RE: financing the price war
I've tended to agree with the idea presented by many here that AMD can weather the price war even in this dire economy because they can now supposedly compete in areas where previously only Intel was able to make profits -- and thereby finance the war. However, I am starting to wonder. Your post makes a lot of sense. And what scares me most is how various folks (CEOs, analysts, et al) try to talk the economy up but it just keeps circling the drain...
Not sure if this was posted yet, but a good read:
interactive.wsj.com^AMD
SMARTMONEY.COM: When The Cisco Gorilla Sings
By DONALD LUSKIN
Of SMARTMONEY.COM
THE MARKETS HAVE been waiting for weeks for Cisco System's (CSCO) earnings report to set the tone for the post-earnings-season world. That's because Cisco was a winner of the "gorilla game" as it was played during the late, great bull market. As a tech gorilla, it's the dominant force in a technology domain that it once invented and now controls.
[...]
For the surviving gorilla, it'll be like Nietzsche said: "What does not destroy me makes me stronger." So this is Cisco's moment to prove it's a real gorilla, and some of the top analysts have been betting that it can do it. Morgan Stanley's networking analyst Christopher Stix has been telling clients about Cisco using a "golden hatchet" strategy, hacking away at pricing to win core router business away from Juniper Networks (JNPR) at any and all costs. And we've heard unconfirmed reports from industry insiders that, in at least one instance, Cisco went so far as to offer to buy all of a customer's existing Juniper gear if it would promise to become an all-Cisco shop. That's the gorilla way to play!
That's the kind of thing chip gorilla Intel (INTC) is doing, slashing prices in order to finally bury its smaller archrival Advanced Micro Devices (AMD) once and for all. Sure, Lehman Brothers chip analyst Dan Niles says he's shocked - shocked! - to see Intel "detonate a price bomb" (words he no doubt typed on his new Dell Dimension 8100 with a 1.4 gigahertz Intel Pentium 4 processor, which he snagged for a mere $999). Intel can do that because the grizzled old survivors in the semiconductor industry know all about the recession thing (even if young analysts don't). The chip-heads aren't afraid of the dark because they know that the darker it gets, the closer must be the dawn - they've been through it all before. You just slash prices and make it up on volume when the inevitable turnaround comes - and the competition ends up dead.
[...] |
