Intel and AMD - The Aftermath

Anybody who believes in efficient markets should take a look at the slow-motion reaction in Intel and AMD over the past few months to a fairly obvious chain of events. We started talking about the price war in April, and we were hardly the first to broach the subject.

So now that the latest earnings reports are in and the world knows how bad things are (though possibly not how much worse they can get) we thought we would run through a few of the recent news items.

So Intel cut prices and ate into AMD’s gains. Then introduced a new chip that everyone agrees whips AMD’s butt.  None of that contributed to AMD’s shortfall, management assures us. No, it was because Intel befuddled the channel. We’d laugh if so many investors weren’t in such pain. If anyone knows the drivers of market share are performance and price it is AMD. To point the finger at confused distributors is a disturbing sign that AMD management does not grasp the severity of the price war they are in.

Now Intel claims they will be first to market with quad-core processors.  They may or may not be, but the real point is that after being asleep at the wheel for a couple of years Intel is back with a vengeance and coming out with products as good or better that are priced competitively. Without a real competitive advantage, it is simply easier for buyers to go with the market leader in most cases.

Don’t, however, read this as a recommendation to buy Intel. We remain bearish on semiconductors for reasons we have discussed many times. It is hard to like the largest company in an industry while disliking the industry.

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