Originally posted by: strummer
Originally posted by: Rock Hydra
Well played in one area, though investors are not happy with the ATI acquisition right now and it's showing in stock prices.
Intuitively, I can see investor concerns with the ATI move. They are already battling Intel for the technological edge in the desktop chip market, now they will also have to battle nVidia in another market. There is just so much energy that can be expended by a company.
Does the ATI move provide any synergy? I don't see it - it is a move away from their core business - the server market, where their presence is strongest. Is the move an act of desperation by AMD to diversify and perhaps change focus from competing with Intel in the desktop market to competing with nVidia et al, an arena where roles will be reversed and they will be the 500-pound gorilla in the room for a change. I don't know.
Contrary to what someone said upthread, now is not the time to buy AMD stock. The price cuts in for their desktop processors may be somewhat discounted already, but a price war is never good for a company. There will be even greater downward pressure on prices, while the cost of goods sold will, of course, face upward pressure. It is rather obvious - the same processor that was selling for $390 last week is now selling for $155. The only way to offset that is to capture more marketshare. The price cuts have to be part of a long term strategy to mute the impact of Intel's technological lead (at least in desktops). AMD really should have gotten more out of the really significant edge they held over Intel with K8. The Intel/Dell partnership really paid huge dividends to Intel with regards to that. Intel has all the tools that AMD was lacking to really exploit their latest competitive advantage. The thing Intel needs to really exploit the situation is for software to become more demanding, so that consumers will see a point of paying the premium for an Intel chip.
I said "well done" by AMD because they did what they had to do. It is medicine that they had to take to keep themselves being a viable long term player. BTW - in my opinion, now is not the time to buy Intel stock, either. Their competitive advantage with Conroe is of great importance to gaming enthusiasts, yet little importance to the general computer buying population (at least right now). There is rarely only one side injured in a war, and this price war between AMD/Intel is not going to be an exception to that rule.