Before I start this article I wanted to clear something up. I have been receiving comments from the same people suggesting that my blog no longer talks about industry trends. This obviously isn’t true, in the last month I have written a few industry articles both on the blog (like here, here, and here) - and in various magazines. I don’t talk about HP anymore than I did Voodoo in the past – although there has been a ton of activity to speak about as of late. ...and you better believe that I’m proud of our accomplishments and I love working for HP.
You’ll no doubt hear more about it as time goes on - so for the people who choose to hide behind an anonymous name and write the same weak comment over and over again, please take the time to actually read the site. :)
Intel from Winnie the Pooh to Red Bull
I wrote my Thanksgiving Day (U.S.) blog over here. It seems like Intel has much to be thankful for as well this year.
If you asked me last year if I thought Intel would turn their product line around in twelve months I would have said it's highly unlikely. To me, Intel’s product line was about as interesting as a cold sore last year.
Granted their upcoming products (Conroe/Kentfield) looked interesting, but I figured they would have a tough time blowing out their existing inventory of Pentium branded processors. I was also very sure (and vocal) that Intel’s most exclusive customer would switch some of their product line to AMD in short order. I was right on that point, as were some others – and Intel continues to lose market share to this day as a result of this sudden unexpected switch.
Last year I was so down on Intel that when the stock hit $30 that I thought there was no upside in sight for at least two years.
Well, it turns out that I underestimated Intel's ability to turn their ship around so quickly. In the past I have commented on our love for their low voltage initiative, their Conroe/Kentfield and mobile processors. I absolutely love the overall platform performance that Intel has been able to deliver to the desktop. I have praised the Intel Israeli team for “carrying the company on their backs” when they were down. …and to this day that same team continues to kick-ass.
I also knew that Intel would need to change the way they did business in order to turn things around. They would have to accept the fact that their market share would drop and they would have to control margins.
What I didn’t expect was their ability to swallow their pride and accept the fact that their competition had beaten them good. I didn’t expect Intel to accept the fact that AMD would win business from their largest customer, but as it turns out it’s probably one of the best things that has happened to Intel and the industry.
It looks like Intel submitted, and that said, I am pretty sure they hit rock bottom. There is no doubt they don’t want to go back there, and it seems as if they are making the transition from Bear to Bull.
The thing that people need to remember is it took AMD over three years of being on top of the performance benchmarks in order for their brand to crack into the mainstream. I don’t think it will take as long for Intel to go from Bear to Bull though – and there is a simple explanation for this: Now that AMD is (almost) widely accepted as a mainstream alternative I think the swings will be quicker, similar to the video card competitions of Nvidia + ATI. AMD doesn’t need to “re-crack” the mainstream. AMD has already accomplished the seemingly impossible, now they just have to continue making solid reliable products.
The only problem I see is the growing price wars and sudden dropping of average selling prices. This could be very unhealthy for both companies. Especially since AMD has a giant red pill to swallow - and Intel may lose enough market share to force them to keep margins strong. Regardless I hope both companies can re-strategize quickly and prepare for the long haul.
It will be interesting to see how the swings play out over the next few years. I don't claim to be a master of finance, but the way things are going I'd say Intel is probably a screaming deal right now. Although AMD is in a very unique position because they can take advantage of swings from the graphics and CPU side...
I wonder if Wall Street is paying attention?
As an aside; I have been reading comments from people screaming about AMD "taking channel allocation away" in favor of tier one OEMs. I would say that's completely false because there are those in the channel who have zero issues procuring AMD CPUs. Although AMD's CPUs are in massive demand - I don't believe it's because of any one customer specifically. I believe it's because their notebook CPU demand is out of control. AMD did not expect their Turion processors to be consumed so aggressively, and as such I believe their notebook production is taking up an unexpected amount of their capacity. I wrote an interesting article on the current situation here.