Intel's Bluff (Q3 06 Results)

It's taken me a little time to go over Intel's finances in detail. However, far from being the glowing outlook that nearly everyone is saying, Intel's financial position is much more precarious. The good third quarter results were actually only a temporary fix created by slashing stock buyback. Unfortunately, even following the buyback patterns from two years ago, this will still leave Intel about $2.5 Billion short at the end of the year. The best that Intel can hope for is that it has a much better fourth quarter than even their best projections.

The overly positive outlook for Intel seems to be based on three assumptions:

1. Intel is regaining share.
2. Intel is making more money.
3. Intel is back to playing its own game.

I've seen some very poor attempts to give Intel credit for a supposed increase in volume share by using a bit of statistical sleight of hand. The statistics for the last three quarters for microprocessor volume are:

Intel - 74.3%, 72.9%, 76%
AMD - 21.1%, 21.6%, 23%
VIA - 4.6%, 5.5%, 1%

Based on these percentages, the naiive claim is that Intel gained 3.1% in the third quarter while AMD only gained 1.4%. This would seem to suggest that Intel gained twice as fast as AMD in the third quarter and, presumably, this would be an indication that Intel is taking back share. Unfortuately, this distorted view is caused by the interference from VIA. VIA only sells at the very low end of the X86 market. Adding their share in with AMD's and Intel's is a bit like adding bicycles to motorcycle sales. We can get a clearer picture by removing VIA from the volume statistics and just showing the volume share between AMD and Intel:

Intel - 77.9%, 77.1%, 76.8%
AMD - 22.1%, 22.9%, 23.2%

The undistorted statistics tell a very different story. We can see that Intel has been slowly losing share to AMD for the last three quarters; quarter three was no exception. Microprocessor revenue share is similar:

Intel - 82.8%, 81.9%, 81.7%
AMD - 17.2%, 18.1%, 18.3%

Clearly, Intel is not regaining share in either microprocessor revenue or volume. Similar distorted claims are based on operating income and cash:

Intel
Q2 - Revenue - 8009, Op. Inc. - 1072, 13.4%
Q3 - Revenue - 8739, Op. Inc. - 1374, 15.7%

The operating income as a percentage of revenue appears to be up and Intel boosted its cash by nearly $700 Million in the third quarter. This looks very positive for Intel. However, there is a problem. People who buy Intel stock rely on Intel's stock buybacks to increase demand. In 2004 Intel spent $7.5 Billion on stock buyback and spent $10.6 Billion in 2005. Based on the lower 2004 pattern Intel should spend $7.7 Billion this year. However, Intel has only spent $4.4 Billion so far and should have spent about $1.9 Billion in the third quarter. Instead, Intel only spent $500 Million.

It is clear then that Intel boosted its third quarter numbers by slashing its stock buyback. This makes the third quarter numbers look good but puts Intel $1.4 Billion behind in addition to the $1.9 Billion it would need to spend in the fourth quarter. However, if Intel spends the same as it did this quarter it will end up $2.5 Billion short which will cause its stock to plunge. If it pulls the cash back out that it just put in this would end up only $1.2 Billion short. This is a tough position for Intel. If it doesn't spend any cash then its stock buyback will drop below the 2004 levels and will only be a little ahead of the 2003 levels. This would be a 50% reduction from the 2005 levels and something the stock market surely would not overlook. This could easily cause Intel's stock to slump when the end of year results are released(which will be sharply down from last year). Unfortunately, Intel will not have the money to spend so it will have to choose between spending cash and risking a drop in stock price. From this we can see that Intel's money position is currently worse than it was even in 2004. Intel has not yet recovered in terms of money.

The final assumption is that Intel had to play AMD's game while AMD was ahead in processor performance and now that Core 2 Duo is ahead Intel can play its own game. Well, let's assume for a moment that this is true, that C2D's superior performance is creating lots of demand for Intel and eroding AMD's demand. This could cause AMD to drop its prices even lower to avoid losing too much volume share and this would hurt AMD's margins even more.

