Analyst Opinion - Intel had a surprisingly strong quarter. AMD went the other direction and is now taking a number of actions that probably should have come right after the ATI merger. The difficulty the company is facing is one of competing with a vastly larger and better funded competitor in a market largely defined by standards that its rival sets. In short, it has always been Intel’s game, its home field. And even in the beginning, AMD only got what Intel gave them.
Intel lost its way a few years ago and AMD moved aggressively against them. But the litigation between the two firms reveals that Intel had the power to block AMD even when AMD had better products and while that will likely result in fines and penalties to Intel, it won’t change Intel’s natural dominance.
So, is AMD screwed? Should they pack up and go home? Well, in a way, Microsoft had a similar problem with IBM in the enterprise in the early 90s and Microsoft, who was at an even greater disadvantage, prevailed. So, how do you beat a dominant competitor?
Rule 1: Change the battlefield
The entrenched vendor has a problem the challenging vendor doesn’t have: It is tied to the status quo and isn’t willing to make major changes that would destroy the current revenue model. But the world changes and if you can ride or drive a change more aggressively than the dominant vendor, you can emerge dominant yourself. That’s how Google beat Microsoft.
In a way that’s what Apple did with the iPod and may still do with the iPhone. Apple created something vastly different, based on a back end service that the other hardware manufacturers could not emulate. Microsoft moved around IBM not by targeting IT, but by focusing on empowering users who drove Windows into enterprises, which eventually crippled the dominating power of IT.
What if you looked to Google as the disruptive force that is showcasing how companies could build their own hardware and successfully deploy it? What if AMD worked with Microsoft to get special multi-user licensing for Windows so that PCs could be shared and resources dynamically sent to those who needed it? If one AMD multi-core processor could be used by a family, wouldn’t it carry a higher margin and wouldn’t the solution be less than Intel’s? What if AMD designed systems that were vastly easier to upgrade as components, allowing people to upgrade without buying new systems or ever being intimidated by a bare motherboard?
Change the battlefield from price to value and given that software doesn’t work well with more than three cores anyway, shift to a shared resources model.
Rule 2: Focus
Large and complex companies tend to do lots of things at once and can get very distracted as a result. This is what happened to Intel after Andy Grove stepped down. Suddenly, Intel was in consumer electronics, hosting, IT outsourcing for others and, generally, Intel did not keep its eye on the core business. This will always be a problem for a large company. There are simply too many things going on for the executive management to stay focused on all of it.
Pick the areas where Intel is most exposed - graphics, OEMs, Microsoft and end users - and resource them. This is actually a set of things that AMD has been known to do well, but they tend to under resource the efforts, which has reduced the returns substantially.
Google is more focused than Microsoft, Microsoft was more focused then IBM, and Apple is more focused than any other tech company. When you are smaller, you need to focus at what you’ve got and drive it home. But, it can be fatal to try to put resources on everything your vastly larger competitor is doing because that competitor, in terms of absolute investment can always outspend you. The trick is to husband your resources so you can outspend your rivals on critical point projects, while they try to cover everything.
There is an interesting file floating around the web which uses PowerPoint and animations to show the history of the Second World War. You can actually see the point where Germany, which was unbeatable, overextended itself and then got beaten badly. AMD needs to let Intel overextend and pick and fund key strategic efforts in markets where the playing field is more even. Consumer, MIDs/UMPCs, cell phones, and home automation largely don’t care about Intel inside and are looking for something they currently aren’t getting (which is why you see lines for the iPhone but not for any new PC).
Rule 3: Quality over quantity
Think of the Spartans at Thermopylae (the movie 300 was over the top, but makes the point): They were the best trained (highest quality) solders of their time and while they eventually got their butts kicked, they took on a vastly larger force and held them for a prolonged period. They didn’t do it by going man to man; they did it by focusing on quality over quantity. You might think of this as another way of saying focus, but it is more than that. It is setting a quality mark higher than your competitor is willing to set - and making the market understand that quality.
Think about it: Does Apple compete on price or do they compete on perceived quality? Often, we define products by performance, but there are other measures that are often more important. We don’t, for instance, all drive cars with big V8s. Toyota beat GM and Ford not by having more cars, more lines, or more resources. They beat them by having better gas mileage and better quality at similar prices.
There is a large number, I would argue the majority, of buyers who would like a PC that would last for 7 or 8 years that would never crash and that would use less power. AMD will probably never sell more processors than Intel does, but they could build a platform that could be seen by some as better. Then the goal can be to expand the "some". That’s what Apple is doing in the face of incredible odds. I mean, look at the combined resources of Microsoft and every OEM on the planet, yet Apple, instead of going under, is growing at an incredible speed.
Rule 4: Fund great marketing
Apple outspends HP, the largest and most powerful PC manufacturer by an estimated four-to-one in PCs. This is because HP has to fund marketing across a broad portfolio of products. Marketing is what got folks into lines for the iPhone and it is what gets customers to prefer one ingredient brand over another.
