Will Hammer be too late to save AMD?
Posted by configure on 07 October 2002 - 05:59 · 1 comment & 230 views
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The industry is certainly in hard times. It's currently shuffling through its eighth consecutive recessionary quarter, making this the longest downturn it has ever experienced. Stocks are down, sales are down, profits are down if you're lucky - losses are up if you're not.
And there's no doubt AMD is having a particularly tough time of it. This week it adjusted its Q3 sales forecast downward, having twice revised its Q2 sales expectations. It's in its fifth loss-making quarter and doesn't expect to get back into the black until sometime next year. But if it can't get its sales forecasts right, how can we trust its earnings estimates?
It doesn't look like we can trust its shipping schedules either. Clawhammer, the Athlon implementation of AMD's 64-bit x86 implementation, was due to ship at the tail end of this year. Now it won't appear until three months after that, in Q1, and, as this very organ reported this week, isn't likely to make it into machines people can buy - become revenue generators, in other words - until the second half of the year.
"Things have really gone downhill financially for AMD," mourns Rick Hodgkin over at Geek.com. "They bet the farm on Hammer, and now it seems they may lose the farm."
Maybe not. Here's something else the pessimistic Garry Smith notes: "The interesting thing is that companies don't fail during the downturn. Most companies fail during the upturn as a result of things they did during the downturn."
In other words, companies can weather recessions - it's coping with the recovery that matters. As Motorola is desperately attempting to do, they cut costs, enhance efficiencies and focus on getting ready products people will want to buy not today buy tomorrow, when they're happier to spend the money.
Today there are fewer and fewer reasons to upgrade to top-of-the-range processors. For many people, last year's chips provide enough horsepower for this year's apps. My three-and-a-half year old 400MHz PowerPC G3-based Mac is doing very nicely, thank you. Only recently encountered trouble running Medal of Honor smoothly has given me cause to consider upgrading. But one occasionally run app isn't enough to persuade me to hand over the cash for a new G4.
Windows and Linux fans use different chips, but the principle's the same: for an awful lot of people, there's little apparent value in 'upgrade' processors like the Athlon XP 2400+, 2700+ and 2800+.
Clawhammer, however, isn't an upgrade processor. Like the chip that will become what Apple calls the G5, it's a major, generational release. Buyers will sit up and take notice. It's the kind of product they will wait for. That doesn't make it recession-proof - buyers have to be willing to spend money - but it will be a good proposition when buyers become more confident.
Process problems may lie behind the Clawhammer delay, but all things being equal, the delay is good. AMD's fiscals - and those of other companies - show buyers aren't yet willing to invest in new systems - the time isn't right yet. That gives AMD breathing space to get Clawhammer right. And, as Gartner Dataquest's Garry Smith implies, the best time to do that is during the downturn, ready for the upturn.
Only then will we know whether AMD was right to bet the farm. If it's too early to release Clawhammer, it's also too early to forecast AMD's downfall.