AMD Holds Steady Versus Intel

Intel can rightfully crow about its latest releases. The chip giant’s newest
server and desktop processors are widely considered more
competitive, if not better than AMD’s chips, which have had Intel on the
defensive for the past few years.

AMD continues to hang tough, though the latest market figures
show Intel is already starting to slow AMD’s earlier momentum.

According to PC component market research firm Mercury Research, AMD’s share of the x86 server market in the second quarter of this year was 25.9 percent; a 17 percent
increase over Q1 of this year and a 133 percent increase over Q2 2005. Intel  still commands the remaining 74 percent of
the server processor market.

In the combined overall CPU market (desktop, servers and mobile) AMD
 bumped up only slightly, rising to a 21.6 percent
share from 21.1 percent the previous quarter. A year ago, AMD’s overall share
was 16.2 percent.

Forecasting chip results for the rest of the year will be particularly
challenging, according to Dean McCarron, who heads Mercury Research.

“There is substantial inventory out there and that makes this one of the
hardest periods I’ve seen in recent memory to forecast,” McCarron told “There’s is a lot of uncertainty in the market.”

Inventory can be a huge problem for computer makers as well as the
companies that sell them and the chip makers themselves. McCarron recalls
that at the beginning of 2001 AMD grew to a 20 percent market share and
tumbled down close to 11 percent as it essentially ended up competing with
its own unsold and discounted products.

“It was quite crushing to AMD at the time,” said McCarron. “The
difference now is AMD is a significantly larger company and has more focus
on profitability. AMD isn’t as easy to bait into a bad decision to chase
market share or make deals that aren’t profitable.”

McCarron said AMD’s main competitor (i.e. Intel) is the one with more of
an inventory issue, though not as dramatic as what AMD faced in 2001.

As for the current price war, McCarron doesn’t expect either AMD or Intel
to go for the jugular.

“I don’t see either company making any knock out punches because it isn’t
in their best interest,” said McCarron. “It’s like in the old cold war days
of Mutually Assured Destruction, you price things too low, you hurt your own
company. Right now, they’re playing a game of chicken; the pricing is
aggressive, but self-protective.”

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