The problem is that AMD hasn't lost in volume share; Intel actually lost a little. If the assumption about demand were true then this wouldn't fit with the facts at all.We know that AMD was capacity limited in the third quarter. If demand were strong then Intel should have had no trouble picking up customers beyond what AMD was able to supply. But, this didn't happen. Secondly, the fact that Intel's margins were lower than AMD's and will stay lower in the fourth quarter disproves the notion that AMD has to compete by dropping prices. A similar idea was that Intel was going to get rid of its overstock by selling it at reduced prices and this was supposed to undercut AMD and cause further loss of margin. However, AMD's margins didn't drop all that much and Intel ended up having to take a loss on $100 Million worth of overstock. Apparently, this was only part of the overstock and Intel may have additional losses in the fourth quarter.

The fact that Intel was unable to gain volume share while AMD was capacity limited disproves the idea of extra demand for Intel chips. The fact that Intel didn't gain at all in terms of revenue share also disproves the idea that Intel's chips are more valued. Intel finds itself faced with a competitor who is serious about growing capacity. The only way of stopping this would be to somehow reduce demand for AMD chips and this hasn't happened. Intel seems to be overlooking the fact that having two FABs plus second sourcing from Chartered makes AMD a very reliable supplier; Intel has lost this advantage. Intel has been the strongest player by far in terms of integrated graphics for both desktops and mobile. However, now that AMD has ATI Intel faces a whole new level of competition in these markets.

AMD is currently taking mobile share from Intel. Many have assumed that Merom, the mobile version of Conroe would easily hold this market for Intel. However the fact that Intel will keep making the lower performing Yonah until the end of 2007 suggests otherwise. It appears that Merom is having more difficulty with power consumption than the older Core Duo. AMD's Turion should compete with this very well as it moves to 65nm. This seems to have been a strategic mistake for Intel and not one that it can fix soon. Faced with an inability to manage multiple processor projects, Intel lumped everything together with Core 2 Duo. This chip tries to do the job of server, desktop, and mobile. Apparently, it isn't doing mobile as well as it was expected. This unfortunately occurred at the same time that AMD decided to split mobile off into a separate family. This seems to be what will give AMD the ability to take share in mobile away from Intel. Intel surely realizes its mistake and is probably frantically trying to reform another all mobile team as it had with Pentium M. However, this is likely to set Intel back into 2008 and it can lose a lot of share during that time.

The one size fits all strategy with C2D is also not working as well as it could with servers. Woodcrest doesn't do 4-way and Intel won't have a 4-way until Q3 07. This means that during this time Intel has to compete with the outdated Cedar Mill based Xeons. The result has been that Intel has not been able to take back any of the 4-way and higher share that it lost to AMD both from Xeon and Itanium. Given AMD's recent wins in supercomputers with Opteron it seems that AMD will remain strong in the top end of servers well into 2009. Although Intel has made some gains in 2-way servers it will soon be faced with both lower power 65nm based Opterons and a native quad core design with K8L. This is a fairly grim prospect for Intel as it won't give them much time to gain any share and even then only at the bottom. Further, Intel appears to be behind in base architecture and it doesn't appear that they will catch AMD until 2009. AMD has a good chance of reversing any server losses during that time and taking additional server share.

The sole bright spot for Intel is the desktop. Or maybe it isn't. This depends on how much of Intel's third quarter volume came from moving lower priced P4 stock. It could be the case that Intel's rise in desktop volume share was only a one quarter bump and will drop again in the fourth quarter or even the first quarter of next year after it moves more overstock in the fourth quarter. At this point though there isn't any way to tell. It seems reasonable though that, with increasing pressure from AMD within the corporate market with its Stable Image Platform and integrated graphics from ATI, AMD is not likely to lose very much share. Its deals with the two highest retailers in China and its deal with Dell also suggest that any volume loss on the desktop will be limited. Some have tried to argue that Dell is rapidly losing ground and therefore won't help AMD. However, this seems to be more of a sour grapes argument than anything else. Looking over Dell's financials I was unable to see more than a drop of about 4% and this is hardly proof of any downhill slide for Dell. Intel dropped much more than this during 2006.

