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Brian Caulfield, 04.16.07, 9:00 PM ET
Burlingame, Calif. - The tables have turned in the contest between Intel, the world's largest chip maker, and its scrappy rival, Advanced Micro Devices.
A year ago, Intel (nasdaq: INTC - news - people ) was staggering: AMD's (nyse: AMD - news - people ) hot-selling server chips were burning a hole in one of Intel's most lucrative businesses. Intel's efforts to push beyond computer processors and into television and cellphone chips had failed. And Intel's stock price took a nose dive.
Since then, Intel Chief Executive Paul Otellini has taken the fight to AMD by focusing on the one spot where AMD had hurt it most: the so-called "x86" chips built by both Intel and AMD that power most of the world's PCs, servers and notebook computers. A new wave of x86 chips introduced by Intel last year has analysts giving the technology edge to Intel. That pressure, combined with price cuts from Intel that forced AMD to follow suit, has bruised the upstart, forcing multiple earning warnings and a restructuring plan.
Now Intel is trying to press its advantage. At the company's developer forum in Beijing Monday, Intel detailed 20 products flowing from its new focus on the x86 design. The first to hit will be Penryn, a series of processors based on the so-called Hi-k metal gate silicon technology that Intel is touting as the "biggest breakthrough in transistor technology in the last 40 years." The new technology will reduce electric current leakage in transistors, allowing Intel to build processors that run faster using less power.
In the meantime, Intel is already benefiting from its renewed focus. If the Santa Clara, Calif.-based company is hitting its marks, it will announce continuing operations earnings of 22 cents a share Tuesday afternoon, while recording about $1.3 billion in profit on sales of $9 billion.
Those are the numbers that will make headlines. But here's the metric to focus on: gross margins. Intel has told investors to expect gross margins of 49% of sales. In the past, Intel has seen gross margins as high as 62%. That difference comes thanks to AMD. Any sign that margins are slipping will signal that the fight with AMD is still taking a toll.
Meanwhile, AMD is already feeling the squeeze. Last week it slashed its first-quarter sales forecast to $1.225 billion (investors had expected $1.55 billion) and announced it will cut roughly $500 million in 2007 capital expenditures (see "Is AMD Giving Up?"). On a continuing operations basis, analysts now expect AMD will report a loss of 47 cents per share Thursday.
It's hard to fault AMD. Most of its woes are what follow from waking a sleeping giant. But it hasn't helped its cause by gunning for market share last year just as Intel was rolling out a wave of advanced new chips. Over the long haul, AMD's $5.4 billion acquisition of graphics chip specialist ATI last year may help as Intel and AMD race to cram graphics and other capabilities into x86 chips. But 2007 belongs to Intel.
Burlingame, Calif. - The tables have turned in the contest between Intel, the world's largest chip maker, and its scrappy rival, Advanced Micro Devices.
A year ago, Intel (nasdaq: INTC - news - people ) was staggering: AMD's (nyse: AMD - news - people ) hot-selling server chips were burning a hole in one of Intel's most lucrative businesses. Intel's efforts to push beyond computer processors and into television and cellphone chips had failed. And Intel's stock price took a nose dive.
Since then, Intel Chief Executive Paul Otellini has taken the fight to AMD by focusing on the one spot where AMD had hurt it most: the so-called "x86" chips built by both Intel and AMD that power most of the world's PCs, servers and notebook computers. A new wave of x86 chips introduced by Intel last year has analysts giving the technology edge to Intel. That pressure, combined with price cuts from Intel that forced AMD to follow suit, has bruised the upstart, forcing multiple earning warnings and a restructuring plan.
Now Intel is trying to press its advantage. At the company's developer forum in Beijing Monday, Intel detailed 20 products flowing from its new focus on the x86 design. The first to hit will be Penryn, a series of processors based on the so-called Hi-k metal gate silicon technology that Intel is touting as the "biggest breakthrough in transistor technology in the last 40 years." The new technology will reduce electric current leakage in transistors, allowing Intel to build processors that run faster using less power.
In the meantime, Intel is already benefiting from its renewed focus. If the Santa Clara, Calif.-based company is hitting its marks, it will announce continuing operations earnings of 22 cents a share Tuesday afternoon, while recording about $1.3 billion in profit on sales of $9 billion.
Those are the numbers that will make headlines. But here's the metric to focus on: gross margins. Intel has told investors to expect gross margins of 49% of sales. In the past, Intel has seen gross margins as high as 62%. That difference comes thanks to AMD. Any sign that margins are slipping will signal that the fight with AMD is still taking a toll.
Meanwhile, AMD is already feeling the squeeze. Last week it slashed its first-quarter sales forecast to $1.225 billion (investors had expected $1.55 billion) and announced it will cut roughly $500 million in 2007 capital expenditures (see "Is AMD Giving Up?"). On a continuing operations basis, analysts now expect AMD will report a loss of 47 cents per share Thursday.
It's hard to fault AMD. Most of its woes are what follow from waking a sleeping giant. But it hasn't helped its cause by gunning for market share last year just as Intel was rolling out a wave of advanced new chips. Over the long haul, AMD's $5.4 billion acquisition of graphics chip specialist ATI last year may help as Intel and AMD race to cram graphics and other capabilities into x86 chips. But 2007 belongs to Intel.
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