Post of the Day
December 20, 1999
Posts selected for this feature rarely stand alone. They are usually a part of an ongoing thread, and are out of context when presented here. The material should be read in that light.
Time to Look at History
I think it is time we look at what has happened and try to determine where we are going.
Several Years back there were three companies making CPU's for Microsoft compatible Miro Computers, Intel (INTC), Advanced Micro Devices (AMD), and Chips and Technology (C&T). C&T finally threw in the towel and ended up being bought out by INTC in 1998 for $321M. This left only two.
Shortly after the Federal Government indicted Microsoft on monopoly charges they did the same thing to INTC. Unlike Microsoft, Andy Grove (Chairman of INTC Board) quickly worked out a settlement that hardly amounted to more than a light slap on the wrist. INTC needs to keep a competitor in the CPU business in order to keep the Federal Government at bay.
Operating income for AMD and INTC for the last 5 reporting years:
On top of that INTC has done outside investments of $18,633M in the last three reporting years (1996 thru 1998). At the end of 1998 they had short term debt of $159M and long term debt of $702M. Hardly a drop in the bucket.
** All financial figures from 10-K reports filed with the SEC.**
Here are some questions you should ask yourself:
Historically how many times has AMD put out press releases and then:
a) could not meet delivery dates,
b) could not meet projected production, or
c) did not meet advanced specifications released?
How successful is a chip making company that has lost money the last three reporting years, and is expected to lose money again when they report in MAR 2000?
Why has Andy Grove, Craig Barrnett INTC CEO, and Andy Bryant INTC CFO, targeted the one niche that AMD has been successful (low end CPU's) and then did not come out with a major assault when AMD attacked the high end market?
Why has Andy Grove zeroed in on purchasing internet stocks and started talking about production of smart chips for cell phones and broadband?
Andy and company needs to keep AMD in the CPU business so that the government will not step in and break up INTC. The money in the CPU business is starting to flattening out in the developed countries. I realize that sales to developing countries will be huge business for years to come, but it is an unpredictable business. That was what INTC blamed the drop in operating profits on in 1998.
I believe that smart chips is the next major area of attack, since INTC needs to go somewhere to guarantee future high growth rates. We will never know how much of the 2+ billion dollar R&D budget has already been spent investigating smart chips.
AMD will be wanted to continue CPU production, but will be kept under control by big brother.
I will continue to enjoy the links provided by vikingfool for AMD news releases. But, don't expect me to buy into what they say, until they develop a history of consistently doing what they report.
I will agree with vikingfool, if AMD could develop a history of increasing profits and if they could start taking an increasing market share away from INTC there is a lot of money to be made there. However, I believe that any major move to take market share from INTC will be met with enough resistance that AMD's operating profits will again fall (the pain of falling stock prices).
Each of us has our dreams of rewards and our limits for pain. Personally the pain/reward ratio for AMD is far greater than I am willing to pay.
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