Advanced Micro Devices
Emotional Investing

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By HipNGroovy
March 14, 2006

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"Love the company, trade the stock" has been the mantra of many of us here for quite a while. However, I've noticed that the line between loving the company, and loving the stock, has been very blurry related to the Conroe benchmarks.

What do I mean? Well there seems to be a pattern of disbelief among the faithful. Why has Anand been getting flack over just reporting his findings? Why all the hullabaloo over BIOS settings or other minor effects? Answer: we don't want to believe that AMD will be beaten down again.

As an AMD company lover, I was a little slow to believe it myself, and as a result I lost a couple of extra dollars a share before I sold (sold @ ~$37 when I could have gotten ~$39 had I not been a slow believer.)

Sure, it's possible that Intel is just being sneaky somehow. It's also true that AMD will release a new memory controller, and probably a couple of speed grades before Conroe is available. But new memory, and a couple of speed grades don't give you a 20% improvement in the benchmarks. There's always hope that AMD will maintain the speed crown, but we should not be investing based on hopes. Make no mistake; a 20% lead in the benchmarks is HUGE. I don't like it either, but to the slower believers I say: unhook your emotions, and read the writing on the wall.

To those that have said the speed crown is unimportant, I will point you back to the times of Northwood vs. Thoroughbred, PIII vs. K6-2/3, or any other time that AMD lagged in performance. Intel has the brand name, the economies of scale, and pretty much every other advantage on its side. AMD has lived on its performance crown (especially per dollar), and perhaps the image of being a "nicer" company. AMD's CPU sales profit seems to track very closely with the size of its performance lead. If you believe that the speed crown is unimportant to the business, I think you're investing based on hopes, not evidence.

Sure, AMD has won a lot of mind share in the last year or 2, but that mind share is based on product superiority, not brand loyalty. When Intel has the better product, they'll get the mind share back.

AMD has always had to compete on price, and that won't change soon, although the price premium Intel commands is shrinking. So with the performance crown in hand, Intel will charge Celeron-like prices on the stuff that competes with AMD, and higher prices on the stuff AMD can't touch.

All this also ties in with the build-out of fab 36. A price war is coming soon. Intel will launch an all-out assault against fab 30. I've said it here before, and I'll say it again. It worked in 2002 (fab 25 converted to flash), and they'll try it again in 2006/7.

I know I'm oversimplifying here, and the term "performance crown" is a little misleading. But the point I'm harping on is that keeping the hopes alive could cost you a lot of money.

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