July 22nd, 2009
Analysts: AMD has no answers for Intel's assault
Analysts on Wednesday panned AMD’s second quarter and said that Intel’s Atom chip for netbooks is squeezing its smaller rival. While netbooks may be a risk to Intel’s margins, one analyst made the case that Atom is a real killer to AMD. Simply put, AMD doesn’t have any answers for Intel.
AMD, which doesn’t play in the netbook space, is squeezed for two reasons, according to J.P. Morgan analyst Christopher Danely:
- The chipmaker doesn’t have an answer for Atom and that limits revenue growth;
- The presence of Atom in the chip market hurts pricing overall.
Add it up and it’s an ugly quarter for AMD. The company missed projections and gross margins were well below estimates as AMD sold down inventory. Like Intel, AMD said that the PC market has stabilized, but that outlook was overshadowed quickly. On a conference call, AMD chief Dirk Meyer tried to get analysts to focus on more than just the second quarter. Meyer wasn’t successful.
Danely sums it up:
AMD stated that it expects revenue to increase slightly quarter over quarter in 3Q09, significantly below normal seasonality of a 13% quarter over quarter increase. We believe AMD is losing share to Intel due to inferior products and is being hurt by lack of a netbook processor, which limits revenue growth and hurts pricing. We would note Intel processor sales outgrew AMD by 13% during 2Q09 and are expected to outgrow AMD by another 3% during 3Q09.
Goldman Sachs analyst James Covello said it’s possible that AMD will struggle no matter how much the PC market improves:
While fundamentals for both PCs and MPUs continue to improve as evidenced most recently by Intel’s solid report and guidance, AMD’s tepid top-line results/guidance and weak margins suggest continued execution issues and potential share loss. We expect the competitive dynamics in MPUs to remain challenging for AMD despite new product introductions, as Intel ramps Nehalem, Westmere, and CULV products in 2H’09/1H’10.
And then there’s JMP Securities Alex Gauna who was even more gloomy on AMD. Gauna said AMD’s financial results was “another disappointing quarter from the perennial CPU also-ran.” Gauna upgraded Intel based on AMD’s results.
However, Gauna’s research note foreshadows more problems for AMD. He said that Intel was just the known problem for AMD. Gauna added:
In addition to the crushing pressure Intel is able to exert against AMD with its process technology lead, AMD must contend with the rising interest in ARM-based computing solutions. If ARM technology is able to establish itself as a viable mobile computing solution beyond cell phones, and we believe it will, AMD’s benefit to OEMs as a second source to Intel will be greatly diminished. The result would be accelerated share losses in the 2011 timeframe, with servers likely to be the only viable product category for the company. We believe AMD’s Fusion strategy will ultimately fail due to more powerful NVIDIA GPU technology advances and more compelling Larrabee parallel computing offerings from Intel.
Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
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