AMD defies Intel's monopoly defence

Intel defended itself against monopoly charges in March by claiming that competitors Advanced Micro Devices and, to a lesser extent, Cyrix presented a serious challenge to its market share. But recent developments seem to chip away at Intel's argument.

Intel defended itself against monopoly charges in March by claiming that competitors Advanced Micro Devices and, to a lesser extent, Cyrix presented a serious challenge to its market share.

But recent developments seem to chip away at Intel’s argument. In May, Cyrix parent company National Semiconductor decided to exit the PC chip business and sell the Cyrix brand. Via Technologies bought Cyrix last week. And two weeks ago, AMD announced a second-quarter loss that was far worse than analysts had projected. AMD blamed the $US200 million loss on declining shipments and pricing pressure from Intel.

Should people who are invested in other chip makers start to despair? Analysts say it’s still too soon to tell. But whatever the outcome, they say renewed claims of an unfair Intel monopoly aren’t warranted.

“AMD screwed up themselves,” says David Wu, an analyst at ABN Amro in San Francisco. “Nobody told them they couldn’t manufacture [the K6 chip] in volume [in the first quarter].”

Wu says he’s neutral on AMD stock pending the market’s acceptance of the forthcoming K7 microprocessor, which AMD hopes will be its breakthrough chip. According to experts, AMD’s K7 represents a fundamental shift from the company’s home turf -- the value-PC market -- and into competition with Intel’s Pentium III.

“K7 is a good chip, but that doesn’t mean much unless you can produce it in volume and back it up with a lot of marketing,” Wu says.

“K7 is definitely a problem for Intel,” says Dan K. Scovel, an analyst at Fahnestock & Co. in New York. With a premium price exceeding $100, it hits the sweet spot of Intel’s market, where Intel isn’t accustomed to competition, he says. “Intel may be bloodying AMD right now [with price cuts] in hopes that AMD will stumble. But the onus is really on AMD to deliver K7 smoothly,” Scovel says.

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