Barcelona's Entry Level Dilemma

Even George Ou agrees with the dangers of launching a next generation product that isn't quite ready and worst, in small quantities.


Barcelona at 2 GHz will only threaten high-margin AMD CPUs but it will not threaten high-margin Intel CPUs because the clock speed isn’t high enough yet. When a $250 Barcelona DP quad-core kills a $750 Opteron DP dual-core processor on performance, who will buy that $750 part? When a $700 Barcelona MP quad-core kills a $1600 Opteron MP dual-core processor, who will buy the $1600 part? Barcelona will effectively erase all of the high-margin CPUs in their line-up next week when it launches.

Like I mentioned in my previous blog, AMD's decision to go ahead with the launch renders its entire Opteron line obsolete. AMD even make it worse for themselves by making Barcelona socket compatible therefore giving its customers the ability to quickly switch to the the new platform. This is very risky from a business point of view. The much needed revenue that the original Opteron line provides AMD can never be replaced by the new but lower volume Barcelona as it slowly ramps. It would be interesting to watch AMD's server inventory levels in the next few quarters.


Intel Fanboi said...

George reads your blog :-)

Anonymous said...

Ahhh.. but you are forgetting the ability of AMD to produce these chips in limited quantities!

After the smart folk buy the cheaper ones... there won't be anything but the dual Core Opterons. Of course at this point folks could just wait 3-6 months or switch to Intel!

I wrote a while back that it was STUPID to release bottom bin first despite everyone saying they might as well release them and try to make a little money.

On top of the issues you listed/referenced, it also pretty much prices in the future higher bin parts as folks will look at the low bin parts and decide if the premium is worth it for the higher bins (X2 6400 "Black Edition" anyone?).

If you start at the top and waterfall the chips down, like Intel or any other SANE business would do then you can set the top price and then price in the lower bins at the same time (and then maybe even have artificially low supplies of the cheap parts to get people to buy up the higher bin parts).

Now AMD will be selling low margin parts to the early adopters who are MOST willing to pay a premium. By the time they get the high end parts out this market will have diminished and the volume buyers/value pickers will come in and expect cuts on the low bin parts and not really care about the top bin.

The other funny thing is the lower price quad parts will also cost more to make then the higher price Opteron parts, further squeezing on AMD's margins! So AMD is selling a more costly part at a lower price that will compete with their own high margin, relatively cheap to produce part!

And you wonder why AMD is incurring massive losses!?!?

Anonymous said...

Leaked Barcelona launch slides have reached George Ou. Obviously the numbers doesn't look very good for AMD. But if you've been in this blog before, then you shouldn't be surprised.

Finally Roborat! A nice word on your blog!
That guy is a joke the guy recently wrote an article showing the Intel IGP being much better than the Ati IGP. The idiot fake all the tests. And the complete idiot even admitted it in the comments. The guy is a complete joke.