Novice Investing - AMD Advances Ahead of Intel

Date: Friday 29th 2008f August 2008 02:02:59 AM

AMD Advances Ahead of Intel - 05/19/2006

By: Novice Investing Staff

Advance Micro Devices (AMD) have truly stolen the spot light from Intel Corp. (INTC) these days. It began in 2003 when AMD earnestly introduced its 64 bits dual core opteron chips. Naysayers opined that it won't affect Intel one tiny bit. It turned out that it does more than a tiny bit of damage.

Slowly, AMD managed to steal a few customers and there. For hard-core gamers, AMD chip is not a stranger for them. AMD has faster clock speed as well as durability, some claimed. However, the biggest prize of all was announced on 18th May 2006 when Dell Inc. (DELL) decided to use AMD opteron chips for its high-end servers. You read that right, High End! That means AMD won't play second fiddle with Intel anymore. Furthermore, you can expect AMD margin to expand as big computer manufacturers now realize that AMD's chip is not for cheap, low-end computers.

Dell is the biggest fish there is. Before today, it uses solely Intel microprocessors and it accounts for as much as 16% of Intel's total revenue. Things change. While it does not do Dell any good to turn its back on Intel, it does AMD a whole lot of good to its coffer. Picture this. Dell with $ 56+ Billion in annual revenue, which solely uses Intel chips. If you assume that Intel component is 10% of sales, then you get $ 5.6 Billion potential prize to be won. Winning half of that will bring significant fortune to a much-smaller AMD.

There are a lot of potentials in AMD. It has not yet reached a 'halo' effect from Dell defection. In general, when one big customers chose a particular supplier, other customers will take a second look and eventually, some will follow suit. However, be forewarned that AMD stock has increased more than 200% since the low reached on 2004.



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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Advanced Micro Devices Inc. (AMD) or any other securities.

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