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Technology Stocks : Advanced Micro Devices - Moderated (AMD)

AMD 231.94

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3:59 PM EST

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To: Charles R who wrote (4086)	8/9/2000 1:40:13 PM
From: Petz	Read Replies (1) of 275872

Chuck, <So what is your theory on why Compaq/Gateway/HP are [not] shipping systems right now?> Isn't it obvious? If they announce Duron systems, their K6-2 systems become worthless. The K6-2 production cuts only reached the fab output a few weeks ago judging by the sudden jump in K6-2 prices then. Which means that until mid July OEM's were still buying K6-2's by the truckload, which means there are freight trains full of K6-2 systems still not sold. There are 3 ways AMD could have aided the product transition at the OEM's: 1. Make the new product (Duron) the same price as the old product (K6-2). Not reasonable, since Duron is "too good," and it would hurt revenues. Those revenues would have flowed to the OEM's instead by selling Duron systems at premium prices. 2. Reduce production of the K6-2 by larger amounts than they did. Would have resulted in a bigger loss of market share in Q2 and gotten the OEM's mad. Also, riskier than a slow drop in K6-2's. 3. Force the OEM's to buy Duron's and Athlon's rather than Athlons only, or give incentive deals for that. This is the best strategy, I hope AMD did it. But even if they did, the OEM's would probably just hold their Durons in inventory until their K6-2 systems are sold out. AMD can still count these sales in their revenues because the OEM's don't have the right to return the CPU's. (according to Toni) 4. [EDIT - just thought of this] Create demand for the new systems with an ad campaign or rebate Duron systems ad costs to OEM's. The first alternative would have pissed off the OEM's who had a lot of K6-2's to sell. The second, sounds like a good plan, but the OEM's aren't going to start their advertising until the K6-2's are gone. Petz

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