Tuesday, December 11, 2007

AMD - thermal consumption heading north

Read this - pretty self explanatory and not too shocking. After all why change from TDP to ACP after so many years. It's just deceptive marketing to hide the truth about a sad product line up.

In further evidence of their "head in the sand syndrome" - they hired a new high level VP when one would think they should be cutting costs till they stage some kind of recovery.

AMD is going down...

Friday, December 07, 2007

Why isn't it surprising

With everything else heading backward, it's not surprising AMD's roadmap is doing the same. AMD plans to bring more K8 models out while reducing it's K10 line up.

Well - why would anyone in their right mind do this? No reason actually. But remember, we're talking about someone who is not in their right mind currently. My Ruiz continues to be obsessed with unseating Intel and getting to 30% market share.

How does this help? It's clear that AMD is having problems ramping K10 in volume and at the bins they want. So now Hector is going to have a yard sale of K8s. He needs to keep his factories full. And since K10 is not competitive performance wise or manufacturing wise, he is trying to whip up the speeds on K8 in an effort to try and compete with this outdated technology. Undoubtedly, his next step will be to drop prices on these parts so he can sell in volume to keep all the excess capacity he has built full.

But this is going to be tough. Why - even people in emerging markets where price is more important will not buy yesterday's technology. So he's really going to have to drop prices and even then his customers will find it tough to sell this old technology.

Another desperate and not so smart move from the boys who wanted to be men too soon.

Thursday, December 06, 2007

AMD stock hits 52 week low

AMD stock is now $ 8.91 due to an analyst lowering his rating. If they deliver a fantastic quarter as defined by some combination of the following:

1. Revenue grows faster than the market (without a significant inventory bloat)
2. ASPs flat to up.
3. Gross margins increase
4. Net loss decreases significantly to the region of 100 million $ (due to an improvement in business conditions and not just cost reductions).
5. The forecast improved momentum into Q108.
6. They gain market share from Intel (and not just from the other miniscule x86 players).

At which point the stock may return to around 10-11$. If not, the stock is heading south of $8 and toward 7 bucks. And Hector will be "monster.comming" his way out soon after.

Intel stock today is $27.22...close to it's 52 week high.

Friday, November 30, 2007

Global semiconductor rankings

Alas - sad news for AMD and good news for Intel. iSuppli released it's preliminary results of the world's largest semiconductor companies and Intel outgrew the industry with 7.7% growth while AMD declined by 22.7% and also dropped out the top 10 after being in there for just one year.

This is yet another catalyst for a change at the top at AMD. Hector was apparently in Bangalore opening a new R&D centre. If I were him, I would be making sales calls 24x7 on his biggest customers.

Wednesday, November 28, 2007

And in the news today...

AMD is apparently pondering the purchase of Aegia.

This of course is a smart use of executive time when you have no cash in your pocket and a competitor who is coming at you like speeding train. But heck - let's sell out the company completely to acquire whatever we need because we're all so fixated on getting 30% market share.

It's no wonder AMD's stock hit a 1 year low all the way down to $9.80 a share. When you have them publicly contemplating folly like the above, of course investors are going to get spooked.

And my final whinge is Doug Freedman from ATR who downgraded the AMD stock. Saying there are no positive catalysts...

I contniue to laugh at how blase some folks on Wall Street can be as I point you to these post I had written some time ago chronicling how the gurus on Wall Street get to call the market with little impact:

Post 1

Post 2

I had vented when Mr Freedman called a Buy on AMD at 14 odd $ back in May. So read the posts and now think about how much money you would have made or lost had you followed the recommendations.

The primary fall out of AMD's stock going sub 10$ is the board will have to consider replacing Hector. Now don't get me wrong. I like Hector. I think he has cojones and he took on Intel and gave them a fight that must have scared them half to death. But he let it go to his head. He got to focussed on breaking Intel's market share and getting to 30% which he must have though is the tipping point. What he should have done is focussed on building a profitable and sustainable business and the market would have rewarded him with the market share.

Alas, it is human nature to want to touch something shiny...specially when you think it's soooooo close. But if you over extend yourself, you topple over and that is what you should never forget. The laws of physics still apply - so work within them.

Sunday, November 25, 2007

Intel increases dividend

Intel raised their cash dividend by 13% effective quarter 1 2008.

