The Globetrotters (Intel) needed the Generals (AMD) in order to play the game (keep antitrust fears in check). The Globetrotters might have even kept a match or two close to keep the spectators interested, but there was never much doubt who would end up winning the game.
For years, Intel has controlled generally 70-80% of the microprocessor market, with AMD owning the majority of the balance. Today is no different. AMD is still alive and competing, but consistent profitability is something that has always eluded the company. Take a look at AMD's financial results over the past five years, and then compare them to Intel's:
AMD ($ millions) Sales Net Income 1999 2,857.6 (88.9) 1998 2,542.1 (104.0) 1997 2,356.1 (21.1) 1996 1,953.0 (69.0) 1995 2,429.7 300.5 Intel ($ millions) Sales Net Income 1999 29,389.0 7,314.0 1998 26,273.0 6,068.0 1997 25,070.0 6,945.0 1996 20,847.0 5,157.0 1995 16,202.0 3,566.0Clearly, Intel has kicked AMD's behind over the past five years, roughly doubling sales and harvesting billions in profits. AMD, on the other hand, has seen its business barely grow and has been awash in red ink. Another place that AMD has greatly underperformed Intel is in stock performance. Take a look at this long-term chart of the two stocks, and guess which one is AMD.
Of course, I'm sure that my associate Rob is saying, "This year will be different!" I've been a longtime AMD bear, and I can tell you that the AMD faithful have been saying the same thing pretty much throughout the '90s.
The story of a competitor's chip being faster and cheaper than the current Intel offering has been repeated many times in the past, yet Intel has always managed to squash the competition. Pick any microprocessor product cycle in the past two decades and you will likely find a similar story as today. That is, the Intel competitor gathers a bit of attention as rumors of Intel's defeat start circulating, but then Intel uses its size and resources to pull out the win in the end.
Like numerous other industries, size is a serious advantage in the semiconductor market. While AMD has done its part to maintain technical innovation, it remains seriously outgunned by Intel in marketing, research and development, and production. Even if AMD can manage to come out with a better processor sooner than Intel (and it has many times in the past, including today with the 1+ GHz Athlon), Intel can spend gobs of money on advertising, throw money at its R&D department to regain the lead, or focus on producing its chips cheaper and cheaper.
For example, Intel's R&D budget is over six times larger than AMD's. And while Intel has been investing increasing amounts into future products and technologies (R&D spending is up 32% over the past year), AMD has been skimping (R&D spending is down 7%). Long-term, this can't help but to harm AMD.
To close, every dog has its day, and AMD is having a relatively good year compared to the previous four. I'm sure Rob has told you all about it. However, when you buy AMD, you're still ultimately buying a dog. Perhaps Intel -- or the Globetrotters -- will actually lose the next battle, but I'm not holding my breath.
This Week's Duel
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