A Bit of A Puzzle

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Intel released its financial numbers on Tuesday. They weren’t too good; essentially the typical bump in sales dollars for Christmas was the Bump That Wasn’t.

In their conference call, they blamed a lot of things for that. They said the PC market was weak; they said people like nVidia didn’t come up with chipsets and mobos on time.

On Wednesday, AMD released its financial numbers. For the second quarter in a row, they were extraordinarily good. AMD sold around 2.5 million more CPUs in the fourth quarter than they did the third (which was a record breaking quarter), while getting about 6% more per CPU.

AMD sold well over ten million CPUs for the quarter; the actual number is probably in the eleven-to-twelve million range. So they did very well.

One of the bean counters released preliminary 4Q figures, too. Contrary to Intel’s mutterings, IDC Research said that growth in PC sales were better than average, growing more than 15% measured either by quarter-by-quarter or 4Q 2004/4Q 2005.

This leads to a puzzle. About eight million more PCs were made 4Q compared to 3Q. We know AMD covered about a third of that increase through its increased production. One would normally expect Intel to account for the rest. Yet Intel essentially got no more revenue in Q4 than they did in Q3 (and only about 4% more than they did Q4 2004).

Some might say selling off inventory might explain this, but Intel’s inventory grew the last two quarters.

Intel said its ASP dropped slightly in Q4. Well, if you make more processors, and make no more money from the effort, your ASP has to go down.

If you make roughly 12% more CPUs (which is about what would be needed to account for the rest of the bump in PC production) than you did the prior quarter, but you get less than 1% more money from them, ASPs went down, and not slightly.

While this is hardly a perfect comparison (CPU production isn’t perfectly attuned to PC production; outside factors like foreign exchange losses/bad hedging could also account for a chunk of lost revenue); it does look like it was a poor quarter for Intel, but more because they got less money for their processors rather than making fewer of them.

To get a better call on this, we’ll have to await the breakdown on sales by CPU company by Mercury Research. AMD will certainly gain marketshare, but probably not as much as relative revenues might indicate.

Ed


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