Although it has been suggested that AMD's current capacity constraints will cause it to lose customers this logic too does not appear very sound. AMD's capacity will increase rapidly next year so Intel can't count on capacity constraints for AMD unless the market grows much more rapidly than it has. Then too, Intel still would have to turn these limitations into demand for its own products as it was unable to do in the third quarter.

Intel is also unlikely to improve its popularity with vendors. Even though AMD now has ATI it is quite willing to let its customers use other brands of chipsets if they prefer. Intel in contrast, is much more insistent about pushing its own products as it has with its exclusive chipset policy for Centrino.

I have been unable to find any evidence in the third quarter reports that Intel's prospects are better than AMD's. Intel has been unable to create demand or decrease demand for AMD. Intel will find itself in a defensive position trying not to lose share in mobile and corporate accounts while trying to push a single chip design that is not fully adequate for either server or mobile use. It has to do this against a tough competitor who is putting huge amounts of its earnings into capital expenditures to grow its capacity. On top of this, Intel will find itself with a very disappointing 2006 earnings report and enormous pressure on stock buyback with money that it won't have. It is likely to be faced with the prospect of either spending down its cash even more or watching its stock price plunge. From all of these disadvantages it is clear that Intel is not playing its own game.

Tigerton or Kittenton? Memory Amnesia.

The glowing reports about Intel's roadmap for 2007 continue. Central in this enthusiasm is the native quad core Tigerton which is supposed to be the platform that will keep Intel ahead of AMD's K8L technology. However, in evaluating this platform most people seem to have forgotton the memory bandwidth lessons from P4 and Athlon 64. This amnesia of memory requirements has led to exagerated expectations of performance for Tigerton.



The diagram above for Tigerton looks impressive. Surely four buses with an aggregate bandwith of 34 GB/sec would be enough. Or would it? Just think back to 2002 and 2003 when P4 was so strong against K7. I remember how Intel enthusiasts bragged about the 800Mhz FSB for P4 which was well ahead of what K7 had. Curiously, while these same Intel enthusiasts thought 800Mhz was necesary for one core they now seem to be insisting that 1066Mhz is enough for four cores. Let's consider this more carefully.

We know that when Intel increased its FSB from 400Mhz to 800Mhz that it didn't use all of the bandwidth. We also know that Athlon 64 seemed to get along okay on socket 754 which only contained one memory channel. One memory channel on socket 754 was basically the same as the 400Mhz FSB for P4. It is difficult to imagine that anyone today would suggest that this was more bandwidth than these processors needed. I think clearly that this level for one core is the most reasonable starting point. Let's see where this takes us.

If we need one memory channel with DDR 400 for one Athon 64 core then the dual memory channels with socket 939 and 940 would seem to be enough for X2. Likewise, an 800Mhz FSB with two channels of DDR 400 or DDR2 400 should be enough for Intel's dual core Preslers, Conroes, and Woodcrests. If this is the standard then both AMD and Intel clearly have more bandwidth than necessary for dual cores. AMD's Integrated Memory Controller (IMC) allows expansion beyond two sockets and Intel's 5000 series chipset with two buses again allows expansion to two sockets with similar memory bandwidth. Dual core today is well in hand. Let's look at more cores.

Intel will soon release the quad core Kentsfield and AMD will release the quad core Barcelona in Q2 07. The above diagram is for Tigerton which most likely would arrive in Q4 07 but could arrive in Q3 07. Although Intel does say Q3 07 the chips may not arrive in volume for another two months if recent releases are any indication. At any rate, we know that dual core works well but will quad core work the same? If an 800Mhz FSB is required for dual core then reasonably a 1600Mhz FSB would be needed for Kentsfield or Tigerton. We know that Kentsfield will have a 1333Mhz FSB at most and may only have 1066Mhz. A FSB of 1333Mhz would only be equivalent to a Conroe with a 667Mhz FSB. This would be equivalent to a 333Mhz FSB for P4. We can probably skip comparing with a 333Mhz FSB single core P4 because it is possible that the longer pipeline changed the bandwidth requirements. Since Core 2 Duo (C2D) is not available in single core it seems reasonable to compare with the single cored Athlon 64 which also has shorter pipeline. For Athlon 64 this would be the same as using the single channel socket 754 and using DDR 333.

