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AMD in financial peril?
Author: Tim SmalleyPublished: 12th March 2007
AMD's share price dropped almost 60 percent last year, resulting in $10 billion of shareholder wealth being wiped out.
The fierce competition resulted in AMD's share price dropping by over 60 percent over the last year - around $10 billion in shareholder wealth. The reason behind this is because of fears of the company's ability to keep stealing market share from Intel without hurting its profit margins.
In fact, the chip manufacturer warned that it was likely to fall short of its first-quarter revenue expectations of $1.6 to $1.7 billion last week. Analysts expect the trend to continue until the company introduces its next-generation architecture later this year, too.
A lot of the problems stem from AMD's long-term plans for stability and competitiveness with Intel. Intel is also spending heavily on this front too.
The technology industry is an incredibly fast-paced beast, and AMD has spent heavily on long-term plans over the last year. In addition to buying ATI for $5.6 billion, AMD also spent money on increasing its production capacity and potential market share with new fabs.
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Comments (13)
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AMD have been sitting on their Laurels for way too long, we need K8L and we need it last month.
Amen to that, but i also think R600 is sitting in the same basket
The budget market, and maybe there new integrated HDMI mobo for HTPC users - but never are really big money makers of cause
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AMD investing in the future is a good idea - survival in the short-term is useless if they don't have a strategy for the future. However, spending money for the future costs you momentum and money in the short-term. :) And hey, how times change... it wasn't that long ago that people (read: Market Analysts and enthusiasts) were saying Intel were in deep trouble. It was shortly after the release of Prescott... (Of course, Intel have way more money to throw around than AMD do...)
I do agree that AMD/ATi need to get their next-gen hardware out the door, though; both in the CPU and the VPU arena...
*waves fist*
I think their server market share will be in danger unless they pull something out the bag in the not too distant future. Woodcrest processors (Xeon 5100s) trounce the dual core Opterons in just about everything apart from some encryption / decryption tasks, and even there the margin is insignificant.
R600 will be a good prop for AMD, once it's out, but the real biggie is getting more OEM's to use AMD chips. The integrated HDMI chipsets are a godsend for the OEM builders - they'll be selling HD ready media PC's powered by AMD.
If K8L even comes close to C2D, we should see them picking up.
Either way, Q3+4 2006 and Q1 2007 were always going to be poor for AMD anyway.
To be honest I think this was inevitable, AMD have always been a smaller company, and, while they had a year of glory with the K8 architecture (Opty's especially), now Intel are back on top, and AMD have to get back to their standard place as sub-Intel. The forecasters were hoping for the two to be on equal footing in a few years, but it's not going to happen.
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Of course, the news that Intel are going to slash their prices in Q3 puts a new spin on this: AMD are going to be squeezed hard unless they can get K8L out a little early and have it far better than Core 2.
of course they cant sit on their hands forever, but at the moment the server market is definitely keeping them afloat, and of course the ATI buyout will most likely server them well if they can actually make something <_<