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

To: kapkan4u who wrote (14163)	10/16/2000 7:25:31 PM
From: Petz	Read Replies (1) \| Respond to of 275872

kap & Pravin - on segmentation strategy Pravin: AMD's segmentation strategy is a failure Kap: Selling Athlon for $50 will destroy the premium brand. I've been thinking about this. The Intel segmentation strategy doesn't benefit Intel much anymore but I think the big OEMs love it. Everyone knows there's no reason you can't put a DVDROM and a CDRW in a Celeron system, but the OEM's agree with eachother to keep Celeron systems "low end" so that salesman can "bait and switch" the public. They sell their Celeron systems with cheap video, cheap HD's, lower memory and sell them at razor thin margins. They only put the high-end stuff in the PIII systems and they have a healthy markup on them. Meanwhile, Intel only gets $50 more for a PIII 700 vs. a Celeron 633, but the OEM's make an extra $200 profit on the latter. To work this "bait and switch" strategy, you need bait. The Celeron is bait because its a recognizable brand and it has the Intel-Inside sticker. Unfortunately, the Duron is totally unknown to the public. It is not bait because AMD had absolutely no advertising campaign for it, and no OEM's were willing to advertise it for AMD [showing their foolishness, IMO]. The OEM's were extremely reluctant to add an unknown brand, Duron, to the part of their computer lineup which is designed to attract customers. I am sure Intel gave them huge incentives not to build Duron systems as well. So, should AMD abandon the Duron? I think not. Duron systems would still be sold at retailers to people who come in to buy a Celeron system but find its out of stock or doesn't have the add-ons they want. It should be pretty easy to "up-sell" the consumer to a Duron system, IF THERE WERE ANY IN THE STORES. This is not a hopeless situation. The AThlon had zero brand awareness when it debuted. Without brand advertising, it will just take time, and one or two OEMs, for the awareness of Duron to reach the level of Athlon systems. Sales of Duron systems will take off when they exist in the retail stores because they will be "up-sold" to the Celeron-hunter. BTW, for at least the next 3 months, even if Compaq were to announce Duron systems tomorrow, MOST of the Duron systems at retail will be sold to those who want something better than integrated video and a 15" monitor. This situation will exist until the Duron has sufficient brand awareness, either by time, by AMD advertising or by OEM advertising, to be considered "bait" by the top OEM's and retailers. Then they will advertise it like crazy, and hope to up-sell the consumer to an Athlon or PIII. Why would this benefit AMD? As kap said, it allows Athlon to retain the premium brand status. In AMD's case, that means an extra $30 at a given MHz level. Less than Intel's $50, but more significant for AMD's ASP. Petz