It does seem curious that no one uses a Conroe with the FSB set at 667Mhz since this is what is being claimed is adequate for Kentsfield. However, the question of whether or not Kentsfield can do 1333Mhz on its FSB is moot since the above diagram for Tigeron only shows an aggregate of 34 GB/sec for four buses. 34 GB/sec for four buses is only 1066Mhz per bus. This is only equivalent to a Conroe with a 533Mhz FSB or a P4 with a 266Mhz FSB. The equivalent for AMD would be an X2 or Athlon 64 with DDR 266 on socket 754. To make things worse, the memory speed listed in the diagram is incorrect. To keep up with four FSB's running at 1066Mhz, Intel will need DDR2 (or DDR3) running at 1066Mhz as well. The only way that the above diagram would work with 667 Mhz memory would be if the number of memory buses is wrong and it actually has six memory buses instead. However, even if the memory is able to keep up the FSB speed is inadequate for four sockets.

As far as I can tell the only reason for this recent outbreak of amnesia for memory requirements is the sloppy testing over at Tom's Hardware Guide. Apparently, THG is on some kind of crusade to prove that Intel has the best hardware even if THG has to fake the tests to prove it. It doesn't seem to do any good to criticize the testing at THG because the excuses from Intel enthusiasts seem to grow exponentially in proportion to how bad the testing is. However, not matter how sloppy or unprofessional or biased the testing is at THG there really is no escaping common sense. A Tigerton with four buses of 34 GB/sec aggregate bandwidth is only equivalent to a Conroe with a 533Mhz FSB. I'm curious why THG doesn't run a Woodcrest test with the FSB set to 533Mhz to show what the expected performance with Tigerton will be. Tigerton should be double a Woodcrest with 533Mhz FSB. The comparative proof for Kentsfield is easy as well since you only need to set the FSB to half the FSB speed for Kentsfield to get the same memory bandwidth.

The notion that a Tigerton can run four cores with a FSB of 1066Mhz is beyond ridiculous. This would only be 533Mhz for Conroe and equivalent to DDR 266 for both X2 and Athlon 64 on socket 754. Even the old Barton Athlon XP 3200+ used a FSB of 400. To get as low as Tigerton we would have to go all the way back to the Athlon 2600+ which used a 266Mhz FSB. None of the P4's were ever this low as even the original 1.4Ghz Williamette's had 400Mhz FSB's. We would have to go back to the PIII to get down to 266Mhz on the FSB.

It is clear that memory bandwidth is going to be a serious problem for Intel and is going to set Tigerton's performance back badly. The question then is how well AMD stacks up in the memory bandwidth race. The socket 753 Athlon 64 used one channel of DDR400 memory. This was doubled to two channels with socket 939 and 940 so this would be the same equivalent bandwidth for X2. Presumably, Barcelona would need double this or 800Mhz memory. This shouldn't be a problem as even the memory controller on Revision F is about to handle DDR2 800. This would be equivalent to 1600Mhz and well ahead of the 1066Mhz for Tigerton. In fact, a little math shows that this is fully 50% more bandwith than Tigerton will have. This means that in memory intensive operations Tigerton will bog down to 33% slower than Barcelona or you could also say that Barcelona will be 50% faster.

