AMD gets some breathing room as price war with Intel cools

But firm must take advantage of new focus on features and performance

With Intel and Advanced Micro Devices reportedly backing off their long and bloody price war, a struggling AMD may be getting a little breathing room.

Since both companies have taken financial hits during their long-running price war, both companies have started shifting from price wars to chip features and performance, according to market research firm iSuppli. Dale Ford, a vice president at iSuppli, told Computerworld that in the past several quarters, despite strong unit sales, microprocessor revenues were flat or down because of the price war. "Now revenues are going up, along with unit shipments," he noted. "In Q3, revenues returned to healthier growth."

Dan Olds, an analyst at Gabriel Consulting Group, said the slowdown in the price war is particularly good news for AMD in the short term, because the chipmaker has been struggling recently to maintain quarterly revenue totals and market share. However, he added that AMD must take advantage of the change in focus in order to benefit over the long term.

"If AMD can't keep up with Intel's performance, they will be forced to compete on 'bang for the buck' and thus push their prices commensurately low in order to win business," he added.

Just last week, iSuppli reported that AMD had fallen off its latest listing of the world's top 10 chip manufacturers. Ford said that AMD's sagging numbers in the first and second quarter of this year pushed the company out of the top 10 and left it in the No. 11 spot.

In the report released on Monday, iSuppli reported that the price war has helped both Intel and AMD to gobble up more market share, with the combined firms claiming almost 93% of global microprocessor revenue in the third quarter.

"The combination of strong PC and server demand, combined with stable microprocessor prices, led to a prosperous quarter for both Intel and AMD," said Matthew Wilkins, principal analyst at iSuppli, in a statement. "Pricing trends were influenced by many variables, including the consistent strength in computing markets, Intel's rapid migration to its new Core 2 architecture microprocessors, and the increasing penetration of multicore products in the market."

The two microprocessor suppliers also gained market share at the expense of their smaller rivals, whose collective share of global revenue declined to 7.4% in the third quarter, down from 8.2% in the second quarter.

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Sharon Gaudin

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