Marketing is also not a factor of just money, but of skills and capabilities. Intel and AMD are engineering driven companies. But, as Motorola recently found out, an engineering driven company can be wiped out by a marketing driven company, if marketing is designed into the challenging (Apple iPhone vs. Razor) product.
You can do everything else, but if you can’t promote your product, you might as well have retired early.
Wrapping up: AMD has the potential for great things
AMD can’t continue to run at Intel head on. Intel is bigger, better funded, more deeply entrenched and isn’t making the mistakes it once made. To win, AMD needs to not just embrace the concept of the little guy taking on the larger force. They need to become the Spartans capable of providing a higher quality offense that is up to challenging Intel’s dominance.
It is that alone that will decide if AMD kicks Intel butt or has their butts kicked by Intel.
Rob Enderle is one of the last Inquiry Analysts. Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them. Currently he provides his services to most of the major technology and media companies.
The Israelis engineers are those who develop the core and the centrino,
which helped Intel overcome the Athlon architecture.
... And it does not take away the thing that Intel can put easily a lot more money to the research than AMD. AMD have to work in the areas where the money is not the desiding factor.
They need a co-operation with many companies. If Intel do everything, they allso block out meny companies. AMD should focus an co-operating with different companies that can develop together something that is more than the sum of their efforts.
And even then Intel is huge threath to companies like AMD. The fusion may be ansver for cheap one chip low power computer. The Intel will have the speed monsters for far future. But who knows if IBM can Help AMD to level the playing field and AMD can compete with their High-metal gate 32-22nm prosessors, but it seems very unlikely. Intel can move to the next prosessing tecnology so much faster rate because all of that money.
Um IBM already helps AMD A LOT with their technologies such as the IMC and their current process, 45nm. Its not about AMD being able to work with other companies since Intel works with them too.
Yes Intel works with a lot of other companies to bring much better hardware such as PCIe and faster USB solutions and many more. But what AMD needs to do is take these technologies it gets from IBM and incorporate them wisely.
Heck if AMD wasn't so stubborn and didn't head on a naitive quad at 65nm and waited till 45nm like Intel has done maybe they would be better off. This is especially true since in most markets except the server where quads are better. But in the rest if they had gotten a dual out that was better than C2D they would have been better off. Then they could have used the incoming money from the duals to work on a quad.
So in all reality AMD made a lot of wrong moves and in truth I am going to doubt they will even be able to truly take Intel head on. I am sure they will challenege Intel like they have done before but never push them to the bottom.
You're not reading what the article was about though Jimmy. You're still banging your head on it has to perform better in benchmarks. Which isn't what the article was really about. 60+% of AMD's issues are Lack of Mass market advertising. How often do you see a TV commercial about any of AMD's products, video cards or otherwise? The answer to that one from my experience is Never. The only place you see AMD ad's is on computer tech sites, and computer enthusiast magazines. And more rarely in mags like Maxim or playboy. The main force that allowed Intel to outsell AMD in the P4 Netburst days wasn't performance, but the fact that when you turned on the TV, you'd see a commercial for the P4, think they were still using the blue man group at the time. And then you'd see a commercial with the dude your getting a Dell guy, where at the end it was say featuring Intel Pentium 4 processors.
It doesn't have anything to do with Native quad at 65nm. The biggest thing AMD is guilty of there is not catching and fixing the TLB bug before they tried to release the processor. At which point the TLB bug was then blown waaay out of proportion by Intel fanboys, keeping most people from buying phenoms until b3 revision. The place where the TLB bug hurt AMD the most was the server market, where buyers that were waiting to upgrade to Barcelona were forced to instead go with Intel due to the delays. And even now, even though Barcie is better than the Xeon, it's still biting them in the rear due to that delay.
OEM Manufacturers don't care about which processor runs faster on given benchmarks. They care about which processor they can get for cheaper. And they care about what is going to run stable. For a long time Intel had the advantage here because they could provide an entire platform to oem's that was guaranteed to work together, mainboard, chipset, igp and processor. AMD now has the ability to do this, but how many OEMs are selling systems based off AMD Phenom, 780/790g/x/gx/fx boards, and radeon graphics? And when you look at tray prices and see dead even, on certain area's it says something. Go do some research, by looking at Walmart, or bestbuy.com, then come back and tell me the ratio of pc's for sale that have Intel processor, to AMD processor, even in area's where the AMD would perform better or cost less at stock. So that should tell you, even today that something that isn't suppose to be, is still going on today.
Now all we need is some crystals to channel the "negative energy" and a shamanistic necklace to speak to the wolf gods so AMD can come out on top. I'm glad it's really just that simple, we can all go home now.
AMD: MADNESS? THIS - IS - SUNNYVALE!
I don't agree. Intel always pushed forward, even when there was
less competition. There was never a real lack of progress in new products. The only difference was the pricing. That's the only thing AMD is good for at the moment, to keep intel's prices (relatively) down.
If anything the industry is moving too fast, and logically, the weakest
shall fall. In this case, AMD.