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Politics : Formerly About Advanced Micro Devices

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To: Paul Engel who wrote (29083)	2/27/1998 8:09:00 PM
From: Profits	Read Replies (2) of 1573984

Paul, Q: Why didn't AMD do this last year? A: AMD didn't do this last year because they didn't have a robust part. The yields were low and they didn't know why. IBM wouldn't touch the K6 with a 10 foot pole because yields weren't there. Paul: Last year Intel had a huge advantage in wafer fabs over AMD. Profits: True then and still true today. Does that mean that AMD should back away from adding capacity? Paul: Now, AMD will have to pay IBM's profits to IBM before they ever get a dime selling these K6's to their own customers. Profits: AMD will pay IBM for producing chips just like any other foundry arrangement. How does Xilinx or Lattice or any Fabless company make money? They all must use foundries to build parts. Besides, AMD's die size is so much smaller than Intel's that AMD will still have a cost advantage over Intel. Paul: If AMD's customers didn't think AMD was a viable manufacturer of x86 CPUs before, this deal sure tells them they were wrong! Profits: Why? Because AMD wants to ship 15MU in 1998? And they will do what is necessary to ship 15MU. I don't think so. Paul: And you can bet Intel's sales force will be making sure all Tier 1 and Tier 2 PC manufacturers know this fact - and the fact that any K6 bought from AMD helps IBM - a competitor to these PC manufacturers. Profits: And Dell and Gateway shipping Intel boxes aren't competitors to Compaq and HP. Give me a break. Paul: If Intel drives down pricing enough, AMD may end up losing more money on this deal - as opposed to MAKING money. Profits: Based on sheer marketshare, Intel has much more to lose than AMD by driving down prices. Paul: Last year, AMD didn't think Intel would drive down CPU pricing. Last year AMD found out they were wrong. Profits: Knight to Queen. Checkmate. It's all a marketing game. AMD made the move to cannibalize Intel's MMX technology and beat Intel to punch. Intel lowered pricing to stall the massive migration of Intel's customers (IBM, DEC, Compaq, Acer, etc.). It's all a game. Paul: This year may be no different. Profits: Like I said, Intel has more to lose by bombing prices. I think that things are very different this year than last. AMD has yield issues resolved. They are doing business with many tier 1 companies. The K6 and Cyrix processors were so successful in the sub $1K market and more than 40% of boxes sold today are below $1K that Intel had to change their strategy with Covington. Profits

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