Playing Monopoly: Part II . . .

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Yesterday, we talked about two big reasons why that economic report sponsored by AMD shouldn’t be taken very seriously.

Today, we’ll give you the last one.

Point Three: What’s In It For Us?

The second half of the report claims that if there were “full competition” in the CPU market, Intel would have to cut their average selling price about 16%, or twenty dollars, and that would mean Intel would charge the world about $80 billion less for CPU over a decade.

There is much that is disputable about this contention, but there’s one big item that would be any serious economic analysis that isn’t there at all.

What would happen to AMD’s prices in such a world? If AMD has to charge so little due to “unfair” competition, what would happen under “fair” competition? Seems to me AMD’s prices would go up, probably up to around Intel’s level. Given current ASPs, that would mean AMD’s prices would go up by more than Intel’s would go down.

So while Intel buyers would pay less, AMD buyers would pay more, so any serious economic analysis would subtract the extra amount paid by AMD buyers from any overall consumer savings. You’d still have overall savings, just a considerably smaller one.

This was not done (at least not in the summary), ergo, this is not a serious report.

What Is AMD Really Trying To Do?

This is a “boy in the bubble” type of economic report; it’s just not going to survive any serious contact with the outside world. Insofar as the legal/bureaucratic world is concerned, it seems like “Throw up everything you can up against that wall, and maybe some of it will stick.”

But I don’t think that legal/bureaucratic world is the real audience for this message. Nor do I think that much of what AMD has been doing or saying lately is really meant for the outside world.

Then who is it for?

It’s pretty obvious that in the long-run, AMD needs a sugar daddy.

AMD’s core problem throughout its whole existence has been lack of money compared to Intel. Every major problem they have ever had can be traced back to that: having to make do with less than Intel.

Right now that problem is pretty intense, but even if AMD muddles through the current crisis; the strategic shortage remains.

The problem for AMD management is that they really want a sugar daddy, not just someone to take them over. If a real tech company took them over, well, current management would be history very quickly.

Samsung (who, BTW, has never made a major outside purchase of another company, they believe in internal growth) would certainly replace the AMDers in a few years, and IBM would probably get rid of them a lot faster since they know quite a bit about the company through their partnership.

AMD was never a good candidate for a typical private equity buyout, and now that banks have become much less willing to fund such buyouts, you can forget about that.

No, what AMD wants is someplace with a lot more spare capital than a PE firm, a place willing to spend additional billions for a strictly long-term payoff, no desire or inherent ability to actually run the company, leaving Hector and Company in place to do whatever they want while they write checks.

A fantasy sugar daddy? No, such financial institutions do exist, and I think this is the audience AMD wants to address.

Just who are they? Hint, hint.

Now do I know this to be a fact? Absolutely not, nor do I have any idea if such funds would be at all interested in AMD. But given what AMD would like to have, it would be strange if AMD didn’t try hard to tap money from these sources.

Even if I’m dead wrong on that specific point, I really don’t doubt that AMD is out to woo somebody with a lot of money. Efforts like this report and the antitrust lawsuits and all the long-range project announcements and the rest are meant to make AMD look as pretty as possible to some sugar daddy.

They may well fail, but if they don’t, it’s not going to be one of the usual suspects, but some group none of us have ever heard of before.

Ed


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