SAN JOSE, Calif. — Hurt by competitive pressures from Intel Corp. and other factors, Advanced Micro Devices Inc. (AMD) has cut its product prices in the channels and offered favorable terms to others, according to an analyst.
''We believe AMD is experiencing a challenging Q4'06 from both a demand and a product mix stand point,'' said analyst Doug Freedman of American Technology Research Inc., in a report. ''Intel's new products are having an impact as they ramp Core 2 supply, enabling the company to reverse some recent share losses. In the server market, Intel's quad core has increased the ante in the arms race.''
AMD is taking a number of steps to improve its position, including a plan to cut microprocessor prices by an average of 8 percent in the retail channels.
''We believe AMD has made the following decisions in order to move inventory: 1) A price cut to channel partners; we saw prices decline [about] 8 percent earlier this week, and 2) Favorable pricing to server customers that are in competitive situations,'' said Freedman.
AMD has other problems as well. ''AMD has had a mismatch of product at Dell , with significant inventory being made available to channel partners. The dry channel issues are likely to resolve themselves fairly quickly,'' he said.
''A few notebook wins that AMD had thought were secured now seem to be in danger, and may in fact be lost to Intel as it ramps Merom and offers competitive pricing,'' he said. ''There are several large server projects that have previously been supported by AMD that the company is in danger of losing to Intel's quad core solution. We believe AMD could hold the sockets, but it will have to pay the price of lower ASPs and promises on future performance from the pending Barcelona launch.''
And after a bad 2006, Intel's prospects are looking up. "Our late quarter checks indicate no significant order cancellations for Intel," according to FBR Research.
"In addition, our checks indicate a relaxed tone in the supply chain and the absence of a late quarter push. As we are now in the 'non-cancellable' period for orders, we believe Intel has likely achieved its top line guidance for 4Q," according to the research firm. "Our positive stance on the stock continues to be predicated on the potential for margin improvement over the next several quarters, and is based on Intel's ramp of new products and a richer mix of notebook and server products."
