AMD 2nd Quarter Earnings

7/23 - AMD is on a tear, and has finished its third complete year of solid growth.

It is true that AMD missed its sales target for the second quarter. However, the reasons for this were hardly unexpected and, given the circumstances, probably unavoidable.

AMD's chief rival has to quickly move old inventory in preparation for new products and so is selling its chips dirt cheap. Intel drove prices so low last quarter that AMD walked away from some its channel business, an area that AMD has traditionally been strong in. Things might have gone poorly for AMD, if it weren't for AMD's Opteron server processor, which carried the field.

AMD and Intel are currently in a furious race to see who can manufacture the best quad-core part. Intel has moved up the date for its first quad-core products from the first part of 2007 to the end of 2006. AMD has also promised a demo of its quad-core by the end of 2006, with its quad-core chips shipping around midyear 2007.

AMD and Intel implement multicore differently.

Intel intially puts two of its existing chips either in a single package, or two cores on a single die. The Pentium D chips Smithfield and Presler were this way. Kentsfield and Clovertown promise to be this way, too.

The difference between Intel's first dual-core and first quad-core chips is that the Pentium D used dual Netburst chips, whereas Kentsfield and Clovertown are to use two dual-core Core microarchitecture chips.

AMD, on the other hand, re-architects its multicore chips, and in the past AMD's native dual-core implementation performed better than the Pentium D. This time, however, Intel will use a better chip.

If nothing else, it should be a good fight.

Intel hopes to release a chip next month that shall compete head-to-head against AMD's Opteron in the high-end, x86 multi-processor (MP) server segment. The chip, codename Tulsa, hopes to compensate for the weakness of its front-side bus (FSB) architecture with lots of shared L3 cache.

Shared cache is of the reasons that Intel's Core microarchitecture performs so well, so even though the Xeon 7100 family is not part of the Core microarchitecture, maybe the shared cache will restore competitiveness to the MP server segment.

One thing that investors should note is that AMD's management, in response to queries about Intel's Core microarchitecture, is saying that benchmarks do not count for much. They should know better. Performance is why AMD is currently sitting on top of the world.

AMD remains optimistic, largely because of healthy demand for Opteron, and in truth this is unlikely to change overnight. Nevertheless, it will be interesting to see how the market responds to Intel's Core microarchitecture products over the next quarter. AMD may not be as optimistic next time.

Or maybe Hector Ruiz is right, and all of this is not about benchmarks but about breaking the Intel monopoly, and AMD shall continue its upward path.

Sources: AMD Reports Second Quarter Results, Earnings Webcast

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