Intel Poised to Launch Price War as Rival AMD's Barcelona Processor Enters the Market Ahead of Upcoming Shopping Seasons

AMD's reliance on Barcelona to revitalize their lagging competitiveness couldn't come early enough against longtime rival Intel, who over the past year has grown accustomed to exploiting AMD's weakened executions following a stellar rise that saw the number two microprocessor maker rise to prominence the past few years.

Despite last year's success in landing Dell as a key new channel customer after having been allied to Intel-only for years prior, AMD haphazardly left an opening for an eager and newly roused giant in Intel. Intel's current exploit, timed to preempt the upcoming release of the quad-core Barcelona processor, is to cut their own prices by 50% in an attempt to supersede AMD. Alongside speculation that the release date of Barcelona will be delayed until September/October, if true, the move could hurt the still tiny foothold in the marketplace.

Barcelona, AMD's ace-up-its-sleeve, would have furnished greatly more sophisticated architecture to battle Intel and drew the harsh, prophylactic response. The resulting price differences between competing processor families will effect current computer manufacturers using AMD, such as market duopolists HP and Dell. And because PC counterpart Macintosh from Apple, with a newly revitalized operating system in Leopard launching simultaneously on Intel architecture, will be using the newly economical Intel chips, consumers already leaning towards Apple and Mac OS 10.5 Leopard could impact other competitors such as Microsoft's Vista, already forced to compete with its own predecessor in Windows XP. With back to school and Holiday seasons rapidly approaching, even computer retailers like Best Buy and Wal-Mart are looking at which computers to stock with a lot riding on one wrong choice.

Since Intel released Xeon, AMD Opteron suffered a rather unexpected decline in market share from 13.3% in Q2 2006 to 8% in Q1 2007. We'd expected AMD's share to moderate or level off by the time Intel improved its dual-socket Xeon platform in mid 2006, but we hadn't anticipated the decline we've seen, commented analyst Alex Herrera. The resurgence of Intel's Xeon put an immense amount of pressure on AMD to deliver profitably with Barcelona, which has better performance features than Xeon.

Now, with as little as a month left until the launch, AMD has kept the Barcelona chip a bit of a mystery from the marketplace. So with no concrete performance specifications for the chip, Intel somewhat anxiously jumped the gun with its 50% cut in its own quad-core processor family. Proving the best defense is a good offense, could Intel's move suggest that kicking a competitor when they're down can prove a valid rationale that sums up Intel's endeavor to maintain and regain the marketshare they lost to AMD over the past few years. Indeed, Intel almost simultaneously announced a new initiative with Google to push energy efficiency, one of the key differentiators AMD has concentrated on as they took share from Intel in data centers and mobile computing environments alike.

If Intel's continued pounding on AMD's hurt profits and Wall Street responds as expected, someone in the private equity game might just decide to take them private. And, since AMD has been beaten up by the market recently after a solid few years of gains running parallel to gains in marketshare, despite its solid products and a disruptive business model, private equity could offer AMD the strength, flexibility and attitude to seek revenge on its larger competitor bereft of such similar options.