AMD is in a world of pain right now. The cause? The short answer is a continued pricing war with microprocessor archrival, Intel. But that’s not AMD’s only problem these days. In response to recent losses and lower sales, AMD has cut its 2007 capital spending budget by 20% (a $500M reduction) and imposed a hiring freeze for all but the most critical positions.
Just a year ago, AMD was a favorite on Wall Street. It had Intel on the run with better products and better pricing, and AMD had finally gotten its foot in the door at Dell, which had been an Intel-only house for years. In 2006, AMD had the momentum to challenge Intel’s stranglehold on the processor market for PCs and servers, and it was on the march in mobile electronic devices and other market niches, too.
Then something bad happened. Intel fought back.
2006 was Intel’s year of pain. Losing market share, and seeing profits and sales drop, it was forced to sell cheaply whole product lines it had paid dearly for in the tech boom of 1999 and 2000. It reduced headcount while most chip companies couldn’t add people quickly enough. But then, most importantly, it brought out a new line of processors that were well-received, and it cut prices on older processors. It cut prices deeply.
AMD had to respond to remain competitive on pricing, and they’ve done so with vigor. At the same time, they’re integrating the worldwide operations of ATI Technologies, the graphics chip company AMD bought last fall for $5.4B (including $4.3B in cash). ATI added more than 3,000 employees to AMD’s headcount, which shot up to 16,500. Acquiring ATI also brought AMD a subpoena from the US Department of Justice, which is looking into potential antitrust violations in graphics processors and cards. Ow!
Intel and AMD are reporting their Q1 figures this week. It should be a tale of two cities, and I don’t mean Santa Clara and Sunnyvale. More like the City upon a Hill and Sin City.
Comments
Paul Says:
April 19th, 2007 at 3:14 pm
Excessive and undeserved payouts of millions to corporate executives… even when in a loss positioin, like AMD… will eventually bring another crash to the markets like we had in 2000. Of course the BS artists in Washington DC will scratch their heads and fake amazement….
With Interest rates cut to a false low and a new crash in the market… America will probably reach a more than 50% “below the poverty line” population.
Let’s hope that Bush doesn’t start with his “Americans should invest in the stock market to save social security bit” again….
Paul.
Mike Says:
May 23rd, 2007 at 9:59 am
P..P…P…PLEASE Paul….
Intel had the advantage that it did not have to “convert” users to their brand like AMD had to do… once Intel came out with a better multicore chip they re-entered the game with strenght, AMD will come out with a faster better performing chip and will regain position, I still feel that Intel has more to lose in this battle, because now there are 2 equally recognized manufacturers.
And Paul… please don’t tell me that the 2000 crash was Bush’s fault too… the market today is not being driven by technology like in 2000… so your partisan comments make no sense whatsoever.
Jason Says:
April 30th, 2008 at 10:52 am
AMD will ultimately succeed due to their pro-consumer history. Any company that punks the customer by controlling the market and bullying the industry will eventually be found out. Intel will out-perform for a little while until this anti-trust lawsuit against them eventually turns them on their head. Better yet, Intel doesn’t get trampled, they just get honest. Since when does Bush have to do with micro-processors? Wow.
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