Looking at the Caneland chipset I can say that moving to quad buses is a step up from the limited dual bus 5000 chipset. I can also say that the 64 MB snoop filter cache is a great idea. This is basically a map that prevents cache coherency traffic from being retransmitted across to other buses unnecessarily. However, this is bad because it indicates that the FSB will still carry the cache coherency messages. The snoop filter won't help when the cache coherency messages must be transmitted to another bus. It is not nearly as good as AMD's design where none of the cache coherency messages effect memory bandwidth. It is also disappointing to see that Intel will still be using the outdated MESI protocol rather than a more advanced protocol like MOESI as AMD uses. This too would reduce cache coherency saves and loads. When another chip needs to access a memory location that is in another chip's cache, MESI requires that chip that has the data save it to memory whereas MOESI can allow sharing without having to save.

The Tigerton server chip is an upgrade to Woodcrest and will at least give Intel something to replace its aging Cedar Mill Xeon chips and finally let C2D go beyond 2-way. However, because of memory bandwidth constraints, Tigerton will be proportionately slower than Woodcrest. Secondly, the octopus-like design of the Caneland Northbridge with four FSB's and four memory buses is not going to be compact or inexpensive. Finally, this limited four bus design will not allow Tigerton to move up to bigger 8-way and 16-way server designs as AMD will have. In conclusion, it appears that although Tigerton looks good, it will be held back by the memory bandwidth of the Caneland platform which is as low as what was used by PIII and Athlon 2600+. This will cause Tigerton to get beaten badly in memory intensive applications, making it more of a kitten than a tiger. Clearly, memory bandwidth will be Intel's biggest problem into 2009.

A Real Forecast

Although there have been many projections lately that favor Intel, it is my guess that these are based largely on old biases towards Intel. I believe that a more careful look at AMD and Intel shows that AMD's performance and current position are better than Intel's. And, although I believe that Intel hit bottom in the last quarter and will now grow, it seems likely that AMD will grow faster during 2007 and 2008.

For recent performance we can see that AMD clearly hit its stride in the fourth quarter of 2005. This quarter was the best quarter in Intel's entire history. Yet, AMD was able to increase its processor revenue share from 12% to 15% during this same quarter. It is staggering to think that AMD pulled revenue away from Intel while Intel was at its best. However, these gains by AMD left Intel unable to rid itself of its inventory overstock which increased 11% from the previous quarter. In contrast, AMD reduced its own inventory by 58%. Intel began to drop and hit bottom just two quarters later in Q2 06. Intel has been unable to rid itself of its overstock and it has continued to build since Q3 05. Today, AMD's inventories are less than half of what they were in Q3 05 while Intel's are 60% higher.

The best that can be said for Intel is that they've hit bottom and are slowly growing again. However, the frantic scratching in the dirt by some in an attempt to put a positive spin on Intel's numbers is truly amazing. I've seen people suggest that Intel is now doing better than AMD. Unfortunately, statements like this are purely delusional. The reality is that 2006 is a very bad year for Intel. This will be the largest processor revenue drop for Intel since 2001. Short of a miracle (which even Intel does not project) in Q4 06, Intel's total yearly processor revenues for 2006 will be much lower than 2005's and only about equal to what Intel received in 2004. In contrast, AMD's processor revenues for 2006 will be double what they were in 2004. I'm baffled how zero growth in two years versus 100% growth could be equal or ahead for Intel. Clearly, AMD has done very well and Intel has not.

AMD's processor revenues are up 33% from the Q3 05 while Intel's are down 21%. Faced with dismal numbers like these, those who favor Intel have resorted to looking only at this quarter versus last quarter. However, even here there is no place to hide. Intel's processor revenue's increased 8.8% from last quarter. However, AMD's increased 10.1%. The fact that AMD's margin dropped more from Q2 06 to this quarter has been tossed out with glee by those seeking to fabricate a better outlook for Intel. Howevever, the only reason that this is true is because Intel's had already dropped badly during Q2 06. Today, Intel's margin at 49.1% is still below AMD's at 51.4%. I find it amazing that some don't see how noteworthy this is. Intel has been consistently ahead of AMD and usually be several percentage points. Further, the overall drop has been far worse for Intel. Intel's margin dropped from a recent high of 61.8% in Q4 05 while AMD's dropped from a recent high of 58.5% in Q1 06. This is a 21% drop for Intel versus a 12% drop for AMD. None of these numbers favor Intel. Yet, one doesn't have to look very far to find people proclaiming that these are great numbers for Intel and that they show a glowing future. However, there is no reason to believe the phoney outlooks and no reason to look at Intel with rose colored glasses.

