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To: combjelly who wrote (2533)	1/9/2008 4:33:27 PM
From: inex	of 2581

CJ, It seems as though the same type of irrational selling that occurred in 2002 is also occurring now. Many people following this stock fail to realize that, while it would be nice to have processors that perform on par with Intel's offerings, as the FAB 38 conversion continues and AMD's ability to increase market share grows, AMD has an opportunity to pump out chips and drive incremental revenue by capturing chipset and graphics sales. Prior to this, AMD had to cover all expenses with CPU sales. They were constantly trying to tip the balance between market share and profitability. Now, AMD can use its CPU sales to broaden the market for its chipset and graphics chip sales. In the past, trying to capture market share from Intel with a price war usually hurt AMD's bottom line more than Intel's. Now, with the benefit of chipset and graphics chip revenue virtually tied to each CPU sale, AMD has the ability to soften the effects of a price war. Going from 20% marketshare to 33% marketshare increases AMD's marketshare for chipsets by over 60%. It's a little more difficult to determine how this would effect discrete graphics, but, it certainly would effect sales in a positive way. The nicest part about all of this is that none of this market includes Intel as a competitor. Sure, one can say that NVidia is a worthy competitor, but, NVidia is no Intel. All of this breaks down to the following... If AMD sells a CPU for $50 to try to capture market share from Intel, then, they sell a chipset for $35 and possibly a descrete graphics card for $100, the net profit from the sale of all three is more than the net profit from only selling a CPU for $100. This is why the ATI investment was a good one. It finally allows AMD to go after marketshare without giving up on the notion of profitability... Scott

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To: inex who wrote (2536)	1/9/2008 6:25:55 PM
From: Elmer Phud	of 2581

Scott - I disagree with your analysis. AMD only has 65nm capacity. They aren't going to waste that on chipset silicon. The chipsets and graphics come from foundries which have to make their profit too. I don't see much of a market for highend graphics in lowend systems, which is the niche AMD is forcing themselves into. Intel's chipsets and graphics are done in house on older depreciated process technology. Intel brought that inhouse because foundries are problematical, to put it nicely. As for market share, AMD does not have a compelling product in any market segment with significant profit potential. All they can do at this point is try to under price Intel in the low to midlevel market, a strategy which has had them losing many 100s of millions each quarter and there is no end in sight. Even if AMD could manufacture their quad cores, they underperform even Intel's 65nm products and if the recent rumors of the barcelona B3 step still having the TLB bug are true then no one knows when it may be fixed. Even if fixed it is still a huge very expensive die on a poor yielding process. Speaking of process, 45nm is now apparently slipping to 2009. If that's not enough, without HiK-metal gate they will fall further and further behind on both performance and power consumption. The much heralded "asset lite" strategy fails to mention that AMD is restricted in the x86 volume they can contract out. That means AMD has to maintain their own fabs and develop their own process with help from IBM. Their loan guarantees for the German fabs have full employment clauses as well. That's enormously expensive but no alternative is legally available. Bottom line is that without a compelling product portfolio and a competitive process/manufacturing infrastructure, there is little to support the view that AMD will be gaining market share any time soon and those loan payments have to be made from profits that just aren't there. It would be to your benefit to look at the whole picture.

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To: Elmer Phud who wrote (2537)	1/9/2008 8:17:25 PM
From: inex	of 2581

Ephud, The chipsets and graphics come from foundries which have to make their profit too. I don't see much of a market for highend graphics in lowend systems, ATI made a profit on chipsets prior to AMD's buyout... Are you insinuating that this is no longer the case? As for market share, AMD does not have a compelling product in any market segment with significant profit potential. I'm not sure about this... I think that many would choose an AMD processor coupled with an ATI chipset and integrated graphics over Intel's Core II with Intel's weak integrated graphics... However, I probably neglected to mention that one of the <reasons that I picked up more stock is that I agree with you that AMD is completely misfiring on multiple fronts which has, IMHO, provided a buying opportunity. I do not expect AMD to become competitive on the high end anytime soon, but, fortunately, the notebook market doesn't require highend processors. I expect that in April/May, AMD WILL have a competitive (or at least sellable) alternative for the notebook market which is becoming increasingly more important, AND, is the one segment in which AMD has a virtual lock on chipsets in any AMD based systems. All they can do at this point is try to under price Intel in the low to midlevel market, And I'm under the impression that this segment accounts for the majority of the unit shipments... So, you agree that AMD is in the game in this segment... Good. Me too... :) there is little to support the view that AMD will be gaining market share any time soon I believe that AMD will sell whatever they produce and that they will produce whatever they can. I think the only limiting factor on market share is AMD's ability to produce more chips, which, should continue to improve as FAB 38 continues to ramp up 65nm 300mm product. They will sell at whatever price point the market will bear, which, will be lower if AMD continues to stumble, but, IMHO, I anticipate that by April/May, we should have a better idea what will unfold in Q3 and Q4... With my "speculative money" I have placed a bet that they will correct some of the problems they have been having. If they weren't having problems, then, I would never have been able to pickup stock under $7/share... Scott

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To: Elmer Phud who wrote (2540)	1/10/2008 9:50:46 AM
From: inex	of 2581

They can't make money with an underperforming higher cost product in the lowend. Ephud, This touches upon one of the points that I made earlier... Prior to buying ATI, AMD was a CPU and Flash company. When entering a price war with Intel, AMD thought that the Flash was going to insulate them a little bit and help them break even (knowing that the CPU division would lose money...) Intel subsequently brought the pricing war to the Flash market and created a double whammy for AMD... Now, with products which don't compete directly with Intel, AMD can in fact wage a price war in the CPU market and hope to at least break even. Here's a hypothetical situation... Let's estimate that the low and middle ends of the market account for roughly 8o% of unit sales. If AMD can capture 50% of this market, then, that would equate to 40% of total unit sales. Right now, AMD only holds ~20% unit sales. Not only would this double their unit sales, but, it would also double their market for chipsets and graphics cards. Doubling a market in which Intel doesn't compete is very lucrative for AMD and could potentially finance a price war which could have very humbling effects on Intel. Just because AMD is not in a position to compete in the high end has no bearing on whether or not they should strive to capture marketshare. You perceive the lack of competitive product as the reason that AMD will fail. I perceive the lack of marketshare to be the reason that AMD is failing. The difference between the two of us is that, under your scenario, AMD must produce a competitive product to turn things around, but, under my scenario, they need to pump out MORE product. This added product will improve profit centers outside of Intel's influence. This is much the same tact that Intel has historically used to counter previous price wars with AMD. I applaud AMD for finally "getting it"... Scott

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To: inex who wrote (2541)	1/10/2008 11:34:02 AM
From: Elmer Phud	of 2581

Just because AMD is not in a position to compete in the high end has no bearing on whether or not they should strive to capture marketshare. Do you realize you're describing their current strategy? That's what they've been doing and you can see what it's done to their bottom line. They have only 1 fab and an oversized, bug ridden, low performing, low yielding, power hogging die. Their other 65nm products are now lowend where ASPs are commodity levels. It will be 2009 before the other fab is converted. Just what market segment do you think AMD can attack where Intel doesn't have a better and cheaper alternative in almost unlimited volumes and lower cost? Then there's the issue of credibility. What customer is going to believe AMD's assurances that they can deliver a new product on time and in volume? One has to go back into the historical archives to find a statement from AMD that turned out to be true and a schedule they actually met. Who is going to commit a new product line to a company that can't be believed while their competition designs around Intel and has a higher performing, lower power product shipping while you're still waiting for bug free samples?

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