-kept secret in the CPU world today is the X2 3600+. It's selling on Newegg for $65 right now, and while a dual-core 1.9GHz Athlon 64 isn't going to make Intel tremble, $65 is pretty darn close to Celeron price territory. Apparently the 3600+ overclocks well, too. Really well.

Buffer overflow:

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And finally... Animator vs. Animation II

Richi Jennings is an independent technology and marketing consultant, specializing in email, blogging, Linux, and computer security. A 20 year, cross-functional IT veteran, he is also an analyst at Ferris Research. Contact Richi at blogwatch@richi.co.uk. Information is power.
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