CJ,
It seems as though the same type of irrational selling that occurred in 2002 is also occurring now. Many people following this stock fail to realize that, while it would be nice to have processors that perform on par with Intel's offerings, as the FAB 38 conversion continues and AMD's ability to increase market share grows, AMD has an opportunity to pump out chips and drive incremental revenue by capturing chipset and graphics sales. Prior to this, AMD had to cover all expenses with CPU sales. They were constantly trying to tip the balance between market share and profitability. Now, AMD can use its CPU sales to broaden the market for its chipset and graphics chip sales. In the past, trying to capture market share from Intel with a price war usually hurt AMD's bottom line more than Intel's. Now, with the benefit of chipset and graphics chip revenue virtually tied to each CPU sale, AMD has the ability to soften the effects of a price war. Going from 20% marketshare to 33% marketshare increases AMD's marketshare for chipsets by over 60%. It's a little more difficult to determine how this would effect discrete graphics, but, it certainly would effect sales in a positive way. The nicest part about all of this is that none of this market includes Intel as a competitor. Sure, one can say that NVidia is a worthy competitor, but, NVidia is no Intel.
All of this breaks down to the following... If AMD sells a CPU for $50 to try to capture market share from Intel, then, they sell a chipset for $35 and possibly a descrete graphics card for $100, the net profit from the sale of all three is more than the net profit from only selling a CPU for $100. This is why the ATI investment was a good one. It finally allows AMD to go after marketshare without giving up on the notion of profitability...
Scott |
