In his argument, he put forth a bunch of impressive techno-speak that made AMD look like a star and Intel look like a bumbling idiot. Don't believe it. Intel is one of the strongest technology companies in existence, and it has more than enough resources to catch back up to AMD in the race to make the fastest chip available. Remember, Intel has an R&D budget six times larger than AMD, a much larger established base of customers, and a far greater manufacturing infrastructure.
This isn't the first time that AMD has had a fleeting technological lead against Intel. Many of Rob's arguments would have sounded just as good in 1999 when it was the K6 versus the early Pentium III. And look what happened -- Intel went on to earn over $7 billion while AMD was awash in red ink. No wonder Rob didn't use a single word in his initial argument to talk about AMD's financial statements!
Actually, the war between Intel and AMD has been going on for the last two decades, and Intel is the clear winner. In my initial argument, I showed you how Intel has kicked AMD's tail financially in the past couple years. Now let me shed some light on the ultimate scorecard -- the balance sheet.
($ billions, at end of Q2) AMD Intel Cash 1.1 13.2 Total Assets 5.0 48.5 LT Debt 1.5 0.8 Total Equity 2.4 36.6AMD didn't come to have more debt than cash by being a consistently profitable company. Rather, it got to where it is by every few years coming along with a design that temporarily harvests some cash flow before Intel squished any hopes of sustained profitability.
On another scorecard, retained earnings (which is basically all the company's accumulated profits and losses over the years), AMD has retained earnings of only $1.2 billion, while Intel has some $28.7 billion. And this is with Intel spending tens of billions of its retained earnings to repurchase its shares!
To close, one product does not make a company, and one battle does not win a war. Rob did an excellent job of describing some of AMD's temporary advantages. But remember, these are just temporary advantages and are not sustainable. While historical results do not guarantee of future results, I am a strong believer that they are a pretty darn good indicator. Look at the bigger picture and see AMD for what it is: a weak second fiddle to Intel. Do you really want to own a company that is in Intel's sights?
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