AMD celebrates record market share numbers

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AMD celebrates record market share numbers

Chicago (IL) – Mercury Research today released its annual market share numbers for the x86 microprocessor market, which could be considered the icing on an especially delicious cake for AMD in 2006. AMD gained market share year-over-year, while Intel lost. But, AMD faces challenges that may the impact of its growth.

In plain numbers, AMD finished the fourth quarter of 2006 with a market share of 25.3%, up more than 8% over Q4 2006, in which the company held 21.4%. Intel, meanwhile, dropped about 3.4% points from 77.0% to 74.4%.

While these numbers indicate an all-time high for AMD and a record low for Intel, there is, of course, more than the plain fact that one company gained and the other one lost. Mercury Research declined to provide detailed information below the top-level numbers, but eagle-eyed readers may have noticed that AMD in fact gained more market share than Intel lost and both companies now control a greater share of the market than before.

According to Mercury Research, Intel lost 2.6 percentage points, while AMD gained 3.4 points. Dean McCarron, principal analyst of Mercury Research, told TG Daily that the difference of 0.8 points was lost by Via. Compared to Q4 of 2005, in which AMD and Intel held 98.4% market share in the x86 market, the number of 2006 climbed to 99.7%. One contributor to that overall shift was Apple, which transitioned from PowerPC to x86 Intel processors over the course of last year. For Q4 2006, that means that Intel had a new customer that pushed more than 1.6 million x86 processors into the market.

However, those 1.6 million new processors were not enough to offset AMD’s gains. McCarron mentioned that AMD not necessarily profited so much from new customers such as Dell and Lenovo, but received “significant contributions” in terms of market share from existing customers such as Hewlett-Packard and Acer.

Not surprisingly, AMD is proud of this achievement, which resulted in a dramatic change in the processor landscape in 2006 and brought us what can be considered one of the most dynamic landscapes in the microprocessor industry in at least one decade. AMD’s PR department highlighted that, as of Q4 2006, AMD holds an impressive 64.5% share in the multi-processor x86 server space. Also, AMD said that Intel “now faces an onslaught of new AMD technologies, such as native quad core Barcelona in servers and Agena in desktops, or 20-25% improvements in battery life for the upcoming mobile “Hawk” platform.”

However, while AMD can still claim market share gains, the most recent quarter showed that tougher times are ahead. The company lost $574 million in Q4 2006. $550 million were directly related to the acquisition of ATI, but the company said that it found itself in the midst of a cutthroat pricing war with Intel, which has stalled the growth of microprocessor revenue growth and eroded the company’s margins. The Opteron processor, which had pulled AMD from one record quarter to another over the past 18 months, showed flat shipment growth in Q4 and “significant” decreases in average selling prices. This development has been attributed to the increasing availability of Intel’s Xeon dual-core 5100 and quad-core Xeon 5300 server and workstation processors.

At least as long as the firm’s native quad-core processors are not available, the company may face a continuing decrease of average selling prices. Server and PC vendors that once relied on only one processor supplier are now buying from AMD and Intel in an effort to get the best products and to negotiate lower prices. For example, Intel felt that impact from Dell in late 2006, while Sun Microsystems recently announced that it will begin offering Intel dual- and quad-core servers in addition to its existing AMD Opteron portfolio.

Henri Richard, who is heading up AMD’s sales division, recently described the Q4 2006 competitive scenario as “very severe” with “headwinds” making the closing of the largest deals more difficult. He said that he expects the first half of 2007 to remain “extremely competitive.” However, company representatives said that they intend to stay the current course and indicated that the company is not willing to give up market shares in favor of higher CPU average selling prices.

Intel, on the other hand, showed first signs that it has turned the corner in the most recent quarter. Gross margins climbed, according to the company, as result of higher microprocessor sales and higher average selling prices.

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