I had mentioned earlier they may increase their stock buy back to have a blow out Q407. This looks like an alternative route to having the same effect. Basically signalling to the market that the board believe the fundamentals are incredibly strong. Personally, I prefer stock buy backs because reducing the outstanding shares nudges up the EPS which is what many investors keep their eye on.

Dividends are great for long term investors but many tend to overlook this.

Thursday, November 22, 2007

AMD stock south of $11

I'm going to say I told you so...because I did.

Now I'm not trying to gloat even though it's gratifying to be right. However, the problem here is AMD continues to pile on the debt and dilute shareholder value/equity as Hector blindly chases 30% market share in a bid to topple Intel.

The wise man would run away to fight again another day. But Hector is not behaving wisely at all. And it is a matter of time before he is no longer the man in charge. First they'll replace his CEO responsibilities with Dirk Meyer. And then they will quietly ease him out a few months later. And this is going to happen within a couple of months. Specially if Hector cannot deliver a kick @$$ Q4 coupled with a stroke of genius in terms of their asset lite strategy.

The EEE PC - the future is nigh

Back here I had written a post on the EEE PC.

The EEE PC is selling like hot-cakes. This is the future my friends. A low cost, reasonable performance, ultra portable PC. And this will only get better with SIlverthorne and some of other Intel's products on their roadmap. Imagine what a killing they're going to make with a 25$ CPU on which they can still make 50-60% margins. AMD is about to miss out on a big new profitable market. Kind of the way the other MP3 guys watched Apple seduce the world with the iPod. Notebook switches the world over will get accelerated. Governments will want this technology inside their versions of OLPC or whatever thing they're buying for mass education.

This is a game that AMD is not even in. The market is going away from them once again.

Wednesday, November 21, 2007

AMD sells stake to Abu Dhabi

AMD heads back to the market for more cash. This time Abu Dhabi buys an 8.1% stake.

Interestingly, AMD only got 12.70 $ per share so there really wasn't any premium. Which is interesting and a telling sign. The positive of this transaction is that they now have a vested interest from backer who has unlimited funding at his disposal. So should they need to secure more cash, they know where to go. The down-side seems to be that this backer isn't paying a premium so it's shareholder equity to which they must say "ta ta".

In other news, anyone seen wide availability of Barcelona yet. Very very disappointing launch and Phenom isn't that much better either. Anandtech has a review. Core 2 Quad whoops the Phenom's ass and when Penryn comes out, AMD will need to churn out faster Phenoms at lower prices. There is only one way for AMD to win in this environment. Cut your prices and trash your margins. Not good for business though.

And all this while Intel is developing low cost high margin products like Silverthorne. When Otellini displayed this some months ago, I said this is a game changing product. If the reviews of the EEE PC are and indicator of what a reasonable performance low cost part can do, AMD needs to seriously re-consider it's strategy. Because Hector is nowhere close to 30% market share and better forget that dream.

In fact, I'd be pleasantly surprised if he stays in his job for another 30 weeks.

Monday, October 22, 2007

AMD Q3 07 and some related thoughts on Intel

AMD had an improved quarter too:
Press release

Let's look at the same numbers as the Intel report below to see whether there are some market trends emerging.

- Revenues of 1.632 billion up from 1.378 billion in Q2.
- EPS loss of 71 cents which beat the street forecast.In dollars this was 396 million.
- Gross margin 41% up 8% from 33% in Q2. However, 2 points of the improvement came from an inventory write off in Q2 so the real gain is 6%.
- Inventories down 53 millon.
- Headcount down 221 to 16,498.

And some other interesting facts and figures...

- Graphics revenue up 57 million and the losses of 50 million in Q2 are now down to just 3 million.
- ASPs up in desktop and mobile but down in server.
- AMD sees no evidence of over booking too and Rivet too was concerned that inventories were lower than he'd like.

I had said earlier, AMD will lose around 300 million and they did not disappoint. It will be very difficult for them to go into the black in Q4. Rivet says he needs around 2 billion of revenue at 40% + gross margin. However, that will be extremely difficult as it means every incremental $ of revenue needs to drop straight into the bottom-line in Q4.

What seems to be happening is both Intel and AMD have been surprised by some spectacular demand and both of them are tight on capacity. Hence, with almost full factories, their gross margins are naturally shooting up. In addition, at times like this they can afford to ignore lower end less profitable business when supply is constrained. The key in Q4 will be managing their product builds. If they call the right product mix their customers want and have it built, they will be laughing to the bank. However, any screw up on forecasting and it will mean leaving revenue on the table that could have been had.

