AMD has been going a burster pushing Intel into a series of new and interesting measures in order to fight back and get sales. According to Intel the law of nature is Intel first and everyone else a long way back. For two years it looked as if, at long last, Intel had it wrong. That AMD was the horse to back.

Now AMD, Advanced Micro Devices, has issued a warning that its fourth-quarter revenue and profits will be below expectations.

What went wrong?

Price slashing.

AMD has done this before. In order to try and get a bigger slice of the pie it has slashed prices. It has done this big time. Taking market share from Intel. Now this splendid practice has turned around and bitten it on the bum.

The report states that unit sales in the fourth quarter were up, but ’significantly lower microprocessor average selling prices’ will hurt AMD’s profits. Which means it has over-slashed. (Yes, yes, I know that over-slashed is not in every dictionary but it describes what AMD has been doing with prices — over-slashing.)

To add to its woes the enemy Intel has taken its corporate finger out and its new Core 2 Duo line of PC processors are very quick, very attractive and well priced. And the Xeon 5300 server processors are none too shabby. So the performance advantage AMD has enjoyed in the desktop and server markets has been somewhat eroded.

It used to be that for gamers — a most profitable segment of the market — with desktops it was AMD or nothing. Now there are Intel chips which are more than acceptable.

Same in servers. You can chose between Intel’s dual-core Xeon 5100 processors or AMD’s Opteron chips. There is little performance difference so to make the sale AMD has been slashing prices and this has led to to its forecast that profits will not be as expected.

Technology Business Research analyst John Spooner pushed out a report saying that Intel ‘can tout a lower price-per-core than AMD in some segments of the server space. There, Intel has priced several of its quad-core Xeon 5300 processors, which arrived in November, the same as its dual-core Xeon 5100 processors, which we believe may help it win deals in the server space.’

If you are wondering what the server space is it is analyst-speak for the segment of the market where people buy servers.

Added to all of this is the fact that AMD has some production problems and one of its fabs, a new 65-nanometer factory in Dresden, Germany, is not yet on line.

AMD had been banging the big drum as to how it was beating Intel. Now it has had to mute its drum solo more than somewhat.

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Entry was posted on Saturday, January 13th, 2007 at 10:20 am under Technology.

Read more entries by Gareth Powell.
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