Thursday, December 21, 2006

A prediction for Intel & Apple

Here's one for you guys...I'm yanking this completely out of my imagination. Since it's Christmas, I figured what the heck, there's no harm in asking:

In 2007 Apple will launch an "Ultra Mobile PC" based on Intel technology. This product will potentially come around the same time as their IPTV set top box. It will coincide with the launch of a full fledged video/movie service from Apple. Possibly, Apple will take some of the technologies in Viiv & Robson (instant on/off; multi users, flash memory for faster boot and potentially storage of content for CE functionality w/o having to load the OS; etc). It will come with a remote control. If all my fantasies were to come true, it will have a docking station connected to my TV/home entertainment system so that I can just dock it when I'm home and use it as my movie/music player. And if I'm specially good, Santa will throw in high bandwidth wireless connectivity so I can download movies and music from iTunes anywhere in the house.

What do you think...? Is Santa (or perhaps Steve) listening?

Wednesday, December 20, 2006

AMD heading for a GAAP loss

Back in September I had forecasted AMD would be heading for a GAAP loss in Q1 or Q2 2007:

Having seen Bob Rivet's presentation at their recent Analysts Day, I think it's time to reiterate that prediction for the following reasons:

1. While AMD eked out a 56 million $ profit in Q306, ATI lost almost the same amount. does not look like ATI is going to win back market share from Nvidia in a hurry.
2. Their Q306 adjusted debt to capital ratio is at 37%. Of their plans to bring this down, I think "Improvements in working capital" & "Using excess cash flow" are questionable as they seem to make the assumption that they will continue to enjoy the same kind of profits they did in 2006. We shall have to wait and see on this one.
3. There is a 380 million $ acquisition related (intangibles/synergy related costs) write down which Rivet says will be front end loaded in 2007.

All this is going to impact their bottomline. I repeat - AMD is heading for a GAAP loss in either Q1 or Q2 2007. Intel on the other hand seems to have dodged the bullet the good Doctor Sharikou has been asserting and it looks like yet again one of his predictions is going to fall flat...since it is highly unlikely Intel will have a GAAP loss in Q406. Which incidentally was the fall back position when they did not have a GAAP loss in Q206 as he had originally predicted.

Google and Apple are on a collision course

Some time ago I wrote about how Apple was determined to become the Walmart of digital content:

After Google's 1.4 billion $ purchase of Youtube, I now believe Apple's biggest threat long term will be Google. Why...? It's because Google wants to ensure they own every online touch point possible to sell advertising. But not just any advertising. Google's promise is to sell effective advertising because it's targetted. In order to do this, over the long term Google will need to go significantly beyond regular search and own the digital entertainment content touch points. And not just "user generated content" or the boring television from the 70's they started out with on Google video. They will need to own what's hot and what's new. And this is what Apple wants to own too. The difference is Apple wants to sell you the content and Google wants to sell advertising on the content.

So either these guys are heading for a show-down, or they are heading to a partnership which shakes us all down by either selling us content or giving us content but selling advertising on that content. Perhaps now Otellini's presence on the Google board and his willingness to bend over backward for Steve are making a little sense. I thought it was only due to the fact that the 60,000 google shares he got are worth significantly more than his Intel holdings but perhaps I was wrong.

Thursday, December 14, 2006

4x4 - it's a Hummer...not a Merc

I was reading this letter on The Inquirer (before you jump for your guns - I'm going to slay their opinion shortly) about how the 4x4 is the PC equivalent of a 400 horse powered Merc and not a Toyota and I had a violent convulsion of disagreement resulting in this post:
(Pls read the article before reading the rest of the post)

Unfortunately, the dynamics and business models of the car business and the microprocessor business are two different least this point in time (I'll talk more about how they could be converging in a later post).

1. The car industry is hyper-segmented with multiple models serving niche markets. A couple of hundred thousand units make a product/brand a viable proposition due to how their design and manufacturing allows them to optimise across. Further more, cosumer decision making works across multiple axis from speed, mileage to all the bells & whistles inside the car which allow easy brand/product differentiation.