The couple of other things I wanted to comment on:

1. Intel's static ASP vs AMD's improvement. Intel did say desktop ASPs improved while AMD said desktop/mobile improved but server was down. Here's what I think is going on. AMD is slugging it out with a lot of discounting in the server space as they are disadvantaged against Intel's newer products. Hence, they are pulling server pricing down. In mobile, even though AMD is using price to gain entry/share, they are still seeing an uplift as a mobile CPU improves their ASP compared to a desktop part. And some of their new customers like Toshiba tend to sell higher end SKUs. However, Intel is being forced to lower their pricing on mobile as AMD becomes more competitive. However, as Santa Rosa ramps and Penryn comes through, they may be able to create some uplift in mobile ASPs too.

2. It's now obvious that over booking is not a concern and end user demand is robust. Which is a good sign for not only AMD/Intel but also the global economy. Usually tech products and PCs are the first to see demand drop during a recession. It will be interesting to see Apple/Microsoft/Motorola's results this week too.

3. Expect both AMD and Intel to have blow out quarters. Specially Intel. While they are forecasting a mid-point of 10.8 billion for Q4, I think they can hit 11 billion. And get their Q4 profits very close to 2.5 billion which should drive their EPS close to 40 cents. I also think Intel will be aggressive with their share buy back as this is a golden opportunity to have a blow out quarter and drive their EPS and hence share price up.

This is going to be a good quarter for both the players. The guys who should be worried are the OEMs and specially channel as they fight to get supply. HP and Dell have a natural advantage due to their scale. But in the notebook business folks like Acer are becoming big players rapidly so it's going to be interesting. Expect the entire PC industry to have a great Christmas if demand remains strong.

Wednesday, October 17, 2007

Intel Q3 07

Intel announced a bang up quarter today:

- Revenues of 10.1 billion. Well above the updated forecast of 9.6.
- EPS 31 cents. Beating the Street by 1 cent.
- Gross margin 52.4%. At the high end of their forecast and up 5.5% QoQ.
- Inventories down ~550 million.
- Headcount down to 88k

The story is demand is robust. ASPs are flat. The re-structuring is helping drive down costs and make Intel a trimmer company.

Q407 outlook:
- Revenue 10.5 - 11.1 billion. Mid-point of 10.8 billion.
- Gross margin 57 points +/- a couple of points.
- Headcount down another 2k to 86k.

It mostly sounds like good news. Demand is wonderful. Mobile continues to show strong growth. Costs continue to decrease. We have a leaner stronger Intel.

But there are a few areas of concern:

- Accounts receivables is up by 400 million. Which almost accounts for the entire inventory reduction. The Street is concerned there's been over-booking in Q3 and this will impact Q4 sell through. While it's not unusual to load inventory in Q3 anticipating Q4 is the biggest qtr of the year. But there could be some truth in Wall Street's concerns.

- In spite of a renewed product line and competitive pricing - ASPs remain flat! What's going on...? It's simple. AMD is competing hard and the OEMs are extremely happy to counter-balance Intel's influence with a reasonable mix of AMD product. The real problem here is in Intel's marketing. What's going on is end users either don't care about what CPU they are buying or are so price conscious that they are willing to trade off on the brand. This is highly likely a problem for them in emerging markets. But the bottom line is the OEMs are able to negate Intel's strong brand to a good extent.

I think Intel is being conservative in their guidance ever since their fiasco in early 2006. So I do expect them to meet their Q4 guidance. And if everything clicks - to even beat that guidance. However, AMD is competing hard and probably using pricing to try and win back share. Which I think they will have gained some since they should have cleaned out their channel issues by now. While they're still losing money, their focus is to fill their factories in order to drive up gross margin and share. Even if it means lower ASPs.

As for Penryn and Barcelona. These will not have much impact in Q4. Intel will see some benefit to gross margins probably factored into their Q4 guidance already. Going into 2008 these will take on greater significance and the heat will be turned up by both with new products having real availability. Who will win. The end user. Because AMD will probably start to drop prices if they find they're not gaining traction fast enough. Which will create another mini price war. The bottom-line problem is there's too much capacity between the two players and neither of them seems to be slowing down in their drive to keep building capacity.

I'm back...

