Advanced Micro Devices - Moderated (AMD) Message Board

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Technology Stocks : Advanced Micro Devices - Moderated (AMD)

AMD 214.11

+3.9%

Nov 26 3:59 PM EST

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To: AK2004 who wrote (189522)	3/13/2006 2:20:06 PM
From: eracer	Read Replies (2) of 275872

clearly price war is form of intel's damage control - what is your take on actual damage to intel? As I said earlier, I would hestitate to even consider it a price war but a case of Intel responding to market forces. Here is how I view Intel's choices: 1) Doesn't cut prices. -Intel accumulates millions of unsold CPUs over the next couple quarters even as more attractive CPUs from Intel and AMD are ready to be introduced. They have to be sold for massive discounts later on. -AMD gets more socket wins and maintains ASPs even as AMD processor volumes increase due to FAB36 contributions. 2) Cuts prices. -Intel keeps inventory lower relative to point 1 at an even greater cost to short term revenues, but... -Intel slows AMD's marketshare growth and raise worries about AMD's profitability. -Intel doesn't accumulate as many CPUs that will be greatly devalued once NGA arrives, helping future profitability. -Any extra short term losses now will make any future gains (at least a few quarters out) look all that much better. Intel will get credit for a "spectacular turnaround", and in effect get praise for solving a problem that they themselves created. Given the choice between scenario #1 or #2 I felt that #2 made the most sense for Intel. I feel choice #2 means short term losses of hundreds of millions of dollars per quarter for the next few quarters. I don't think big cuts will be made to every produce line, otherwise the revenue drop would be unbearable. The focus will probably be on mainstream to high-end desktops. Mobiles as a group might be more stable than mainstream desktops because the higher ASPs of Core Duo CPUs can offset some ASP erosion and market share losses of Pentium M to Turion. As Celerons are already budget CPUs I don't think Intel could go much lower on pricing as a group. They also have room to introduce faster clocked Celerons or Celerons with 512KB L2 cache to offset price cuts on current models. Perhaps pricing the high-end relatively low will encourage some customers to spend a little extra rather than settling for a budget model.

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