AMD has had very strong demand (up 50%) for its mobile chips. Unfortunately for Intel this is not likely to improve. AMD's 65nm mobile chips will be out soon and will have lower power draw which is a good thing for mobile. AMD is also certain to get a boost in mobile chipsets from ATI which takes away the strongest advantage that Intel has enjoyed with its Centrino line. A loss of share in notebooks is something new as this has been the area that Intel has held onto the strongest. Similarly, AMD's very aggressive move into integrated chipsets gives AMD a good boost for both corporate client computers and budget systems. The budget category lines up well with AMD's recent partnership with the two largest computer retailers in China. The client systems are likely to be a good complement to the already increased offerings by HP, Dell, Sun, and IBM in AMD servers.

Intel is pressuring AMD hard in 2-way servers. This is not surprising as Woodcrest has impressive SSE performance and works quite well with dual core and dual socket with the dual bus 5000 chipset. The only bad part is that this chipset uses FBDIMM which already has a limited lifespan. Worse still, this technology will not grow large enough to become profitable while Intel will have to continue support to the many customers who have already bought or are buying these systems. This will be a future drag on Intel although it only a small one. AMD would pull ahead on 2-way systems in Q2 07 except Intel should have a non-FBDIMM chipset available which will remove the disadvantages of the FBDIMM technology. So, AMD should be about equal on 2-way dual core systems which will prevent Intel's gaining back share. However, Intel will fall behind on quad core systems and will not be competitive on 4-way sooner than 2009. This is the case because, without CSI, Intel cannot use an integrated memory controller. Without both of these Intel simply does not have the base architecture to handle dual core 4-way or quad core 2-way or higher nor has Intel suggested upgrading to a quad bus chipset. AMD should continue to make gains in 4-way and should start making gains in 2-way after Q2 07. This does at least give Intel time for a couple of good quarters with 2-way however it is unlikely to make any strong reversals in servers. Worse still, Intel then loses the advantage until sometime in 2009.

The desktop is Intel's strongest position in the near term. Kentsfield will have little effect for Intel since this is a very small market and will be countered at the top end by 4X4. Secondly, Kentsfield will be countered in Q3 07 when AMD releases the native Altair quad core. Judging from the roadmap for Pentium E 1000 and Celeron D 400 chips, the desktop clock speeds will not increase as quickly as some have suggested. AMD should be able to counter these with Rev F and G chips while competing at the high end with dual core versions of K8L. There does not appear to be any advantage for Intel in Q3 07. This would suggest that Intel's sole strategy for pulling back ahead of AMD will be a move to 45nm. However, this move is not likely to be as successful as some have suggested. In 2008, less than half of Intel's FABs will be 45nm while both of AMD's 300mm FABs will be ramping to 45nm. The advantage of APM will finally be felt as this will make extremely rapid transfers between the two FABs possible. Intel on the other hand will still require two months to move a chip or process from one FAB to another; AMD will be able to do this the same day. Two similar FABs should allow AMD even tighter control over costs although AMD's costs will fall steadily through 2007 as FAB 36 continues to ramp. The costs for 65nm on the 300mm FAB 36 are far lower than the costs at 90nm on the 200mm FAB 30. Unfortunately Intel will not see this same reduction in cost as it is already using 300mm FABs and will already have converted most of its capacity to 65nm by year's end. These reductions in cost should pull up AMD's margin even if Intel continues the price war.

