AMD is solid at retail, now the bad news
The supposed meltdown at Dell doesn't tell the whole story for AMD but the whole story isn't necessarily great either.
Advanced Micro Devices may have been demoted on Dell's Web site (though three AMD-based notebook models are still listed). But its chips aren't collector's items yet.
A quick inventory of Best Buy, the largest U.S. electronics retailer, is telling. A search on the reseller's Web site greets you with a page full of AMD-based notebooks. Ten to be exact. Some are fairly attractive too. Many are models in Dell's svelte Inspiron line. (Correction: not Dell's XPS line). Granted, Best Buy may not have the turnover of Dell's Web site but it's not Radio Shack either.
Then there's Hewlett-Packard. If the perception is that AMD is fading at Dell, that's not the case (at least not yet) at the largest PC supplier in the world. "AMD represents a good value from a price/performance ratio," an HP spokesperson said.
In addition to the AMD-based notebooks available on HP's home-and-small-office site, a crush of systems is listed on Best Buy. If you're keeping score: AMD 9, Intel 4. Go to Staples online, and it's nothin' but AMD in HP.
And let's not forget Toshiba. In addition to listing seven AMD-based notebook on its Web site, almost half the Toshiba notebooks at Best Buy use AMD chips.
What about the brick-and-mortar Best Buy? At a Southern California Best Buy (just south of Orange County), there were 34 notebooks on display. Exactly half (17) of these used AMD chips (mostly dual-core Turion processors). And most of the AMD systems were placed at the front where people browse. But here's the catch. The salesman was pitching Intel. He volunteered that Intel's Core 2 beats AMD's dual core. "Intel runs cooler too," he said. And he had nothing positive to say about AMD. That's a problem.
Which brings us to another problem AMD may face. Last fall, Intel CEO Paul Otellini said in a conference call that his company has "walked" away from "a lot of low-end business" in mobile and desktop because it's not profitable. This is a real danger for AMD: getting relegated to the budget bin where profit margins are typically thin. (Many of the AMD systems are below $900.) But that story--whether AMD's profit margins are in fact razor thin or not--will be told in upcoming earnings statements.
The bigger problem may be Intel's Silverthorne and its low-cost x86 derivatives. These chips are designed specifically to compete at the very low-end--and make money there--unlike current Intel processors. Though nobody knows at this point whether Silverthorne will be competitive or not, its mantra is worth noting: low cost is good. "Because they are so small, literally thousands of them can be cut from 300mm wafers at 45nm. Thus, their economics are incredibly good," said Roger Kay, an analyst at Endpoint Technologies Associates.
And Otellini said more or less the same thing during Intel's fourth-quarter conference call. "We're embracing this trend with Silverthorne and will take the pricing down even lower...A tailored product for ultralow cost notebooks is a new thing for us," he said.