Processor shipment market-share numbers may look bad for Advanced Micro Devices Inc. (AMD), but they do not paint the complete picture of the company's third quarter, according to Dean McCarron, principal analyst at Mercury Research Inc., which released the figures Wednesday.
Intel Corp. once again held a commanding lead in the number of processors shipped into its reseller channel, with 86.8 percent of the overall shipments, up from 82.8 percent in the second quarter, and 79.2 in the third quarter of 2001. AMD's percentage of shipments fell to 11.6 percent of the market, down from 15.6 percent in the second quarter, and 20 percent in the year-ago quarter.
The drop in second-quarter shipments can be attributed to AMD's decision to ship fewer processors in the third quarter to relieve a large oversupply of its processors in the channel, said McCarron, who is based in Cave Creek, Arizona.
"AMD's momentum is not as strong as it was a year ago, by any measure. But they are not losing momentum the way the third-quarter figures would indicate," he said.
Both Intel and AMD experienced inventory problems this year, as they increased production following a record first quarter in terms of shipments, McCarron said. The first quarter is typically a slow one, as PC buying drops off after the holiday season, but the strong performance in this year's first quarter had Intel and AMD's customers talking about a resurgence of the processor and PC markets, he said.
However, it became clear in the second quarter that a recovery was not going to take place anytime soon, and it's very difficult to quickly cut output levels, McCarron said.
Resellers for both companies were left with processor stocks that weren't quickly used in PCs. Intel is better equipped to handle this type of downturn, since it ships an average of about 35 million processors a quarter, and can absorb hiccups in the channel, McCarron said. The oversupply of Intel processors was not as severe, and that coupled with strong shipments of Intel-based chipsets and motherboards, meant the Santa Clara, California, company was not as affected, he said.
But AMD, with average quarterly shipments of about 7 million processors a quarter, was faced with a far greater percentage of its processors stuck in the channel. The company needed to make a decision to cut production in the third quarter, allowing resellers to use the chips they already have to build new systems, he said.
Had PC manufacturers and other resellers stopped building AMD-based systems, the Sunnyvale, California, company would be in serious trouble, McCarron said. But shipments of chipsets and motherboards for AMD processors were relatively strong in the third quarter, representing 16.7 percent of the market. This meant that manufacturers continued to build PCs with the AMD processors they had in stock, and remain committed to the AMD platform, he said.
"The fourth-quarter shipment numbers should be a more accurate representation of PC manufacturing habits," McCarron said. "Whenever you have an inventory bubble, it creates havoc with the inventory statistics."
Still, the cut in production showed up in AMD's bottom line. The company's third-quarter revenue declined 34 percent from the third quarter of 2001 to US$508 million, resulting in a net loss of US$254 million. [See, "AMD, Transmeta Q3s reflect chip market doldrums," Oct. 16]