After several years as an Intel’s follower, AMD had finally achieved the market recognition of a superior product for the Server and Workstation Segment and, as a consequence, is gaining market share at Intel’s expenses. Faced with the need of increasing volume, AMD considers essential to leverage the success obtained with Opteron to increase market share in other segments. The analysis of the data presented in the case indicates that there is still volume to make in the Server Segment and important issues to address in this same segment. We can also conclude that there is a high probability of failure in succeeding in other segments. For these reasons, AMD should focus in its key segment in the short-term and, only after consolidating its market position in this particular segment and establishing the value of AMD’s Brand, consider a major strategy to expand to other segments.
AMD is present in the B2B market with little interaction with the final consumer. Its costumer basis is composed by the OEMs, according to the following segmentation: Segment Server And Workstations Desktop Higher-end Business Mid-range Business Lower-end Business Higher-end Business and Consumer Mid-range Business and consumer Lower-end consumer Higher-end Business and Consumer Consumer Lower-end Consumer
Dell, HP, IBM, Sun Dell, HP, Lenovo Fujitsu, Gateway Dell, HP, Lenovo, Fujitsu
AMD has gained its space in the server and workstations segment but there are still some major problems to address in its customer’s purchase process in order to increase its market share: • There is a power relation between Intel and the Key Customers that influences the purchase process. Since Intel is the major supplier in all
segments, the customers are afraid of retaliation from Intel if they buy from AMD; Although there is a high awareness from customers on AMD products, there is low familiarity with the product line and even lower purchase consideration in the market; Though AMD is reaching CIOs and IT managers, there is still the need of engaging the CFOs and CEOs; The impacts of working with more than one supplier are significant for the OEMs, since it increases complexity of their business, and, therefore, while their costumers keeps buying their products with Intel’s microprocessors there is no real need for changing this behaviour.
Although there is no data to take conclusions on the desktop and mobile segments, there is enough data to estimate Market Demand for the Server and Workstations segment. As we can see in the picture below, though at a decreasing rate, the market demand for servers is increasing for the last three years.
Note: Data obtained from case’s Exhibit 6. Assuming an increase slightly lower than the verified in 2005, and keeping all other variables unchanged, we obtained the following estimation of Product Demands for 2006:
Market-Demand AMD-Market-Share Intel-Market-Share AMD-Total-Units Intel-Total-Units
2002 2701 8% 92% 216 2485
2003 3370 4% 96% 135 3235
2004 4172 7% 93% 292 3880
2005 4793 15% 85% 719 4074
2006 5416 24% 76% 1300 4116
Note: the value for 2006’s market demand assumed a 14% increase in Servers shipments. The presented market shares are calculated means from case’s Exhibit 2b and the expressed units are in thousands.
The data analysed showed an interesting change in OEM’s servers segment that may impact AMD futures decisions regarding this segment. As we can see in the picture...