Excellent article..explains why AMD's stock is lagging and why Intel's stock has not been penalized for its misfires.
After being touted in the first half of the year as the turnaround king, clearly AMD now is out of favor. How long will AMD be in the dog house...I hope not too much longer. Remember that on wall street, hate/out of favor means there's a buying opp.
In fact, just bought me some BVSN, the former e-business software favorite..at 31, down from 93..they couldn't be more hated!
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Intel in driver's seat despite late bump
By Mike Tarsala, CBS.MarketWatch.com
Last Update: 4:25 AM ET Aug 30, 2000 NewsWatch
Latest headlines
SAN FRANCISCO (CBS.MW) -- Intel's most recent public relations black eye won't keep it from winning future scraps in the personal computer chip market with rival Advanced Micro Devices.
It can be argued that Intel (INTC: news, msgs) is getting complacent, and that its market-dominant chip position is in jeopardy following at least four different chip setbacks in the past 12 months. This week, the company recalled its top-of-the-line 1.13-gigahertz-speed Pentium III computer chip due to wiring problems.
Lest we forget, Intel recalled motherboards to a tiny chip glitch in May. Intel canceled motherboard designs due to a bug affecting servers and workstations in February. Also, the world's leading chipmaker delayed a chipset in September 1999 due to problems with its Rambus-(RMBS: news, msgs) based memory.
In comparison, Intel's main competitor, AMD (AMD: news, msgs), introduced its 1.1-gigahertz-speed Athlon chip this week without incident. It seems that AMD's been nearly flawless all year. The company's sales continue to improve. AMD's technology is at least on par with Intel's. What's more, its personal computer chips are less expensive than the industry leader's.
It's no wonder AMD shareholders are being rewarded. Shares of the chip world's No. 2 company have soared 250 percent in the past 12 months, while Intel's shares have gained 76 percent.
But is Intel really getting some sort of wake-up call from its woes, in the face of AMD's success? Not really, analysts say. That's because overall, Intel doesn't need one.
[All these recalls mean nada.....Intel is still chipzilla.]
Analysts acknowledge that Intel hasn't been very focused on some niches in the personal computer market, where AMD has made strides. Still, the chip giant's been far from asleep. It's managed to cling to market share in PCs, while planning for the future in faster-growing niches.
"A company like Intel never gets complacent for very long: That's not the culture," said David Wu, chip analyst with ABN Amro in San Francisco. "The problem they've had in the past 12 months is in trying to get into new businesses...They haven't had their full attention on their core business."
[Here we have the good ole boy network firmly at work; Intel has a problem?....never...not in this lifetime!]
Intel has indeed allowed AMD to creep into some of its major PC accounts with Athlon. But the chip leader isn't about to hand over its dominant PC position any time soon.
Some computer makers recently have announced they're increasing the models that use AMDs chips, including Dell Computer (DELL: news, msgs), Compaq Computer (CPQ: news, msgs), Gateway (GTW: news, msgs) and Hewlett-Packard (HWP: news, msgs). But the majority of computer models still don't use Athlon. One reason is the long-standing relationship Intel's had with the computer companies. Intel still pulls the purse strings of computer makers.
[Here the network is so firmly in place they don't bother to check the facts; of course, Dell is a major OEM for AMD!]
AMD may win battles but not war.
"AMD almost always will beat Intel on pricing wars," said Tim Bajarin, founder of analyst firm Creative Strategies Inc. in Campbell, Calif. "But for them to have big wins, they have to displace Intel at the major vendors. They're getting design wins in some product areas, but overall, they're not doing it."
Another reason AMD won't win the battle against Intel is more technical: AMD chips don't work with the set of surrounding Intel chips that seems to be preferred by the majority of computer companies. For that reason alone, it's too difficult for computer makers to make a more rapid switch to the AMD technology.
[It use to be that AMD was a loser because it couldn't execute; now its because it has its own technology....it looks like AMD can't win for trying!]
Intel's upcoming Pentium IV chip, expected later this year, is yet another reason Intel expects to retain market share. The upcoming chips represent the first architecture change since the company introduced Pentium Pro chips in 1995. The new chips will start at a speedy 1.4 gigahertz, and they should Intel to eventually push speeds beyond 2 gigahertz. To be sure, it will heat up the speed competition with AMD.
Once the Pentium IVs move in, the Pentium III chips will move down in price. Any temporary share gains that AMD made with Athlon over the past 12 months could be just that - temporary. The companies always start a new pricing war in the mid-range chip business once both companies have new hardware at the high end.
[And Frank Simon, you think that MHz/GHz doesn't count, you might want to think again!]
And what of AMD chips above the high-end PC markets, where the profit margins are more meaningful? The company could face a lopsided scrap when it tries to take on Intel's chips in the server world for the first time, starting in the fourth quarter.
AMD may be able to undercut Intel on server chip prices, but top-end performance will take time to develop. AMD will introduce souped-up Athlon chips that should be competitive in the low and mid-range server market. But the chips won't be designed to compete with Intel-based servers with 8 processors or more, which handle more brawny computing chores. Of note is that computer companies' largest purchases are families of servers - both entry-level, mid-range and high-end machines.
While Intel has recently focused on the high-end server market with its upcoming Itanium chip, it's also been busy searching for new markets. The company is starting to offer more telecommunications and wireless electronics chips. Intel executives realize that PCs aren't the future.
Intel buying spree
Intel is rapidly expanding its product lineup to include appliances to speed e-commerce. The company now offers network traffic management equipment. Intel introduced new routers, switches and caching boxes. Intel's even selling e-commerce software and network management software, to some extent.
Indeed, the company's been on an acquisition spree. This month alone, Intel has purchased three companies. It bought telecom products company Ziatech Corp. for $240 million. It acquired DataKinetics, a network signaling technology firm, for an undisclosed amount. Also, Intel bought network software maker Trillium Digital Systems for $300 million.
[Intel has all the $$$ and is buying everything in sight....how can they possibly lose?!!]
AMD offers some similar services. It, too offers networking gear and network management software, among other products. But Wu is among the analysts who give the company's efforts little credence.
"They haven't done anything, Wu said. "They have retreated from this area and concentrated on competing with Intel in the microprocessor business."
Intel seems to be the only chip company setting itself up to offer such a wide range of products. While not every new line will be a success, the company will be ready when the shift away from personal computers begins, analysts say.
In short, the latest in a series of missteps by Intel is minor, in the long run. With Intel's latest chip misery and AMD's success, the latter has scored little more than a temporary coup.
"There's no way that this is a victory for AMD," Creative Strategies' Bajarin said. "Intel will rebound, not just with next-generation technology, but with a solution to the chip problem. They've done this before, and they've always come out really well. While they will take a short-term hit, in the long-run they'll be as strong as ever."
[Intel has been and always will be the King...Long live the King!]
Again really good article....makes very clear wall street's current thinking and why Intel is so hard to dislodge. It shows AMD what it needs to be working on plus it helps to keep Intel complacent. It explains very clearly why accumulation of AMD stock cooled after the first half and why the stock price is languishing.
This, too, shall pass!!
ted
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