AMD’s Slip Gives Intel Some Running Room

An investment firm is hailing a huge reversal of fortune for Intel in its battle against AMD, but the numbers reflect a single quarter aberration that should level out shortly, according to the source of those figures.

Investment advisor JP Morgan trumpeted stats from Mercury Research that showed Intel’s market share jumped from 74 percent in the fourth quarter of 2006 to 81 percent just one quarter later.

JP Morgan also noted Mercury figures stating that Intel  gained roughly eight points of market share in the desktop segment, four points of share in the notebook segment and seven points in server processors from the prior quarter.

On the down side, AMD  lost six percent market share and JP Morgan expects AMD to continue to lose market share in the second quarter as well.

Combined, AMD and Intel were down 15 percent from the previous quarter, which is a typical seasonal slowdown post-Christmas. Dean McCarron, president of Mercury Research, said it wasn’t so much a case of Intel executing perfectly (which it did) as AMD falling down hard.

McCarron said the figures represent shipments to market, which swung wildly due to AMD’s supply problems. “This should even out over time. If you looked at what their customers were shipping, the shift wasn’t so dramatic,” he told He figures that when PC sales are taken into account instead of just chips sold to OEMs and the channel, it comes out to a two point share loss for AMD and a two point gain for Intel.

In the fourth quarter, AMD finally landed Dell  as a client and shifted inventory from the channel to meet Dell’s demand. This left the channel hurting for product for the Christmas season, and Intel was more than ready, willing and able to come in and fill the demand.

AMD solved its supply issue by the end of the quarter, but by then Christmas was passed and now AMD was left with a lot of inventory and less demand. For now, AMD is selling off its built up inventory. “It’s not like they are throwing them into a landfill. AMD’s customers are building PCs with those parts. So AMD’s market presence hasn’t changed so much because effectively they are competing with their own parts,” said McCarron.

Thus far, AMD has not yet suffered the “Osborne Effect” of sales dropping as customers anticipate the next big thing. It has promoted Barcelona, its next-generation Opteron processor, almost non-stop in recent months. McCarron sees it playing a relatively small role.

“It might have an effect in Q2, but server parts in general are less than five percent of AMD’s business, we’re talking about just a portion of that, because the low end of their server line won’t be changing. So Barcelona is a fraction of a fraction of AMD’s sales,” he said.

Both vendors saw unit declines in every segment, which is normal in the first quarter after the Christmas rush. Mobile was the strongest segment, meaning it declined the least.

Seperately, AMD announced this week a private placement of $2 billion of Convertible Senior Notes, due in 2015. AMD expects to use at least $500 million of the remaining net proceeds to repay a portion of a loan used to fund its acquisition of ATI Technologies, with the rest going to general corporate purposes.

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