I've been away from the blog for a few weeks and I apologize. I've been pre-occupied with some other stuff and essentially there's been a whole lot of nothing going on between AMD and Intel as both try and stabilize business, share and most importantly margins.

However, Intel's announcement this morning is a good segue to get back to the blog.

Wednesday, September 05, 2007

Another one bites the dust

AMD loses another senior sales executive.

It seems like rats are deserting the sinking ship. It would have been ok if Henri left and was replaced by someone else. However, Henri leaves, Hector says I'lld do the job and now Rick Hegberg leaves. These are not good signs for AMD. On the positive side. Their costs are reducing.

I wonder if Hector will be doing this job too? Troubling times for AMD. With Barcelona finally arriving, it's tough for them to lose two senior sales guys.

AMD will lose at least 300 million USD this quarter.

Tuesday, September 04, 2007

BofA upgrades Intel

Bank Of America increases their price target on Intel from 29$ to 31$.

Intel is on a roll. Barcelona is not going to save AMD. Not with Penryn coming in less than 60 days from launch.

Still not Barcelona performance numbers with a week to launch. They must be working day and night to get competitive performance and are still struggling.

Thursday, August 23, 2007

The first head to roll

Henri Richard - chief sales and marketing honcho at AMD quit today.

Link 1
Link 2

Sales and marketing will now directly report into Hector. Heads have started to roll at the Jolly Green Giant. When you miss your revenue target quarter on quarter, the first person to blame is your sales guy. Of course, can you blame him if you are obsessed with winning market share even though your current product line up is not competitive enough? A message must be sent - and it starts with Henri.

But what's pretty darn foolish is that Hector is now going to run sales and marketing. Intel must be laughing with glee. Hector now has to do two jobs which means it's highly likely neither will get done well. Or perhaps they're sad because the mistakes Hector has been making over the last few quarters as CEO are worth more to them.

Either ways, this is a signal. AMD needs to scale back their headcount. Another bad quarter or two and either Bob Rivet or Phil Hestor are probably going down. Bob - for constantly mis-leading Wall Street and not managing AMD's cost structure effectively. Phil - for not developing a product roadmap that was competitive enough or perhaps for building an architecture that was too difficult for AMD to manufacture.

I predicted an AMD stock price of 11.50 - 13.00. We're there now people. This is going further south. Over the next 6 months this is going below 11.

Sunday, August 19, 2007

AMD selling assets...

...in this case a big field behind their HQ in Sunnyvale apparently.

I guess that should reduce their Q3 losses by a few million.

Desperate times at AMD. I repeat, they need to cut heads and costs. The way to cut costs is by Hector focussing on key projects and not trying to do everything. Some time ago I had predicted the PIC would die. It actually did - and then foolishly was revived. Hector needs to stop chasing the market share dream as well as the dream of AMD becoming some kind of mammoth platform company in 2008. You're in a hole - don't dig yourself a new one Mr Ruiz. Focus on digging yourself out of this one before you drive AMD into the ground and a lot more innocent employees have to pay the price.

Friday, August 17, 2007

Barcelona continues to have problems

AMD continues to have problems with Barcelona.

What can I say. With a launch that wasn't soon enough and production problems, all they need now is for the performance to be disappointing and they will be toast.

Wednesday, August 15, 2007

Penryn launch date set

Penryn is on track for November 11.

AMD will not have enough lead time in the market with Barcelona to establish a lead. Since the only proof we have of Barcelona's superiority to Penryn is that AMD tells us they're better than the current generation Clovertown, it's unlikely they will have much performance advantage. And possibly be at a disadvantage. As a result, they will not be able to enjoy rich margins on Barcelona as one would expect with a new technology introduction should Intel price Penryn competitively. Which I'm sure they will do because they still want to recover market share.

AMD's Barcelona investments are looking like they will not pay off on the top line as much as they would have liked. Losses will continue for AMD and unless they cut back costs now, I think will continue to be in the range of 200-300 million in Q3.

Thursday, August 09, 2007

AMD continues to borrow

AMD heads back to the capital markets to borrow 1.5 billion through the issuance of convertible notes at 5.75%.

They intend to re-pay the the Morgan Stanley loan as per the conditions of that loan with this money and use the balance for working capital.

This adds more pressure to AMD's financials and their stock price.

