Crunch Time Cometh

AMD released its financial results yesterday. Essentially, their flash division didn’t do well, but their CPU business did.

AMD said that sales revenues of Hammers increased fifty percent from the previous quarter and now account for over a third of the $673 million in CPU revenue the last quarter.

Given the higher price of Hammers, though, that still means the large majority (probably something over 80%) of CPUs made last quarter were Athlon XPs. However, AMD said that unit sales of those were down (though apparently by not all that much).

Those Hammer numbers will improve. AMD has been saying for some time that it expected half of its CPU revenues to come from Hammer next quarter, and they reiterated that yesterday.

They did add that by the end of the year, they expected half their CPU wafer starts to be Hammers, which would mean that unit sales of Hammers would exceed AthlonXP sales by sometime late in the first quarter.

What Does This Mean For You?

AMD wants to charge a lot more for Hammers than they did XPs. While the policy of strict price parity with Intel has cracked, prices for entry-level Hammers are still much higher than they’ve been for XPs.

However, this has by no means been a true test of AMD’s ability to raise prices and make them stick, simply because they haven’t made very many of them. It’s one thing to charge very high prices when you make just 100-200,000 of them, or pretty high prices when you make a half-million or million.

When we move into 2005, from about March on, we’ll be looking at moving three to four to five million units. That will be when AMD’s pricing strategy will be put to the real test, when Hammer truly ramps up.

If the price structure is going to crack (rather than bend a bit), it’s going to crack sometime late in the second quarter of 2005, early third quarter. That’s when AMD will have to sell Hammers come hell or high water.

So if you want a bargain-basement Hammer, that’s a good estimate as to when you’ll be able to get one, if this actually happens.

Ed

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