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

To: Tenchusatsu who wrote (219826)	12/9/2006 2:55:33 PM
From: kpf	Read Replies (1) \| Respond to of 275872

Tenchu Good to see I am not the only one with doubts software-economies would imply a natural monopoly. K. On a sidenote, without a (imo outstandingly wise) ruling of an U.S.-court's judge in 1991 in favor of AMD this thread would not exist - at least not under this name.

To: Tenchusatsu who wrote (219826)	12/9/2006 6:59:02 PM
From: economaniack	Read Replies (3) \| Respond to of 275872

Tench, a natural monopoly is characterized by decreasing average cost across the range of economically significant sales. There may also be significant barriers to entry. The result is that the lowest cost solution is for one producer to serve the market hence "natural monopoly". Hardware certainly has high barriers to entry, fabs, processing expertise, design expertise and patents among them, but the efficient scale is closer to AMDs size than Intel's. At 30% or so of the market most of the cost of an AMD die is production cost, which is scaling more or less linearly. "What's the hardware analog to Linux and Firefox?" AMD of course. Both Intel and MSFT control natural monopolies, but have to balance extracting monopoly rents by charging more that their costs with pricing low enough to exclude entry. AMD has shown a sometimes insane level of commitment to staying in the CPU business, and Intel has refrained from the sort of all out war that could have put them away when they were down. Alternative software providers also benefit from the 0 marginal cost of software, and there are enough frustrations with MSFT and rebellious programmers to carry a parallel open source effort. Both Intel and Microsoft have long seemed at least as interested in pushing technologies that strengthen their competitive position as those that improve the user experience (RDram and Itanium are the obvious examples for Intel, Media Player comes to mind for MSFT, and the antipiracy setup that means that installation of a new primary drive can be a total nightmare). Had either focused on producing the best product at the best price AMD and Linux would never have had a chance. Instead they made product decisions based on what would set them up for even bigger profits in the future, and alternatives that focused on user rather than producer needs flourished. e