AMD, Intel fortunes diverge over past year
Published: 17 Jul 2007 10:31 BST
This week is likely to play out very differently for Intel's Paul Otellini and AMD's Hector Ruiz.
For Otellini, reporting quarterly earnings on Tuesday should be a welcome change from the situation a year ago, when Intel reported a sharp drop in profits and a management overhaul as the company waited to see if its Core generation of processors could halt its market-share losing streak.
They did. Wall Street analysts expect Intel to report a 28 percent rise in profit compared with last year, and the company appears to have put its major problems in the rearview mirror.
Ruiz, however, won't have as much fun. Little has gone as hoped for AMD in the past year, as it has struggled to compete during a fierce price war without new quad-core server chips. The chief executive will have to explain to financial analysts on Thursday why AMD will report an expected loss of 85 cents a share, which would be down an astonishing 570 percent from last year's second quarter.
Both companies can feel thankful that the PC market has held steady this year, although they might have been hopeful that Microsoft's introduction of Windows Vista would cause a spike in PC sales (for the most part, it hasn't).
That's where the similarities end.
VIDEO
Dialogue Box 7.4: The expanding digital universe
How much data will be created and stored in 50 years' time? Rupert and Charles make some extrapolations and come to a startling conclusion
Intel's turnaround has been a year in the making. The company successfully introduced new PC processors based on its Core architecture last July, and selected a quicker method of building quad-core server chips than AMD. Those moves, combined with a willingness to sacrifice some gross margin by slashing prices, drove AMD into a downward spiral in which it had to severely discount dual-core server chips to compete against quad-core models.
It's almost the exact opposite of what occurred two years ago. Back then, AMD chose to introduce dual-core server chips ahead of Intel, which was forced to wait six months with only single-core offerings before it had a competitive answer. This time around, AMD chose a more time-consuming plan in building a quad-core chip with four cores integrated onto a single chip, while Intel chose a quicker method of packaging two dual-core chips.
In the PC market, AMD's chips are also a little long in the tooth. Intel currently has a much broader set of chips than AMD, said Samir Bhavnani, an analyst with CurrentAnalysisWest, which tracks the US retail PC market. The Core 2 Duo and Core Duo re-established Intel as the performance leader among high-end PC users, and the decision to bring one of the most well-known brand names in technology — Pentium — back as its low-end brand gives Intel a little more cachet with bargain shoppers, he said. "There's a ton of brand equity in Pentium."
As a result, Intel has retaken market share, Bhavnani said. Interestingly, AMD's Athlon 64 X2 desktop chip and Turion notebook chip were the best-selling chips in their respective segments during June, at least among retail PC buyers. But Intel has depth, with its various Core, Pentium and Celeron brands accounting for just about everything else.
According to CurrentAnalysisWest, Intel's overall share of the US retail PC market was 64.7 percent during the second quarter, compared with 45.2 percent in last year's second quarter. In notebooks, the growth segment of the PC market, Intel's advantage is more like 70 percent compared with AMD's 30 percent.
Now the attention turns to AMD and its path out of the wilderness. The company seems to find itself in this position every five years or so, although it can console itself with the fact that it's in a much stronger position in 2007 — relative to its past hiccups, at least.
The success of Opteron signalled AMD's arrival as a player in the server market. It also has perhaps its broadest customer portfolio ever, with Dell selling AMD desktops in Wal-Mart Stores and Toshiba finally agreeing to use AMD chips in its notebooks.
The long-awaited arrival of Barcelona in the third quarter should help AMD stem its market share losses among server customers, although it's unclear what type of performance it will deliver — and Intel has…
Previous
Did you find this article useful?
10 out of 10 people found this useful
Digg
Slashdot
Del.ici.ous
Stumble
Reddit
