1.07.2007

Another Bad Prediction from Computer Business Review

It's funny when you think that Intel is supposed to go bankrupt two quarters after 2007 according to some delusional blogger.

From Computer Business Review:
Advanced Micro Devices Inc faces new pricing worries and increased competition from arch rival Intel Corp during the next few quarters, according to new research from Wall Street investment firm Goldman Sachs.
The upshot will be weak fiscal results throughout the year for AMD, said the banker in a research note.

Several factors are at play, warned Goldman.
Notably, excess capacity in the supply chain will continue to weaken prices for CPUs in 2007, it said. While many device makers have increased their semiconductor inventory levels for the past several quarters, Goldman foresees a few more quarters of weak fundamentals as the supply chain corrects for the current build-up of excess inventory.
In their most recent earnings announcements, both AMD and Intel said the bloody pricing war of the past 18 months or so had begun to subside. But Goldman said excess supply may very well persist.
Part of its pessimism is that AMD continues to ramp capacity aggressively, having recently announced that it will grow its capital spending by 32% year-over-year to about $2.5bn this year. The company is adding capacity by ramping its first 300mm fab, called Fab 36, and by transitioning its 200mm Fab 30 to a 300mm fab, which will become Fab 38.
And if Intel's budget, which has yet to be released, is flat or up year-over-year, then Goldman said the supply glut would be further exacerbated.
Goldman also sees higher depreciation expenses at AMD while it ramps capacity this year. "The significant ramp in fixed costs is not absorbed by the share gains that the company expects," Goldman said.
Indeed, Intel will gain market share during the first half of the year, while share gains in the second half are potentially up for grabs, said the banker. Mercury Research has noted that Intel's launch of more competitive products during last year's third quarter saw it gain share for the first time in several quarters.
And while AMD likely got a one-time boost from its new business with Dell Inc during the fourth quarter of last year, Goldman Sachs said it expected Intel to be better positioned than its smaller rival in the first half of '07. In other words, AMD may snatch some market share in the fourth quarter, but Intel will begin to grab some back during the next few months.
During the second half of the year, "the competitive dynamics of the industry may shift again as AMD introduces its quad core processor, which is a true monolithic quad core die while Intel's current quad core product consists of two dual-core die contained in a single package," said the banker.
Goldman said it was too early to call which company will be in the better competitive position in the second half because it will depend on whether Intel launches its "true" quad core earlier than expected and whether it is aggressively adopted by the industry.
The banker also pointed to "significantly higher" interest expenses at AMD this year following the $2.5bn debt it raised to buy graphics-chip giant ATI Technologies Inc last October for $5.4bn.
Also, ATI likely lost "significant" Intel business in the last quarter of 2006 as a result of AMD's acquisition, noted the banker.

2 comments:

Sharikou, Ph.d said...

I never said Intel will BK in Q2'08. Expect it to happen in Q2'09.

Anonymous said...

Sharikou, Ph. D, you're sick.