TAKE A LOOK AT THISTHIS COULD BE GREAT NEWS FOR AMD!!!
AMD - NYSE
By Ian Fried, Bridge News Commentary
San Francisco--Mar 20--Limited supply of high-end chips and occasional
glitches may not be directly hurting the bottom line at Intel Corp. But there
seems to be a growing feeling among computer makers, save Dell, that it pays to
get processors from more than one place. And that does take a bite out of
Intel's profit pie.
* * *
The latest glitch from Intel Corp.--a packaging problem that can cause
notebook computers to fail--is fairly isolated and not of much note. But at the
same time come rumblings from the Toshiba camp that it might abandon its
all-Intel approach, at least in its desktop line.
While the two events are likely not tied together, there is a link.
Intel's air of invincibility is growing increasingly cloudy, leaving
computer makers running for an umbrella.
The umbrella of choice: Advanced Micro Devices' Athlon chip. Introduced last
year, the chip offers clock speeds and performance on par with the Pentium III.
That message was loud and clear from Gateway, which abandoned the all-Intel
approach earlier this year after chip shortages led the direct computer seller
to post lower-than-expected fourth quarter earnings.
Gateway Chief Executive Officer Jeff Weitzen lashed out at Intel in a heated
conference call with financial analysts, vowing to never again let a supplier
determine his firm's fate.
On the other hand Dell Computer Corp. grit its teeth and rode out the woes.
The delay of Intel's 820 chip set was especially painful for Dell, which had
planned a significant number of its high-end shipments to be based around the
computer architecture.
Chairman Michael Dell told Bridge News earlier this year that the company is
constantly reviewing its alternatives. But in an interview with an online trade
journal at around the same time, Dell suggested that his customers require a
level of reliability that the infrastructure around AMD's chips does not offer.
But Dell appears to be unique in that view. The more Intel is viewed as
vulnerable to supply problems and product bugs, the less of a premium it would
appear to be able to claim over AMD.
Having a second source for microprocessors is nothing new. AMD got its start
as a direct second source for other chip firms and made pin-compatible versions
of Intel microprocessors through the 486 generation.
Through business negotiations and legal maneuvering, Intel has been able to
largely exclude those who would directly duplicate its engineering efforts.
Today's version of a second source is a functionally equivalent chip that
can run all the same software. While AMD's processors run the same core
instructions as Intel's, the chips are not socket compatible and require
separate motherboards and companion chip sets.
In recent years, the cost of maintaining 2 infrastructures seemed too high a
price to pay for a second source, leading some makes to adopt an all-Intel
lineup.
But with the Intel gain seeming fallible, more makers are seeing value in
being able to offer machines based on more than one firm's processor, even with
the added infrastructure costs.
The key for AMD is to execute at least as well as its larger rival. Intel
still has volume and pricing power that AMD lacks, a fact made clear by Intel's
last-minute design win inside Microsoft's X-box gaming console.
For Intel, the re-emergence of chips that are as capable as its own means
that its ability to deliver is all the more important.
The impact of small glitches may not amount to anything more than a rounding
error on Intel's income statement, but they could be far more costly if they
hurt the premium for its full line of chips or lead a customer to rethink a sole
source strategy. End