What matters is marketing. Yes, marketing, marketing, marketing.
I would point out that Jerry Sanders is the supreme marketer. He is very good at optimism and making customers feel good about the company and its products. A comparison of his lifestyle and speeches to what comes out of Intel will make this very clear, very quickly. You could go to the following URL and check out his limo: geocities.com . You could also read about AMD headquarters and notice that the design is customized cubicles for non-management employees and "spacious hard-walled offices for executives." Compare this to Grove and Barrett's proud statements about their cubicles. Also, compare Jerry's speeches to recent Intel stuff at its IDF and developer forum. Point being, AMD's marketing is much better than Intel's.
However, I find it kind of painful to think that marketing can triumph over better engineering design. AMD has failed in the past because of pure and simple inferior design. Or, more accurately, its top speed product has always been equal to Intel's top speed product three to nine months before.
On all the other counts you mention, AMD is equal or superior. I am not sure how this idea about Intel's ability to produce chips for less got started. But, given that Intel gets $190 or so per processor, and AMD gets $80 per processor, and AMD makes a slight profit from this much, whereas Intel makes perhaps $70 untaxed (based on operating incomes in most recent 10-qs), I'm not sure how people try to make the argument that Intel would win in all out price war where Intel didn't have a superior product that it did not have to lower prices on.
Leverage-- I think your conclusion about the boxmakers going back to Intel is also incorrect. You make Gateway, Dell, et al, sound like cheap whores that will go skank back to Intel at any point. I think Intel has pulled its last trick on this count. Gateway ditched AMD in the summer mostly because of Intel financial incentives (rather than threats of not getting enough product as your post implies) and reassurances that everything would be all right soon. They came back in January. I don't think any boxmaker is going to go back to Intel so easily anymore. Intel has largely succeeded in keeping AMD out of enterprise business, but I think this is beginning to change (you can get win 2k with an Athlon from Gateway as of a few months ago). I think when Thunderbird comes out there is a decent chance of some business design wins. You can't really ignore technology here though. If AMD has a product as good as Intel's, then Intel simply does not have the leverage you describe.
Stock price-- I must disagree with your assessment of AMD's stock price. AMD made $1.15 per share ($.79 fully taxed) in the last quarter. That means AMD is trading at an annualized P/E of 28 based on current results. Let me give you the last three quarter's earnings numbers: -$.72, $.43, $1.15. Notice the trend? Intel has no response to AMD until the end of q3, so a P/E, based on a fully taxed E in q3, will be around 12. This is not exactly priced for perfection. Given that this is after a 400% run-up, you can appreciate the absurdity of AMD's 1999 valuation. If AMD is successful in its goal of capturing 30% market share, it's worth about $300 a share at a P/E of 15.
Perfection-- Intel has somehow engendered the myth that it has a superior reliability/non-stumbling record. AMD's first decade of existence was based in part on taking existing parts and improving the quality so that they met military specifications for quality (i.e.: larger temperature operating range). Intel has a long history of stumbling-- think Pentium long division "issue." It also has a history of scrambling and recovering well. (It shares this trait with Microsoft.) Its recoveries have also largely been possible due to its opponents being far behind (i.e.: AMD/Cyrix/et al went from being nine months behind to six months behind when Intel stumbled).
Anyway, I guess I should apply this to RAMBus, but I've probably written too much already. I think my points are: AMD is undervalued and a better investment than RMBS; don't underestimate AMD's abilities, especially from a marketing perspective, which is the one regards in which AMD is not at all at risk. |
