AMD's Deneb: Good News, Bad News

Add Your Comments

Intel is giving AMD a break.  Can they take advantage of it?

We spent some time last week talking about Intel’s “fingers in every pie” approach to the future. 

At AMD, issues about the future are much simpler than that.  To be or not to be, that is the question. 

The company simply cannot go on as it is indefinitely.  That doesn’t mean it’s doomed, but it does mean that if AMD survives, it’s going to be a much different company than it has been.  Problem is, no one outside of AMD (and probably no one inside it, either) has a clue as to what that might be, simply because that largely depends on unknown and mostly unknowable future events mostly or entirely outside the control of the company.  AMD has literally become a crapshoot company.  If A, B, and C happen, it could well become an ex-company.  If D, E and F happens, it could become more formidable than ever before, and there’s plenty of possibilities inbetween.

I’ll put it this way, the road ahead is pretty uncertain for Intel, but you know they’re going to be around five years from now, most likely in roughly the same shape they’re in now.  While events like U.S. presidential elections or future antitrust decisions will have an impact on them, Intel’s is as much in control of their own destiny as any other company, and its corporate life isn’t going to depend on how those events turn out.  The same cannot be said for AMD; their future and even their existence may well depend on how events like these turn out.  To thrive or even to stay reasonable viable against Intel, AMD needs a game-changer, and the current strategy is to batten down the hatches and hang on so that they’re around to benefit should that game-changer occur. 

So looking at what AMD might do years from now is pointless; it’s like prognosticating about someone with a dangerous but sometimes curable cancer.  The patient could be really healthy three-five years from now; the patient could also be dead.  In that situation, you just take it day-by-day, and see what happens. 

However, while it might not end up helping, it certainly doesn’t hurt for a patient to do whatever is in his or her power to improve the odds, if only to impress the doctors. 

Given that, Intel’s recent restructuring of its product lines, especially the creation of its luxury line, is actually a pretty sizable break for AMD.  It essentially removes Bloomfields from competition against AMD.  Yes, Intel will suck up huge monopoly profits as a result, but AMD wasn’t going to get a lot of money from anything it was going to come out with in 2008/9 anyway.  For the next year, for practical purposes, AMD will not compete against Bloomfields, but rather Penryns.  That’s still hardly favorable to AMD, but at least they’ll have a fighting chance with 45nm chips against those, and still get a half-decent price for them. 

But . . . but they have to get them out the door!  And so far, they haven’t been able to do that. 

If you read between the lines of recent AMD commentary, they’re talking about Shanghais and not talking about Denebs.  In the past, that has almost always meant that the stuff they were talking about would come out on time, and the stuff they weren’t talking about wouldn’t. 

Unless Deneb samples show up in Taiwan in the next couple weeks, they aren’t going to show up (except maybe in one or two rushed quasi-baked mobos) in 2008, and that’s bad, whatever the reason.  

The issue isn’t whether AMD should get Shanghais out first or not.  The issue is whether AMD is going to take this window of opportunity Intel has given it and get 45nm production cranked up quickly.  The issue is whether AMD can make somewhat more money from a new line of processors that should cost them somewhat less to make, and that means making more than a token number of them.  It literally will mean the difference between profit and loss for the company in 4Q 2008 and more importantly 1Q 2009, and that will have a big impact on how the financial people view AMD.  Right now, AMD is viewed as a cat that’s used up most of its lives, and another delay could well be seen as its last life.      

It’s important to note that it’s not just a matter of getting a new line out the door; it’s a matter of getting a lot of them out the door.  Keep in mind that the vast majority of AMD’s production is still K8-class processors, for which they’re getting little money even at retail.  It doesn’t help you much to get a decent price on 4% or 6% Phenoms or Barcelonas sales when the other 94% of your sales are bargain-basement prices on X2s or lower.  That 94% is an anchor that AMD has to lighten considerably, quickly if they’re ever going to make decent money on CPUs anytime soon.   

Keep that in mind in the months ahead.  It’s not just product introduction, but product production.

Ed

Leave a Reply

Your email address will not be published. Required fields are marked *