Hector and team will have to cut back costs at this rate. I said earlier, they need to scale back to about 15 thousand people. Doing a wimpy lay off of 400-500 people is not enough. As much as I hate the fact that innocent employees will lose their jobs because management wasn't competent enough at their's. I felt the same way when Intel was laying off people.

Tuesday, August 07, 2007

AMD stock heading South

I ranted and raved about how the analysts are pumping up AMD's share price even as it loses money. I had called a trading range of 11.50 - 13.00 in the commentary of one of my posts (can't be bothered to look for it now).

AMD is now trading around $ 12.50. I expect this to go still further South close to 12. Will it drop to 10...it should. But at that point it probably starts looking attractive to the private equity guys and there are probably enough interested parties that want to keep AMD afloat so my expectation is it will stay above 11.

It appears Penryn is more than a die shrink.

AMD is in deep trouble as Barcelona still seems to be in some trouble being manufactured and they have not yet allowed the tech sites to publish any independant benchmarks.

However, Intel is also not out of the woods. To accelerate their stock price, they need to grow revenues faster than the market. And their best bets to do this are Silverthorne and monetizing Wimax at the service level and not just the hardware level.

Monday, July 23, 2007

AMD Q2 - what the...

Ok - I did not see it coming the way it did finally. I did mention earlier that AMD might start giving stuff away at close to cost to fill their factories and win share - every unit they sell is a unit Intel doesn't sell. However, this is the weirdest result I've every seen.

Significant revenue and gross margin growth in spite of which losses that were similar to Q1. Get the details here:

Q2 Results

Q2 Earnings Call Transcript

So here's what I think really happened.

1. AMD sold as much as they could at the low end to maximize their factory utilization to improve GM's.
2. Their transition to 65 nm coupled with the fact that they are not incurring 45nm start up costs improved margins.
3. I had mentioned mobile earlier - this did help somewhat. More importantly, they were able to ride the overall growth in mobile through Toshiba.
4. They also seem to have made some recovery in servers.

So what went wrong - how did they lose almost the same amount of money as Q1:

1. The ATI acquisition. Graphics revenues down YoY. Losses continue. And...the acquisition costs hit their profits.
2. They are selling at the low end. So even though they seem to have improved margins QoQ, the reality is those are not due to improving ASPs but more a function of higher units to fill the factories and some mobile/server uplift.
3. The had 30 million additional MGA expenses. Now how much of that do you think are sales/marketing kickbacks to some of their customers to off load the additional volume.

This was a weird quarter for AMD. If they have stuffed inventory into their customers again, then Q3 might be a tough quarter for them again.

Wednesday, July 18, 2007

Intel Q207 actuals - and impact to AMD

I haven't had much time to listen to the Intel announcement. However, the gross margin was disappointing and as I said below, if Intel misses then the stock is heading down about 5 points which it did after hours. However, I think this will stabilize and possibly go back up 1-2 points as folks look at the results with a cooler head. What was really disappointing was Intel's Q3 revenue forecast and even though they did pop the margin number back up, what it says to me is they are unable to capitalize on the technology lead they have and proportionately converting it into revenue. Unless AMD is doing what I said they might earlier and almost give away their low end at cost. In which case Intel would have had to decide to stem the bleeding at some point and not fight AMD all the way down to the mud.

The impact to AMD is that their GM's are going to be awful. Further down from the 29% they had in Q1. It feels like Intel took more share in server and desktop and potentially lost some more in mobile. The impact of a further hit on servers along with unit pressure on desktop is not going to be completely offset by mobile upside considering the small base of mobile AMD is coming off. Otellini did say they felt pricing pressure on the low end of desktop and mobile. Which was AMD trying to salvage unit share and hence hit their revenue number. So expect the revenue to be at risk. More importantly, with the margin hit their EPS numbers will be worse than forecast so I think they will lose more money than the 85 cents per share Wall Street is predicting. My earlier call was around half of their Q1 loss and I think that's now back in play. Expect somewhere in the region of a 200-250 million $ loss. The other thing to consider is the start up costs of Barcelona. If the product is pushed to Q4 effectively then some of those ramp costs will hit them in Q3 thereby suppressing margins further.

Right now - I have nothing positive to say about AMD. But Intel's execution while good, is not as good as it could have been. I think they have made the critical mistake of allowing AMD to get established - both with the OEM customer base and to some extent their brand. Which is allowing the OEMs to move their parts even if they're inferior which allows the OEMs in turn to take a tougher stance at the negotiating table with Intel.