I believe that many (including people at Intel itself) still have not come to grips with the reality that Intel can no longer grow its way out of trouble. Further, Intel is facing a competitor who now has two FABs and is using 300mm. In 2002 or even into 2003, Intel's current price drops would have been far more effective. Today, they have merely slowed AMD's growth while hurting Intel more. Eventually, the reality that AMD now has products spread among desktop, server, and mobile as well as second sourcing from Chartered and soon chipsets from ATI will be unavoidable. It will also become clear at some point that AMD's HyperTransport consortium is paying off with a low pricing model along with the Torrenza initiative. Intel's copycat strategy is not likley to have the same benefit and will take two years to not catch up to where AMD is now. The proposed Geneseo and CSI standards are about as fast but still less flexible than the current HT 3.0 standard. It is entirely possible that HT could be at a 4.0 or even 5.0 standard by the time CSI makes it to hardware. AMD has at least two other possibilities to compete with Intel's 45nm in 2008. These include the possibility of using TTRAM or Z-RAM for cache. This is not an option for Intel as it requires SOI. Another possibility is using the GPU as a parallel coprocessor. This could negate any boost in SSE speed. Again, it is unfortunate for Intel that using a GPU for procesing is easier with HT than with using the FSB. And, whatever effort Intel does put into this would be wasted when CSI is released in 2009.

I don't see any great gains for Intel in the fourth quarter. I'm guessing AMD will increase at about the same rate and hold onto its roughly 22% volume share. I expect Intel to grow during 2007 and 2008 but I expect AMD to grow faster and increase share. I would expect Q1 07 to be Intel's high point with servers and Q2 07 to be Intel's high point on the desktop. Overall, I would expect Intel's revenue's in 2007 to match the 2005 revenues. I don't honest see how Intel could realistically take back share from AMD given all of AMD's proejcted advantages with cost, volume, and the partners and customers it has lined up. I expect AMD's margins to rise regardless of Intel's pricing strategy due to AMD's conintued drops in costs. AMD has clearly divested of the most unprofitable sections of the company while Intel has made a less serious effort. Intel may have to revisit the issue of divestment if it cannot get its margins up. I don't see any possible way for Intel to grow at 30% while AMD grows at only 15% during 2007. Intel show grow but AMD should grow faster.

These are comments I made in December 2004.

I've been thinking lately about what is going to happen in the next year. I know that some are desperately hoping and that others are at least suggesting that Intel will make a comeback. But, so far, I can't see it.

The comeback for Intel didn't happen. AMD retained its share during 2005.

It is clear that Intel's dual core strategy is threefold:

1. Release dual core Prescott chips to slow down the erosion of the workstation/low end server market. This won't actually work very well since these chips will be starved for bus bandwidth. Expect Intel to pump up the cache. This strategy would put another company out of business but with all of that spare fab capacity Intel will only take an embarassing margin hit.

This was pretty accurate. Intel released Smithfield and then followed up with Presler. The dies are large and Intel still uses the large cache approach on the Xeon units. These processors have been ineffective against Opteron.

2. Release dual core Dothan based chips to slow down the erosion of the desktop market. Intel is hoping that just one of the benchmarks will favor this chip. This is not a great strategy but it really is all Intel has since, without being able to keep up with Prescott, Intel's only other choice is to fall farther and farther behind.

Yonah based on Dothan was next. Yonah was also not very impressive on the desktop.

3. Work on something more reasonable for 2006. This is Intel's real strategy although they won't actually admit this to their shareholders, employees, or customers. Intel is praying that they can get something out the door in 2006 that will give them a fighting chance.

At the time, no one else was talking about a new design for 2006. The talk was that Intel was going to release something competitive in 2005 which did not happen.

In all honesty, I don't think Intel has hit bottom yet nor do I think AMD has hit its full stride. I think things will be better for AMD and worse for Intel in 2005. Maybe in 6 months things will look better for Intel in 2006 but right now not even that looks promising.

Since my past comments seemed to have been accurate perhaps my latest ones will be as well. It appears to me that AMD will exit 2006 in the strongest position it has ever been against Intel. This should be a good reason for a positive forecast for AMD.