Ted - For several years, AMD had the business plan from hell - take on the worlds best semiconductor manufacturer (read low cost producer) in the low end by underselling by 25%. Now their business model is changing to take on the worlds best semiconductor manufacturer (read low cost producer) on the high end and sell at par or a premium based on how much of a differential we can produce in besting their comparable product on benchmarks.
First of all, that's a better business model, provided that "leapfrog" doesn't leave them with some products that aren't notably better for any time period. Leaving aside the problems of mass producing high end products (Dresden Uber Alles) they have traded (at considerable cost) a non-working (some would say never workable) business model for one that gives them a shot. They will have windows of opportunity and the opportunity to drive into the market they have been shut out of (the high end) for the last few years.
All they have to do is design and deliver the highest end product, as promised to their vendors, on schedule and at good enough prices. The K7 launch has not been auspicious, but they still have a shot. Whatever the reason - bins, yields, chip sets, mobos (but certainly not earthquakes for the last quarter, for heavens sake) they blew an exceptional opportunity related to the hideous Intel botch. The business of "announcing" essentially unavailable products has to stop. As the world moves to "just in time" inventory control, glitches in any part of the equation are unacceptable and there are consequences for non-delivery. There are consequences for AMD just as there are consequences for Intel. And those consequences are painful.
AMD may or may not be underpriced. If they can deliver on their promises, they are. If they can't, they will sell out to someone with deeper pockets and, most likely, better judgement. But they will be sold in order to prevent horrific death throes - usually not the condition to extract premium prices for assets (unless you have a fool for a buyer - not a condition for a bright future, though it would prolong the agony).
I personally see an opportunity for them, but a very challenging set of gates to negotiate, and very little room for recovery from anything negative. Prior attempts to negotiate challenging gates have been met with pratfalls, but there's always a new day. At this juncture I would say that the odds are 50-50 on whether they survive as an independent company. Of course, that's a purely subjective take and others may disagree.
As I said in another post, neither AMD nor Intel has fools making the majority of the vital decisions. Each has individuals making decisions based on their reading of their relative positions and their projections of the landscape. Each company has to recover from past errors. I think it's a great spectator sport and, as in horseracing, each investor is free to place their bet and deal with the consequences.
Good luck,
Burt |