On the market share, we won't see the results this week but I think we're on track to see some minor upside for Intel. I'm still comfortable with a point as I called it below.

Tuesday, July 17, 2007

Q2 - for Intel and AMD

In a short while Intel will announce their Q2...followed by AMD a couple of days later. I've been busy to really do any analysis but I'm going to put some thoughts down anyways with an eye on what would happen to the stock.


I see two possible scenarios for Intel.

1. They hit the numbers (revenue/gross margin) they gave Wall Street at the end of Q1. In addition, EPS comes in as forecasted by the Street. This is a no win situation for them. The stock has grown significantly in the last few months. They will not be rewarded for this and expect a close to 5% drop almost instantly. If AMD pulls off a relatively "not so bad" quarter, then the Intel stock will get hammered.

2. They exceed their revenue numbers. They also beat Street forecast on EPS. If they can blow this away, they're heading north to the tune of 2-3% and the stock may even flirt with 27$. I think this is a high possibility because I think they were ultra conservative with their numbers. Since Intel always reports before AMD, they had no way of knowing how much AMD was bleeding in Q1. As a result of which I think they were conservative.


I think AMD has an easier quarter. After the abysmal Q1, there's no way but up. The question is how much up?

What AMD needs to do is meet or beat Q1 revenue Considering they had stuffed the channel in Q4 and the inventory should have worked itself out in Q1, they can expect some upside. However, balance this with seasonality where Q2 is usually the lowest quarter and this might balance things out. The key things to watch for are how Intel calls their server and desktop shares. If they call a big increase in servers, then AMD's revenue share is at risk. If they call a big desktop share increase then AMD's unit share is at risk. If both then AMD's entire quarter is at risk.

Either ways, I think AMD's price has not dropped sufficiently since the Q1 debacle with an uptick in the last couple of days. I think the stock will be static unless they really surprise pleasantly...which I think is unlikely.

One last thing, I'm also expecting Intel to win back another point or so of market share over the 5 points they won in Q1. Reason - it takes time to win back the channel so that market share momentum should carry them at least this quarter.

We'll see shortly.

Wednesday, July 11, 2007

AMD cuts prices again

AMD cuts prices again at the same time trimming their product line of single core at the bottom.

This is pre-empting Intel's July 22 price cut. It will reduce their Q3 margins so they will need to re-gain share to balance this out. However, the key issue here is once again they are shafting their channel by dropping prices at short notice. All the guys who bought inventory in the last couple of weeks are going to be ticked off that they are going to be stuck with parts that are about 15-20% more expensive and thus hard to move.

AMD is making it harder for themselves to re-take the DIY channel. I'm also surprised that they are dropping prices across the desktop stack when Intel's cut is only on Quad Core. The only thing I would think they'd have to be worried about is the Q6600 at $266 which was a little too close to their 6000+ part originally at $229. Which leads me to believe AMD has not been as successful as they would like in re-taking share in the channel in Q2 and they're using this opportunity to try and do so.

More losses for AMD is all I can say...!

Tuesday, July 10, 2007

Friday, July 06, 2007

Barcelona and AMD continue to get slammed

George Ou from ZDNet posted a scathing review of not just the Barcelona benchmarks but also AMD's ethics.

He outright calls them dishonest. I've been saying for some time now that AMD is spending too much time trying to PRtheir way out of the mess they're in instead of focusing on execution.

Once again Hector and his boys - stop focusing on bringing Intel down. Focus on building and bringing to market innovative and reliable technology. Forget the 30% market share. Focus on doing the right thing for your shareholders.

With the sad results emerging for Barcelona until AMD can scale the MHz, it looks like this year is going to be a total wash out for them. And if Penryn can ensure Intel maintains the performance lead then I don't see any hope for AMD even in 2008 unless they can bring Fusion to market successfully. It's time for them to get back their focus - kill the peripheral projects and have laser focus on their bread and butter.


AMD has removed the benchmarks and replaced it with some marketing pooh pah.

Hat's off to George - and to the power the Internet gives individuals.

Friday, June 29, 2007

Barcelona is a dud...?

It's up to you whether you want to believe the Inquirer. But Charlie the AMD loving penman himself is dissing Barcelona and is writing off AMD being able to compete with it against Penryn.

