fpg: quite a few faulty assumptions...
Why didn't Dell use AMD immediately? They had very strong ties to intel, they had BUILT their business on being Intel only. AMD was still very much a question mark in 2002. Shifting their manufacturing to a new socket and new cpus would COST MONEY. And as it turned out all the question marks WERE RIGHT> AMD was unable to support Dell and HP. HP was able to build a decent business in the lowend. But it was all price based. And Dell was doing fine in 2002. It wasn't even a question till 2006.
You ask why is it so important to keep business? Really??? So intel is not allowed to compete for business...I see.
"Because AMD would take share, make money hand over fist, use it to build capacity, and become an even larger threat to intel"
AMD can only do so much within a short time period. FABS take years to build. They are absolutely limited by fab capacity in the short term. They DID gain MSS and make money during this period. THEY DID EXPAND capacity even though AMD is a pretty poor business drowning in debt and bad decisions. Even when they manage to be successful they have never made money hand over fist and/or expanded capacity profitably. They
always boom/bust and flame out big time when demand softens. Because those same fabs that cost 2 billion plus go obsolete in a couple years...and AMD has never been good about managing their business in down times.
Another faulty assumption: AMD would raise prices. You really don't understand the power that people like HP and Dell have. They absolutely WILL NOT let you raise prices because you are constrained if they can just go to intel and get product. AMD GIVES AWAY product to HP regularly to keep the relationship going. And HP lets them:P And if you think that AMD does not give away rebates, meet comp and give away market funds in the millions with no strings attached you are kidding yourself. The PC business is ultra low margins now and UBER competitive. Do you remember when Intel tried to raise prices on flash? AMD ate their lunch(one of the few times and thankfully on a low margin commodity product:P).
