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Technology Stocks : Advanced Micro Devices - Moderated (AMD) -- Ignore unavailable to you. Want to Upgrade?

To: Paul Engel who wrote (8894)	9/17/2000 10:29:59 PM
From: Maverick	Read Replies (1) \| Respond to of 275872

AMD Fights to Gain Market Share Excerpts follow: Number two sets aggressive pricing strategy By Jayant Mathew While Intel Corp. contends with its many recent missteps, archrival Advanced Micro Devices Inc. (AMD) last week sharpened its focus on the microprocessor business. After years of playing second fiddle, AMD pre-empted Intel and cut prices for its high-end Athlons and Durons by up to 44 percent, a bold move to grab market share from Intel. But will this result in razor-thin margins for the upstart chipmaker? Although some price-cutting is typical before a company bumps up a processor's speed, (in this case AMD's move to 1.1GHz) the near-rock-bottom prices posted by AMD were unexpected. Intel also cut prices for its Pentium III chips, but those cuts had little effect because the company recalled all of its 1.13GHz Pentium IIIs. Historically whenever the two chipmakers have sparred over prices, Intel has come out the winner. The most glaring example was when Intel, a late entrant in the low-end market, took on AMD by engaging in a fierce price war that all but destroyed AMD financially. AMD, however, is not vulnerable as it once was. The company is almost sold out across the board for the rest of the year. The only slip-up AMD made recently was to miss the back-to-school market for the Duron. In spite of that, AMD bumped up the speed to 750MHz last week. Industry watchers believe that very few systems will be available this year. "Historically Intel would dictate prices but that has changed now," said Fred Hickey, editor of The High-Tech Strategist . "AMD is leading the pricing and Intel is responding to it." AMD needs to penetrate this market to gain acceptance with PC OEMs, Hickey believes. Such penetration also would allow AMD to get a foothold in the workstation and server market, he added. This might be true, but AMD has to understand and master the margin business. With both chipmakers making their price cuts for the quarter, AMD's prices continue to trail at an average 36 percent discount compared to Intel's prices, which the company cut by as much as 34 percent, according to Merrill Lynch & Co. For AMD, it's a tough call: take a hit on margins and increase share with the hope that PC OEMs will buy more Athlons and Durons, or keep the prices in line with Intel. AMD has a couple of quarters as a window of opportunity to make substantial inroads while Intel is in transition, according to Morales. "If they continue to execute, they can gain share until Intel's new products are introduced," he said. Intel is expected to introduce the Pentium 4, Itanium and Timna microprocessors in the next quarter. These chips, however, will take at least a few quarters to begin volume production, giving the Athlon and Duron some room to capitalize at Intel's expense. electronicnews.com