Doug,
I certainly share some of the concerns over AMD losing the performance crown for a period of 9-12 months, but have not been able to make the logical leap that this means Intel will clean up profit wise and return to their old stock price.
On one hand, the argument is that AMD with the current performance lead is being hurt and will not make their numbers because of a competitor dumping excess supply in advance of better technology (part played by Intel). With roles being reversed by late year, what makes Intel (now playing the part with better technology in a segment of the market) immune from dumping of inventory in advance of better technology (part now played by AMD)? Seeing as how the AMD product is still better than the majority of Intel products being shipped through the end of the year, how does that make it big profit play for Intel?
For clarity, I am out of the stock right now and will not get back in until after the earnings call. However, I think Intel will hit their lowest point in Q3. Everyone is expecting the tank in Q2, but Q3 will not be any better. They have good introductions, but it takes time to get out there in the market. However, Intel gave guidance for the big turnaround immediately. AMD will hit back eventually with pricing, probably about the end of August to keep the slots for Holiday season.
At some point, the reality of an expense base of 10K people vs Intel's number will make it clear who can afford to price most aggressively. I believe Buggi is on to something when he talks about mix, it is still going in AMD's favor now and will continue to do so even after WCM.
I look at a what-if on a macro level for AMD. If they have to, they can reduce average pricing by roughly 15% (say $85 on average for ease of computation). If at these lower levels they can ship 16M units, they make the same operating profit as Q1. That will work out to about $1.50 eps. Better technology or not, Intel is not returning to the old days in this kind of scenario.
Given the typing that has already occurred, I hesitated to post. But these things are not clear to me at this point. Guess investing never is too clear. Except for Drbes....
Cravey. |