The microprocessor business however has two primary vectors of comparision. Performance and now power consumption as a recent phenomena. Hence, everyone is expecting more performance with all the benefits of reduced power consumption (lower electricity bills, less heat, smaller form factors, etc).

2. In 2005 the Mercedes car group sold ~1 million units. Of which their top of the line models contributed only 72k units. In the microprocessor business the same does not hold true. At least for now. If AMD were to operate at the same scale as Mercedes and sell only 72k of it's top of the line product then it would be meeting with it's debtors pretty soon.

Now, I know I'm pushing it a bit using these two as a comparision but it's to make a point. The business models and scale of both these industries is vastly different. Can you imagine someone walking into Hector's office and telling him they will sell only 72k units of their top of the line platform.

3. The Merc is what it is because it is not only powerful, but also a thing of beauty. Unfortunately, the 4x4 is a loud, ugly beast. Which is why I think it's more a Hummer if we have to draw a parallel. Allows you to drive everywhere - on and off road but is expensive, pig ugly and guzzles gas faster than an 8 year old can eat candy.

The only bright spot for AMD if they follow GM's model is at least the sales of Hummer's seem to be increasing YoY. They've sold 65k of them so far in 2006.

Monday, December 04, 2006

Quad FX - or is it Quad just for effect

Reviews and pricing for 4x4 are out comparing it to Kentsfield. Here are some of them:

I'm not the right guy to dissect the technical details but there are two things I was expecting:

1. This will be a power hungry, large and loud beast of a system. Which is correct.
2. That this would be a hard kick in the performance cojones for Kentsfield. Which to my astonishment is not correct.

From a pricing standpoint...this thing is priced extremely agressively (in pairs):

2 x FX70 = $599
2 x FX72 = $799
2 x FX74 = $999

Considering the FX62 is at 713$, this is quite a steep price drop. However, the issues with the system price overall is the cost of the mobo and the fact that there is only one supplier - Asus. My hypothesis is that AMD knows at this point Quad FX is only a marketing ploy. It is not a market winning solution until they bring out Barcelona. Hence, they do not want to enable all their partners at this stage until they have a better sense of whether they want to market Barcelona by itself or as part of Quad FX.

Having seen that the performance is not spanking Kentsfield, I think Intel will now accelerate their quad core ramp. They will bring pricing further down in Q107. Their intent will be the same as it was on dual core. To make quad core mainstream faster than expected and hence place supply and capacity pressure on AMD. Their hope will be AMD cannot ramp Barcelona fast enough and Quad FX is hardly a mainstream desktop solution. Hence, customers (starting with channel I guess) will once again feel AMD is unable to meet their needs.

So do expect Kentsfield to drop below 999$ in Q1. I'd assume this will be accompanied with a new SKU with a higher clock speed just to land a 1-2 punch on AMD.


Anandtech in his review shows a Quad COre at 2.4GHz in Q1 priced at $851. So Intel will bring Quad Core mainstreamish fast.

Intel Core 2 Extreme QX6700 2.66GHz 4MB per 2 cores $999
Intel Core 2 Quad Q6600** 2.40GHz 4MB per 2 cores $851
Intel Core 2 Extreme X6800 2.93GHz 4MB $999

I suspect the scenarios AMD is playing with right now are:

1. If Barcelona kicks Conroe's performance and perhaps more importantly performance/watt ass then 4x4 will die an unnoticed death.

2. However, if Barcelona does not completely wipe the floor with Conroe. Even if it's better but only marginally better then AMD will increase the focus on 4x4 and try and bring platform price and thermals down. They may even introduce dual core flavours of Barcelona (not sure if this is already on their public plans) to drop into 4x4 just as Intel is potentially introducing single core versions of Conroe for the lower end of the market.

Of course, everyone (including me) are assuming Barcelona will wipe Conroe off the map. But I was also expecting 4x4 to do the same to Kentsfield and that is not the case so let's assume nothing till we see it for ourselves.