EDITORIAL - The buck has to stop with AMD
Just when the market was sure that chip company AMD was beginning to solidify its position as a recognised player against the Intel machine, the company issues a profit warning that sets back its efforts to prevent the monopolisation of the semiconductor market (see News, page 6).
Monopolisation is obviously bad for a number of reasons - especially for those in the assembly game, where differentiation is often the key to making a buck. With only one chip on offer - and the most expensive at that - it would make it even harder to come up with an package that sets you apart from your rivals. Different chips - especially where AMD's cut-price policy is concerned - can make all the difference. After all, there's only so much that can be shaved off the cost of a motherboard, graphics chip, or internal modem.
Right now, David and Goliath is not a correct analogy for the AMD/Intel fight, because before Goliath could charge over and squash the puny teenager, David let fly with his trusty sling and felled the man monster.
At present, it's more a Rocky III where a big, blond spiky haired and steroid-enhanced Russian is beating up a slightly dense, slab-faced Italian American. Unlike the movie, the latest AMD prediction of profit damage does not guarantee a pugilistic miracle in round 15. Despite AMD's promotion from annoying insect on the back of a rhino, to actual threat to certain Intel revenues, the company's size is fighting against it. It's like chucking a flyweight in against a super-heavyweight - you can only run around the ring for so long before one devastating haymaker flattens you.
There's no doubt as to the technical excellence of the AMD products, which have time and again stood head-to-head with Intel products in tests. But the company still suffers by being so much smaller. Every time AMD produces a technical winner, it loses the marketing battle because Intel can throw the entire worth of the AMD balance sheet into marketing what are sometimes inferior products.
If that doesn't work, it can throw even more at it and still not feel the pinch.
AMD is looking at an operating loss of £200 million for its second quarter, with a mixture of price pressure and unit shipments blamed for the shortfall. Even Intel's massively aggressive pricing on the maligned Intel Celery - oops, Celeron - chip was quoted as a factor, along with the clearance sale on chips from outgoing chip player, Cyrix. A downturn in the grey market was also cited - not a good sign for a company that has traditionally made a lot of money out of this second and third tier arena. Even though the company has signed some lucrative deals with some of the bigger PC players, they are not enough to supplement falling income from its traditional mainstay.
It also doesn't help AMD that many of these 'breakthrough' deals are constricted to certain ranges or smaller geographical markets such as Toshiba in Japan.
Some experts would say that it's not unusual for AMD to file poor quarterly results, peppered with warnings in between. It's time that AMD started looking for a backer with deep pockets, someone that could help it weather the storms of the fluctuating market conditions and the vicious price battles with companies such as Intel. It would be a shame to watch Intel's only worthy opponentfail, not on the merits of it's technology, but for the sake of few bob.