Analysis The share price of AMD closed on Wall Street at $62.75 on Friday, a pretty big drop from its $97 high just a couple of months ago, prompting the good old tabloid question, why, oh why?
Because AMD, despite dire predictions from Wall Street analysts and a handful of hax only 14 months ago, has executed on its microprocessor strategy. In the process, it has confounded the Cassandras and the Dad's Army journalists chanting doom, dismay, death and destruction for W.J. Sanders III and his cohorts.
We're pleased to see that Wall Street has at last dragged itself into the 20th Century, just before it ends, and at last decimalised its share price system but seriously wonder, here at La Registra, whether the analysts who make share prices of high tech stock have got an earthly about the szechuan at AMD and INTC.
Long-toothed readers will recall that AMD's prime marchitectural directive in the bad old days seemed to consist of "mopping up" markets that INTC originally made, by introducing "clone" products obsoleted or about to be obsoleted by Chipzilla.
That all changed this time last year when Athlons, which AMD had announced in June, started to appear in some volumes at a price, and at a speed, which must have rattled the senior suits at Intel.
Doctrine of Inaccurate Conception
Those senior suits ought to have seen the Athlon threat coming. It was signalled clearly enough for the previous nine months.
But instead of so doing, the said senior suits, at the Intel Developer Forum, held at the Palm Springs Convention Centre at the end of August last year, instead invented the doctrine of Innacurate Conception.
This led Craig Barrett, Intel's CEO, to proclaim its Coppermine 0.18 micron desktop cores were coming earlier than anyone had realistically expected.
Sure enough, on 25 October last year, to the applause of Wall Street and to a fanfare of applause from the said Cassandras and the Dad's Army of obedient Hackdom, Intel announced a whole spate of Coppermine cores.
What a difference a day makes. On the 26th of October last year, Intel quietly sent its PC customers and its distributors a little memorandum which spelt out the unfortunate fact that even though it had announced CuMines, there was going to be something of a long delay in delivering these parts in quantity.
How to antagonise the Taiwanese
Meanwhile, while AMD was continuing to ship its Athlon microprocessors in volume, and at a price that suited, Intel was quietly cheesing off a whole raft of Taiwanese motherboard vendors with a cunning tridentine strategy that meant it was delivering Caminogate i820 and other chipset platforms that didn't work, insisting that the future was Ramboid, and saying that the popular BX chipset was also in desperately short supply.
Quite a few Taiwanese customers who previously were 100 per cent Chipzilla houses, decided to defect and use Via chipsets while ramping up their plans for AMD Athlon based systems.
Between then and now, that process has accelerated, so much so that at last June's Computex conference, we heard the kind of dissension in the ranks that would previously have meant administration of a blindfold at dawn, soon after followed by the stacatto sound of 12 Intel rifles.
How to Piss Off the Channel
Let's face it, distributors and dealers easily get cheesed off with their suppliers, which makes them such a great source of news for IT journalists.
In January this year, we had occasion to meet with one of the bigger European distributors of microprocessors - and one, moreover, which distributed both AMD and Intel chips.
He told us a sad and sorry tale of how Intel had placed its boxed microprocessors on allocation not for weeks, but for months.
Although INTC business had previously been good, indeed very good business, he alleged that shortages and tightness in supply had meant that the "good earner" had stopped being the cash cow and gravy train it was, and that, like it or not, AMD was promising and delivering good supply. His company therefore had no option to deliver AMD chips to those dealers who would accept them. At this stage, quite a few dealers were still Intel-only houses.
But, over the next four months, we heard from members of Intel's dealer channel of undeliverable orders from Chipzilla and a subsequent move to the opposition in the shape of AMD.
How to stiff your PC customers
For some time after CuMine shortages had become evident, it looked like Intel's main distributor, the Dell Corporation, was humming and hawing as to whether to use AMD processors, or not.
The answer, so far is not. That decision that has affected Dell's bottom line, and so caused the Wall Street wallies to conclude that the bottom was dropping out of the PC market.
We heard from formerly Intel-loyal Toshiba that it was cheesed off because it had been delivered samples of CuMine portable chips a matter of days, rather than months, for validation.
And this is what a formerly Intel-loyal UK original equipment manufacturer(OEM) has to say about its experience over the last year.
"The success of the AMD Athlon product has surprised everyone. The complacency of Intel in previous years left them in a very dangerous position and AMD has taken full advantage of that."
"AMD has provided a cheaper, faster product that the Intel Pentium III and, more importantly for us non-Tier 1 players it is available"
"At last AMD has executed when it mattered most. For those accounts who have felt left stranded by Intel over the last year. AMD has answered our prayers by being able to supply processors at the required frequencies in the right timeframes."
So what about next year?
While AMD has made hay while the sun has shone, Intel has, at least from the outside, taken some steps to respond to the situation.
Far from regarding AMD as an "imitator", Intel now sees it as a very real threat to its core microprocessor business.
While it has a relatively short time left to turn round the situation, INTC still has enormous strengths and resources. It is a highly liquid company with unmatched fabrication plant facilities.
AMD's capacity is somewhat constrained and while it still has, as far as we are aware, an agreement with IBM, so far it has chosen not to use this additional resource. It wants to build a new fab plant for its microprocessors but fabs take time to build.
Suits at AMD tell us that they are unworried about capacity at present, and there's little doubt that it will continue to turn in successful results while momentum on its Athlons, Durons, and later on this year, its corporate mobile offerings grow. Er.. that means that its share price is going to go up again.
In the meantime, INTC has not only to offer a better technological answer to AMD, it has also to re-build its relationships with the different sectors of the market it has antagonised over the last 18 months.
At the end of last year, we wrote of Intel's Annus Horribilis. It still has a window of opportunity to prevent the year 2000 being its second bad technology year in a row. ®