The Battle Within The Battle . . .

AMD issued a sort-of-profit-warning yesterday, saying that sales were down 9% from the previous quarter.

That’s a little more than one might seasonally expect, but given the single-core price cuts late in the quarter, that’s OK. Intel’s numbers are likely to be worse when they come out.

For AMD, the bad brown stuff is likely to hit the fan next quarter . . . unless . . . .

If Dell is going to start selling AMD systems across the board, what AMD will certainly lose in price per unit, they might be able to pick up in volume.

But, there’s a few questions that need to be answered first . . . .

1) What will Dell pay for AMD chips? Dell resisted AMD for a long, long time. Why the change? There have been indications that Intel is probably not offering quite the sweetheart deals Dell used to get, and/or Intel doesn’t have the nerve to impose stunning penalties on Dell for selling AMD chips given the antitrust lawsuit.

Nonetheless, it’s likely that any deal Dell has made with AMD will make up for any penalties Intel might impose, which makes it likely AMD isn’t going to get very much money from Dell for a while.

2) How many chips is Dell likely to sell any time soon? Before Dell can start selling AMD systems, they kind of need to announce it first. When are they likely to do that?

I would be very, very surprised if they didn’t announce it right around the time the earnings report for Intel and AMD are due out. Intel will release the evening of July 19; AMD the evening of the 20th.

If you put a gun to my head, I would say the day of the 19th. That will make it seem like Intel’s poor results are partly due to the Dell action, make the prospectus for Intel look really bad the rest of the year, and obfuscate any less-than-stellar results from AMD.

Such a date (with actual sales following shortly thereafter) would also be good for Dell because then they’d pick up the back-to-school sales, particularly notebook sales. It looks like Merom-based notebooks will miss most if not all of the back-to-school sales, so there’s a window of opportunity for both Dell and AMD.

Still, even if Dell does this, odds are they’ll start off small to work out any initial bugs in the new systems, and won’t really ramp up until Christmas quarter. Underlying any rampup would be . . . .

3) Can AMD deliver? I’m sure AMD has signed in blood that they’ll supply Dell no matter what, with penalties up to and including body part removal if they don’t. Dell probably need not worry at all about not getting supplies. It’s the rest of us (well, maybe not HP) who’ll face any shortages.

Remember, this is the company that’s been getting rid of 1Mb cache chips at a time when Intel will be offering 2 and 4 Mb caches on its new processors. That doesn’t like a lot of excess capacity just waiting to be filled to me, talk of Fab36 and Chartered notwithstanding.

Yes, 36 and Chartered will offer more capacity, but remember, the fabs giveth, and the 90nm dual cores taketh away. It’s likely to be touch-and-go, and remember, the more AMD makes, the lower the overall price is likely to be.

Making A Wild Time Wilder

A lot of AMDers have felt that getting Dell to sell AMD was like getting the Holy Grail. It’s not, though it certainly will be a good thing in the not-too-long run.

What it will do in the very short term, though, is make what already looked to be a wild situation even wilder. It adds another battlefield to the AMD-Intel war, a war that will be especially intense the next six months.

What will happen? It’s hard to say, because it really boils down to the combined production of the two companies, and their ability to sell their products. It’s going to be a story of supply and demand, with action going occurring on both ends of the equation.

The already announced price cuts were caused by Intel trying to stir up demand for less-than-ideal processors. AMD was forced to match the price cuts, and may end up increasing supply to compensate for the lost revenues.

Tossing Dell into the picture will intensify the battle because now it will become a bellweather and trend-setter for the whole industry.

Dell will become the battle within the battle.


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