After Price Battle In Flash Field, Analysts See Intel Taking Lead
Tuesday April 12, 7:00 pm ET
James Detar
I'll be back in a flash.
That's what Advanced Micro Devices (NYSE:AMD - News) might be saying, assuming archrival Intel (NasdaqNM:INTC - News) has passed AMD to take the lead in sales of the Nor type of flash memory chips.
"Intel was No. 1 in the Nor flash business" in the first quarter, said ThinkEquity analyst Eric Ross.
No market researchers have gone that far, but most analysts estimate that Intel sold more flash than AMD in the first quarter and AMD had a slim market share lead at the end of 2004.
AMD has said it's struggling. "In our flash business, we had an awful quarter," AMD Chief Executive Hector Ruiz said in January on a conference call to discuss the company's fourth-quarter results.
And analysts expect lackluster flash memory sales when AMD releases its first-quarter results, slated for late Wednesday.
The consensus of 33 analysts polled by Thomson First Call is that AMD will post a profit of 2 cents a share. That's down from 5 cents the previous quarter and an 83% drop from 12 cents in first-quarter 2004. The main reason for the declining profit, analysts say, is lower flash sales and profit.
Intel is putting pressure on AMD, STMicroelectronics and other flash rivals by cutting the prices of its chips. It's taking share, analysts say.
"It's a pricing issue," said ThinkEquity's Ross. "Intel has been very aggressive, more than I think AMD ever expected."
There are two types of flash chips, Nor and Nand. AMD and Intel make just Nor, which is about 60% of the overall flash market. Definitions get complex, but Nor basically is more reliable and Nand is cheaper. Many portable devices, such as cell phones, use both types of flash.
Intel and AMD have traded the lead in flash chip sales before. Intel led for years, but AMD overtook it. Researcher iSuppli says that in 2004 AMD led the market with $2.41 billion in flash sales. Intel was No. 2 with $2.29 billion and STMicro No. 3 with $1.19 billion sales.
More than a dozen others split the rest of the total $9.3 billion Nor flash chip market.
One reported rumor, which AMD hasn't quashed, is it might sell off its flash division so it can focus on its growing microprocessor business. Several analysts say they hope AMD will talk Wednesday about its plans for its flash unit.
Intel in early 2003 boosted prices of its flash memories. It said at the time it thought the chips would be in short supply. It was wrong. AMD and others held the line on prices and took market share from Intel.
Intel quickly changed its pricing strategy, slashed prices and began to win customers back.
"AMD has competed with Intel for so long that they should never take them lightly on pricing of commodity products," said Caris & Co. analyst Rick Whittington.
Intel's latest product salvo came April 7. At an industry event in Tokyo, Intel unveiled new flash memories with capacities up to 1 gigabit. That's four times the company's current high-end, 256-megabit offering. Intel says the new devices will be suitable for cell phones with games and Internet access.
AMD's Web site lists 512 megabits as its highest capacity flash chip.
During Intel's midquarter update on March 10, Andy Bryant, the company's chief financial officer, said it looks like Intel's flash sales for the first quarter were healthy.
"We actually have a pretty strong (flash chip) lineup right now at the high end. And we think that's helping us," Bryant said.
Intel is scheduled to release its first-quarter results Tuesday. |
