Ref- < Do you believe AMD will try to position K7 as a high quality chip at a high price, or an "Intel killer" at a low price ? >
I am sure that AMD would like to position the K7 as a high quality chip at a high price. Only if the K-7 dramatically exceeds the Intel offering in MHZ can AMD hope to succeed with a "quality strategy". This follows from the fact that "MHZ sells" ,(Ref- J.McMannis and Paul Otellini) without significant Marketing and Advertising effort. Even with a dramatic MHZ advantage, AMD may need a dramatic Advertising Effort to sell the world on AMD's dramatically higher MHz, and it will take significant time to establish a better quality image.
Given the assumption that the MHz will be marginally higher than Intel, and with the imminence of Coppermine, and that AMD does not have time to establish the quality image, the easiest path for AMD is to offer a lower price. Historically again AMD has always competed against Intel by offering a lower price. A few years ago Cyrix tried offering a 10% better CPU at Intels prices; but failed and had to resort to prices lower than Intel. Anyone can sell if they cut prices! Given the new infrastructure for the K-7, and its inevitable teething problems and lack of economy of scale, AMD will have to discount the K-7 dramatically. [ To establish the K-6, AMD had to resort to dramatic discounts below the published 40%, to induce the Compaq and IBM to buy the K-6, and getting IBM and Compaq helped it enter the other manufacturers.]
So it is a safe assumption that AMD will resort to the low price strategy. For the first six months AMD will probably be wrapping a few hundred dollar bills with every K-7. So in the short term K-7 will not help AMD's profitability, as its naive investors tend to assume.
As an Intel investor, we hope that the Coppermine will be executed on time and with the quality of execution typical of Intel, so that Intel's historical profits are unaffected. |
