Business case AMD as a No-2.
You stated often that AMD should have a strong business case for being a No-2.
I agree that in most businesses a Number-2 can make a decent but not necessary spectacular
living. However the Number 2 must play his cards carefully, or else he can be toast. AMD is gradually
withering away and needs to reevaluate reality before it becomes history.
In most markets the No-2 can survive by differentiating its product, by targeting its market at a different niche or survives in consumer markets by 'just being different'. For example Apple was in a
negative spiral. It did not have a dramatically better technology, and was trying to gain market share against the larger x86 platform .Due to inherent economy of scale of the x86 platform, gaining market share was suicidal and hopeless. However under Steve Jobs, Apple has regained profitability, but not market share. Apple appeals to its fanatical hardcore, and to those who like something different, and the IMAC has filled that need well. So Apple can live on to fight, and wait for an opportunity when it can provide a dramatically better technology to regain market share.
Cyrix would find holes in the Intel's line-up to survive. It found a gap between the 386 & 486, also a gap between the 486 and Pentium, and it lead the way to higher levels of integration with its GX, knowing that Intel would ignore the low end. Cyrix was handicapped by being fabless, and never posed a major threat to the Intel profit machine, and was allowed to survive.
But AMD is trying to compete headon with Intel, and is going after Intel's bread and butter, and does pose a threat to Intel's profits. So it forces Intel to launch a price war, which AMD cannot survive. AMD does not have superior technology and has higher costs and cannot compete on pricing. Initially Pentium II cartridge cost an extra $20 and that gave AMD a hope of survival. But against the Celeron a battle based upon price is hopeless. I agree that all the customers still want AMD around, to keep Intel's pricing in line. So AMD should compete with only a minimal price discount The market share will shrink significantly, but if Dresden is jettisoned or sold off, AMD will survive to live another day. Then even Intel will allow AMD to survive. [ The lion allows a hyena to eat the scraps of its meal. But if the hyena attacks the lion's main meal, the hyena does not live long.] Unfortunately the existing AMD management will not go for this option. The ego and pride will not allow this to happen.
Unfortunately the K-7 will not be the savior. AMD needs dramatically superior technology to make inroads into Intel's market without bleeding to death. And the K-7 is not dramatically superior
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AMD has impressive design teams, and still has significant manufacturing resources to be a credible and profitable second to Intel. Unfortunately it lacks a viable business strategy. The only case for investment in AMD is that it is a good takeover candidate by a company like Motorola or TI.,who could define and implement a better business strategy. |
