Is effective the price war?

[Updated Jun 13]

An effective price war would be one in which lower prices make the competition to lose market share, or to lower its prices.

It is possible to assess whether a price war is being successful or not from the perspective of a normal citizen, we can just look at any store how the products are moving to have an idea. This method is not scientific, but other things equal, I don't see major reasons to think that the city where I live, Chicago, is not representative of at least the rest of the United States.

I have been a client of TigerDirect because I am very price-conscious, and I guess that TigerDirect is not famous for handsome quality but for cheap prices; thus, among the clients of TigerDirect Intel's discounts should be more effective than among BestBuy's or other suppliers. But this link tells us a different story: AMD processors have certainly taken a popularity hit because they have been pushed from the top sellers list #1 to #N position to the fourth, but the prices are about the same prices they had before while at the same time retaining a lot of popularity. What is very interesting about this list is that you can see for the first time in history that AMD prices are not half of an equivalent of Intel, but double, for an advancement of the brand recognition of 4x.

Of course that it is arguable that a Pentium 4 E. E. (Extreme Embarrassment edition) 3.2 GHz/800 MHz at 1050 would be the only counter example of a product not even up to an AMD FX-55 and yet much more expensive, but you can check the rest of the list: The Pentium Processors are finally being given their deserved price, that of crap.

Given that the prices of AMD products remain at the same levels, it only remains to be seen if the market share is holding its ground.

A member of the audience game us an interesting link to a "Dailytech" article in which it is detailed leaked information about steep price cuts plans for AMD processors for July 24, around the launching of Conroe. This is yet another sign that finally AMD is "feeling the pressure", bad omen for this quarter's results.

So far, my take on the July earnings report is as follows: AMD beats the expectations by ample margin (yet again), around $0.34 EPS, but Guidance will be un-optimistic, and perhaps we will have to bear the acknowledgement of one or two market share percentage points lost during the quarter, effectively ending all the momentum growth in the consumer segments and taking the share price to the $25 levels. Nevertheless, it remains to be seen the resilience of the server market, remember that AMD has technology to keep growing in those segments. Thus, $25 would be an absolute bottom for me because the server part of the business has to increase what I think is the share price accounting only for consumer segments ($25).