What do you call the largest semi conductor company in the world that has 16 billion cash? The 800 pound gorilla? That or Intel. Intel was riding high making cpu's for computers. The cpu is the brains of a computer with hundreds of millions of transistors. With no competition Intel was charging big bucks for their chips and slowing down on innovations. After all why innovate when you don't have to.
Here is where the story takes a twist. AMD who made inferior cpu's had acquired some technology years earlier and created a new chip called the Opteron. Laugh at the name, but this was a killer chip. It made Intel turn white as a ghost and made DELL quit their exclusive relationship with Intel! This chip was twice as fast as any chip Intel had and it looked like it could scale farther. Intel was backed into a corner and wondering if their market share would disappear along with their company. AMD had a new FAB coming to make as many chips as Intel. Intels worst nightmare had come true.
Paul Otellini, CEO of Intel, must have gone berzerk. He knew what was at stake. He announced massive layoffs and sales of any company not connected to Intels core business. He then announced new chips that would be faster than AMD's Opteron even though he just had designs on paper.
Intel had one ace in the hole. Their Israeli engineers who made the mobile cpu. Intel charged them with making a new chip that would run faster and cooler than the Opteron. Intel would spend 8 billion dollars to get the lead back from AMD. Money was no object. The Israeli engineers worked day and night and created some really impressive chips.
Meanwhile AMD had made huge miscalculations themselves and scrapped their new chip. AMD would have to respin the chip and lose a whole year. This year was all Intel needed to get back into the game.
Then Otellini used his huge muscle and top notch research facilities to upgrade his fabs to the latest technology. Nobody in the world has better research and technology than Intel. Intel crammed huge gobs of cache on their chips and used new smaller transistors to make the chip run cooler. Otellini had done it! He had spent billions of dollars but he had saved Intel. Intel was very close to going out of business if they lost their cpu market share.
Now Intel would recognize AMD as a true competitor and a formidable opponent. This was not good for AMD. Intel released millions of new chips running faster than anything AMD had and took huge market share from AMD. AMD lost billions. AMD also acquired ATI for 6 billion and had to write that off in a failed attempt to make a cpu/gpu, that is graphics and cpu on one chip. Intel showed no mercy and further wailed on AMD. In boxing if you knock your opponent down you are not allowed to pick him up and rest him on the ropes so you can pummel him more. But that is what Intel was doing to AMD and I could hardly watch.
AMD can't sell the company due to patent legalities with Intel about who can make a cpu. So now AMD is going to sell everything that isn't nailed down and outsource their fab. Intel is once again sitting in the sweet spot and owning the best of everything. The one good thing for AMD is the computer makers won't let them go bankrupt as that would let Intel raise their prices to whatever they choose. So AMD is doomed to being propped up on the ropes and beaten to an inch of their life over and over again I'm sad to say. Every time AMD gets knocked down to the ground the computer makers will prop them up again and Intel will smile and start wailing on them again. Is this Alice in Wonderland or is this real. For AMD this is a very bad episode of the Twilight Zone.
If you own Intel stock, hold it. If you own AMD stock, sell it! If you own computer makers, sell them too. Say a prayer for AMD, they need it.
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Steven Fox, a jack-of-all-trades when it comes to life.
Steven loves sports, chess, nature, science, computers, stocks/investing,
and just being curious on how everything works. Steven loves helping people and
that drives his strong curiosity. Writing articles is a great way to share ones knowledge. Steven writes for United States Vice President and Sell Sheets
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