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Politics : Formerly About Advanced Micro Devices

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To: Time Traveler who wrote (22473)	9/3/1997 11:51:00 PM
From: Maxwell	of 1576159

Man today news from AMD really SUCKS! My condolence to those who bought the stocks in the 40s. This news is totally unexpected and it screwed my plan of making another 10X on AMD options. AMD needs to take a course in BUSINESS 101. Hell if they can't make money in selling a million K6 then mind as well take their money and invest in a mutual fund. AMD made 2 mistakes that costed them dearly. Mistake #1: Campaigning K6 as 25% cheaper than the Pentium: I don't know who is the AMD genius that thought of this idea but that person should be fired. Fact #1: K6 is a much better chip than the Pentium. Fact #2: K6 has a higher manufacturing cost than Pentium due to its 5.5 metal process and flip chip and a larger die size. Because of these 2 facts YOU CAN'T SELL THE K6 25% LESS THAN THE PENTIUM! You can sell for equivalent price and make alot of money and people will still buy K6 (if not in the US than oversea). People will pay same price for better performance. People are not stupid! At least the ones that have common sense. When you go after the giant Intel YOU DON'T WANT TO PISS THEM OFF BY UNDERCUTTING THEM. Pentium MMX die size is 120mm^2 on .35u and is cheaper to make than K6. What if Intel decides to sell the Pentium 200 MMX for $100? That means AMD K6 200 must be selling for $75 if AMD wants to eat their words. At $75 I don't think AMD can make any money. Furthermore the campaign "K6 at 25% less than Pentium" implies that the K6 is the same class as the Pentium. Again another stupid move. Mistake #2: AMD is going after market share rather than profit. This is absurd. AMD has a good product. Who care about courting a tier 1 at the expense of huge profit loss. The key is that AMD can't meet demand. By dropping the price by as much as 50% the demand outstrip the supply. All AMD had to do is to lower the price enough so that demand slightly exceed the supply. The bottom line is AMD must make money on EVERY K6 they sell. This money is the bloodline of future R&D and future fabs for K7 and beyond. AMD is here to make money not TO SAVE THE WORLD BY MAKING K6 SELLING FOR $100. That price can only happen if your production cost is $5 but that is not the case. If they continue to do this they will find out that competing with Intel and making K^ CPU is a very painful way of making money. My conclusion is that Q3 is toasted. K6 .35u is down the drain. If they can't make money on 1M K6 then don't count on 2M K6 for Q4. The only way for AMD to come back in Q4 is the K6 .25u. This K6 will have significant advantage over the Deschutes and Tillamook. It has a smaller die and has power dissipation within the notebook envelop. This chip will be a hot selling item with significant lower manufacturing cost. The catch however is that AMD must get good yield and quickly migrate completely to .25 by Q4. Thus if you believe this is possible then buy AMD when it is at bottom ( probably high 20s) and you will make 10X when AMD succeeds. Remember there are many battles to be fought. Never bring your entire army to any one battle unless you know 100% success. Maxwell PS John Wang: Nice piece of toy you got there. Wish I have one that nice. Thanks for sharing the experience. Let me know more of what you like and don't like about the PII. PS Yousef: Thanks for the info on drive current. It is very helpful.

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