After settling with Intel, AMD now must compete with Intel on its merits. Some experts weigh in on how it will do.
Now comes the hard part for Advanced Micro Devices. It has to compete with Intel on the merits of its products.
After settling with Intel and walking away with $1.25 billion, how competitive is AMD's silicon? Some experts weigh in.
Two analysts that follow Intel and AMD said separately that AMD won't be competitive until 2011--at the earliest.
"The only chance for reaching any kind of parity is in 2011. They don't have anything on the roadmap until then," said Ashok Kumar, an analyst at Northeast Securities. In the interim, AMD will get by with about one-fifth of the processor market, according to Kumar. But whether AMD can expand its market share beyond this and be profitable--like Intel--isn't clear. "Intel can leave 20 percent of the unit volume for AMD but (AMD) will have to come up with a business model where it can return to profitability based on this."
AMD may have a chance to expand into more profitable segments if it executes well in 2011, according to another analyst. "AMD believes it's on the cusp of another cycle where they will have strong product offerings compared with Intel. I think this happens in 2011," said Nathan Brookwood, the principal at Insight64. "The products are innovative and have tremendous potential," Brookwood said, referring to the particulars of new chip technologies that AMD disclosed at its analyst day on Wednesday.
But these are big ifs. AMD must close a yawning gap with Intel that's not going to get any smaller because of the legal settlement. "Technically, Intel now has a definitive advantage, which may widen," said Roger Kay, president of market researcher Endpoint Technologies. Kay believes that AMD will have trouble keeping up with the feverish pace, referred to as "cadence," that Intel sets as it moves to each successive generation of chip manufacturing technologies--which, in turn, allows Intel to quickly introduce performance and power efficiency improvements in its processors. "AMD tends to be six months to a year behind Intel," Kay said, citing a statement made by AMD CEO Dirk Meyer at the company's analyst meeting on Wednesday. AMD may begin to close the gap more in the future "but there's no telling whether that will happen," Kay said.
And if it doesn't happen, AMD becomes little more than a foil to keep Intel honest. "This settlement is actually proving the very point that Intel wants to keep AMD alive and able to compete at least in some small subset of the market, otherwise Intel will be faced with regulatory issues that they would rather avoid," said Avi Cohen, managing partner at Avian Securities.
AMD's best technology play to avoid this fate is "Fusion," Kay said, referring to a technology that combines the two key processors inside a PC: the main CPU processor and the graphics processor, or GPU. Fusion, however, isn't slated to come to market until 2011, according to the road map that AMD disclosed on Wednesday.
And what about today? Dan Ackerman, a senior editor at CNET Reviews and someone who regularly reviews AMD- and Intel-based laptops, makes an important point about the challenges AMD faces in the here and now: Intel-based laptops not only dominate the high end of the market but the low end, too. "Intel CPUs are found in almost all of the high-end systems (such as Core i7 laptops), and the low-end systems (Atom-powered Netbooks)," he said.
Ackerman said that AMD will be hard pressed to beat Intel head to head. "AMD has some room in to maneuver in the middle of the market--laptops from $600 to $900--but unless they can offer better performance for the same price, or a significant price discount to consumers, it'll be hard for the company to gain additional market share."
Rich Brown, a senior editor for desktops at CNET Reviews echoes Ackerman's sentiment: AMD competes by offering lower prices than Intel, not better performance. "From a tech standpoint, AMD's...desktop chips haven't been competitive since Intel launched Core 2 Duo. Instead, AMD has had to compete on price," Brown said.
The best action plan for AMD is to keep executing on key technologies and hope this eventually translates to market share gains. "AMD is rapidly developing a reputation for timely execution of marquee products/platforms," said Doug Freeman of Broadpoint AmTech in a research note. "AMD revealed that its newer platforms...are on track for [the first half of 2010]," he said, referring AMD's high-end server chip lines.