The Low-Down

The microprocessor war truly seems to be a story of David vs. Goliath. Although it seems like Intel and AMD have always been the kings of microprocessors, there was another company. Throughout its life, Intel has always been at the top of the processor world. In fact, they completely controlled the high-end and medium-end range of processors. Fending for themselves below was AMD and Cyrix. Because of Intel's mass, these two companies were competing for the low-end market share. With the creation of the PIII (Celeron), Intel entered the low-end market, which basically knocked Cyrix out of the game. Because of AMD's quick growth, revenues, and quality management early in its life; they were able to hold on to market share and stay alive. Since then, AMD has been able to grow and take market share from Intel. AMD became focused on making quality processors while delivering them to consumers at low prices, slowly building there power to compete with the speed and performance of Intel. According to PCMechanic, the road for AMD has not been made easy by Intel. Once AMD's processors began to rival the Pentium line, Intel had to cut their prices. Since AMD already had low-prices, Intel wasn't happy with the results of their price cut. As stated early, Intel is a massive company and massive companies are able to throw their weight around. This is when the claim that Intel told the companies that make AMD motherboards to stop production, or Intel would cut them off of their chips. AMD has now filed in court a suit against Intel for having a monopoly on the industry. With these trends and the current growth of AMD, Intel could be in trouble in other areas than just the court.

Current Trends

Throughout the years it just seems that AMD's price for performance has completely outmatched Intel. A quote from the EE Times about microprocessor market share is, "The firm noted that in October, processors from AMD (Sunnyvale, Calif.) were in 49.8 percent of desktop and notebook PCs sold, compared to 48.5 percent from Intel (Santa Clara, Calif.)." Although this is a minor win in the industry, it is still a win none the less. We have to remember that Dell is the #1 computer manufacturer in the world, and currently Dell uses Intel processors. So we can't expect AMD to ever have the majority of market share, can we? Well it looks like there have been talks about Dell switching to AMD processors sometime here in the near future, and that could play a major role in the market share switch. Aside from speculation, there are a few things that we can see by looking at each companies numbers. Both are public companies with Intel being on the NASDAQ and AMD on the NYSE. Intel is obviously a much bigger company than AMD, but how much bigger? Well, one way to find out how much a company is worth is to calculate their market cap. The market cap is the number of outstanding shares (common), multiplied by the stock price. According to this calculation Intel is a $128 billion company, while AMD is a $17 billion company. We can see that AMD has a lot of room for growth, especially with the new and improved processors that are being produced. Rich Brown is the Senior Associate Editor for CNet.com, which currently did a desktop rating for Intel and AMD's new dual-core products. In this head-to-head battle, there were 7 different categories to be graded on. These categories were: (1) day-to-day computing, (2) gaming, (3), multitasking, (4) photo editing, (5) MP3 encoding, (6) video encoding, and (7) price vs. performance. According to CNet.com, AMD not only beat, but crushed Intel in all of these areas. All 7 of these reasons and more are why Dell and others are considering switching to AMD processors.

Expectations for the Future

I believe what the future holds for AMD is growth and this can be seen in many ways. Earlier we discussed what a company's market cap was and how it is attained. With a market cap of almost $130 billion, Intel is reaching a point of maxing itself out, especially with a company like AMD on their heels taking away market share. AMD's market cap being at only $17 billion leaves a lot of space for growth. Instead of looking at the market caps we can look at what both companies stocks have done over the last three months. Over the last 3 months, Intel's stock has gone from $23.50 to $21.25; this is about a 10% drop. AMD's stock price over the last 3 months has gone from $23.00 to $41.80; the price has almost doubled. The stock market is very volatile but it can give us insight into the future of a company. Hopefully this growth is an insight to an emerging powerhouse in the microprocessor industry.