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Technology Stocks : Advanced Micro Devices - Moderated (AMD)
AMD 259.65+2.3%Jan 23 9:30 AM EST
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To: mas_ who wrote (255261)8/5/2008 9:13:20 PM
From: Saturn VRead Replies (2) of 275872
 
Atom's primary goal is the low power handheld device market. You are correct that due its tiny size it can be a very low cost competitor to ARM. So Superficially AMD would not be threatened by Atom.

Right now Atom is in short supply and so obviously Intel will not drop its price to the floor, and the immediate threat for AMD is Penryn. However AMD can be in an uncomfortable position when the Atom gets to very low price points, since Intel could potentially sell Atom at decent margins and still be below the AMD variable cost.

A lot of customers buy quality or performance only. AMD Opteron made handsome profits when it was performance king. Now the performance situation for AMD has degraded, and threatens to get even worse with Nehalem. So AMD will lose the high end sales. AMD can only play the price card, and offer lower cost for equivalent performance for mid to low range parts.

A lot of customers buy on price alone, ie they are perfectly willing to compromise on performance and buy the cheapest product. This is particularly true for emerging markets. This has been AMDs refuge. It has dominated sales in the low cost market market. If and when Atom pricing gets to the $10 range or less, AMD could lose a big chunk of its sales and revenue. If this happens AMD would be overrun from the top and threatened from below. Luckily at this time Intel does not have the capacity to mount a major attack from below. But this could change in a years time.
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