The Opteron Fiasco . . .

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1) On August 2, 2005, AMD introduced 90nm socket 939 Opterons, single-core capable.

2) Beginning in early October, the overclockability of low-end Opterons began to be noticed.

3) On October 31, 2005, AMD lowered the prices on many Opterons. In particular, the prices of the Opteron 144 and 145 were lowered to $111 and $125, price points below that of Athlon 64s running at the same speed with half the cache.

4) If demand did not exceed supply prior to the price cut, it certainly did afterwards. Supplies dried up quickly, and prices skyrocketed. It is unclear just who jerked up prices by how much when, but both distributors and retailers played a role in this, and currently, it may be mostly the distributors. It must be said, though, that these price increases were shortage-driven.

5) AMD has not officially responded publicly to this situation. The responses purported to have come from AMD employees have included:

  • Maybe there will be some more in January.
  • There aren’t going to be any more.
  • No more sales to individuals, just system developers.

    What Is Going On Here?

    As we mentioned the other day, we think that the low-ball Opteron pricing was meant to artificially boost Opteron sales (and market share).

    What we didn’t explicitly address was who at AMD would decide to do that. Was this a conscious decision at the top, or did someone further down the food chain decide this was a good idea?

    We think the latter is more likely. We think someone/some people with a vested interest in boosting Opteron sales pushed this through.

    Why would someone do that? Well, you know that the Ultimate Boss loves to talk about exploding Opteron sales, and if the size of your bonus depends on how many Opterons get sold . . . .

    What they actually ended up doing was committing fratricide against the Athlon 64 (and those with a vested interest in selling them, like people whose bonuses are based on how many A64s get sold).

    While we shouldn’t exaggerate the impact of enthusiasts upon the market, imagine what would have happened to Athlon 64 sales on the retail level had everyone been selling Opteron 146s for around $125 the last month (not to mention any bonuses based on those sales).

    Imagine what you do once you catch your fellow co-worker(s) picking your pocket.

    What you do is you fight. Not literally (though that would be a fun video to watch) but bureaucratically. That means having your bosses fight with his bosses. Your bosses will be out to stop the Opteron people from taking your turf by doing things like cutting off manufacture and access to your marketplace. His bosses will be out to hold on to the beachhead by pushing for the opposite, and to get any anti-Opteron decisions reversed.

    Eventually, someone at or near the top will decide this, but in the meantime, the fight goes on, and what you hear will depend on who you ask.

    For instance, restricting Opteron sales to system integrators may make no sense to a customer (i.e., gray market and all), but it approaches the Prime Directive if your bonus mission in life is to sell as many A64s as you can and someone two halls down is threatening that.

    In other words, a turf battle is the only explanation that fits the facts (unless you think AMD is really stupid).

    However, others may see this differently. Others may have their own reasons for seeing this differently to further their own agendas.

    For instance, if you’re somebody at Dell who for his own reasons doesn’t want to see the company sell AMD processors, you can point at this and say, “Look! These guys can’t even produce an extra ten thousand CPUs on demand! How are they going to be able to handle us?

    If you’re someone on Intel’s legal team whose current mission in life is to prove how incompetent AMD is in that little antitrust case, you don’t think you’ll view this as a great green Christmas gift?

    That’s where the real damage from this fiasco could occur, above and beyond being Grinch to thousands, tens of thousands, just in time for Christmas. Now that’s being customer-centric!


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