Dear Mary:
re <<The reality however, is that AMD balance sheet still looks terrible. They have quite a bit of debt to manage. They still have only a small percentage of the consumer market and are capacity constrained to make much inroad. >>
AMD's balance sheet is looking a whole lot better. The only long term debt they have is the German loans to build Dresden and that is at a favorable rate. The convertible debt holders would be stupid not to convert as they would be getting more money by doing so than not. The other debt was bought out early this quarter. Also AMD is having increasing unit output YOY while Intel has been stagnant YOY. Now next quarter, Q4, AMD will have 28% growth QOQ where Intel is saying they may have at best 1 to 2% growth QOQ. So who is capacity constrained? Intel!
<< When was the last time you heard a normal consumer say, Sheez, I've got to get rid of my Intel processor and get me an AMD processor? >>
I have heard many people say that they want to get rid of their P3s and go Athlon. The last ones were my brother Mike, who is a machinist, and my next door neighbor, who is a carpenter. Not what I would call a techie. Mike actually went out a bought a 700 MHz Tbird and uses it to play RPGs and simulations (he got a 21" flat screen Trinitron, the lucky dog).
<< For AMD to succeed, they have to do a lot more. You never replace the champ on points. You have to knock him out. So far AMD does not have a knock out punch. Or anything close to one that I can see. >>
AMD has just delivered three hard blows (Athlon, Tbird, and Duron) to Intel but, like all big brawny boxers, it needs some time for Intel to feel it, longer for it to visibly affect the match, and even more for the boxer to acknowledge that it is a problem. We are still in the visibly affect the game phase as Intel has stumbled a bit and missed a few punches (i820, Rambus, 1.13G P3, Itanium, and more) and is counting on P4 to be a knockdown blow. So far it is a lot of talk but no action. If that haymaker misses, AMD will hit with five more blows to the jaw with Mustang, Palomino, Morgan, DDR, and N-way SMP. Then Intel may acknowledge they are in trouble because they will start to sway. If they do acknowledge and change strategy, they may still keep punching. They could, like with DRAM, forfeit the match. Or they could simply deny troubles and get knocked down with AMD's Sledgehammer (and posibly be relegated to ex-champion in Q4-2002). This may take a round or two (rounds are years and quarters are the minutes in the match taking the boxing metaphor route).
Remember a single blow can cut off oxygen to the brain. It may take a few minutes before the fighter dies (or with just a restriction falls asleep). If Intel's ASPs drop to what AMD gets now say $100, Intel will start eating cash at an astounding rate of 3 to 4 billion dollars a quarter. In a year or two, Intel could go bankrupt although, I suspect there would be massive cost cutting, layoffs, selling of profitable divisions, etc. before it got to close to that point.
Do not count anyone out (they can get a lucky punch (sometimes that is all it takes)).
Pete |