When I wrote this post, I was bored. But the reality is if Barcelona cannot give Penryn a run for it's money, AMD is in a lot...I mean a lot of trouble. With Nehalem coming next year, they needed to use Barcelona to win back some share or at least stem the share loss. I said it a few weeks ago - AMD's best medium term bet now is Fusion which will allow them to hyper-segment the market. Hector needs to stop playing offense going for 30% market share. He needs to play defense, consolidate his position and return to fight another day.

With Barcelona coming in below expectations. Intel will ease up the price attack in the second half of the year and focus on milking the margins on their superior product line up. If they gain any further share this quarter...which I think they will gain a little, they can afford to focus on improving the bottomline to help drive the stock price up.

Thursday, June 28, 2007

Barcelona - at last...?

The Inquirer says Barcelona will grace us on September 10th.

I don't understand a couple of things (he says whimsically):

1. Why are they making such a big deal of pushing server product into the channel. I understand small business probably buys here but surely first thing you want to do is get this into the hands of the OEMs and begin to win back at the large Fortune 500's.

2. What's with the thermals - everything is 95W or 120W.

Finally - I'm glad to see AMD doesn't seem to be giving away the chips at launch. But all this depends on how they perform so bring on the benchmarks dude!

Wednesday, June 27, 2007

iPhone pricing - and my thoughts

iPhone pricing is out.

This is one expensive mother. 4GB phone = 499$. 599$ for the 8GB model. A 36$ activation fee. Service plans start at 60 bucks and go to 80 and then 100 bucks a month.

This is a pretty expensive phone and the service plans sound like a rip off. But the 36$ activation fee really ticks me off personally. That's like a slap in the face. Basically saying to customers - you're desperate and we know it.

My prediction...this phone will have a great launch for the first few months. After which sales will fizzle out until the product is launched outside the US and is sold in regular retail not tied to a service plan.

Rob Enderle has a good article on the iPhone here.

Thursday, June 14, 2007

AMD losing workstation share

AMD losing lucrative workstation share to Xeon:


This number is going further south this quarter. AMD will probably end back up at 6 points or so. I already said it - they will still lose money this qtr. Probably around half what they lost in their disastrous Q107.

They need to intro Barcelona fast...but more importantly their biggest medium term hope is Fusion. Until then, Intel will continue to have them on the ropes.

Wednesday, June 13, 2007

What's inside the EEE PC?

For those who missed it, Asus announced the EEE PC at Computex. A super small 7" notebook running Linux priced at $199.

Press Release
Flash slide show

What Asus and Intel seem to be keeping mum about is what's inside. Folks are guessing it's either an A100 or A110 part. However, I'm curious. These parts are finding their way into several devices. But not one of them comes even close to this price point. Discounting the cost of not handing over a big fat cheque to Microsoft, I'm baffled how Asus managed to hit this price point unless Intel is giving Asus the parts for free.

Now I may be bullish on Intel currently, but I'm not a putz to believe Intel gives their customers free parts. So I'm wondering how difficult is it for Intel to whip out 80 wafers of Silverthorne before they actually get into mass production. I mean that's all they need considering each wafer gives them 2500 CPUs.

So if any of the tech geniuses out there know the answer, I'd be delighted to find out. Can Intel run 80 wafers? How feasible is this considering Otellini first revealed this product perhaps 3 months ago.

Wednesday, June 06, 2007

AMD continues to spin it

Henri Richard continues with the ultra-positive and probably mis-leading rhetoric:

AMD aims to reverse market share slide

This from the same guy who during their Q1 analyst call said that when the final market share numbers came in, the share numbers would not be as negative as the revenue and profit shortfalls. These guys are giving away any credibility they built. I don't think they understand that being predictable and being able to predict the business accurately is a key indicator of how well the management team is able to run the company.

Barcelona shows up - but not officially

Dailytech got a few seconds with Barcelona - and it does not seem impressive right now:

Quick & Dirty benchmark

An existing Xeon beat the Barcelona even after discounting the clock speed advantage for the Xeon.

Low cost laptop from Asus

This is interesting:

Intel, Asustek announce plans for low-cost laptop

If they are able to hit these price points even before Silverthorne then imagine the price point for a laptop with reasonable performance and what it can do for laptop penetration in developing markets. As long as Intel can sustain 50% or so gross margins at these price points because they continue to shrink the cost manufacture, AMD will not have any ability to follow them. At these price points, AMD with their current roadmap will be forced to sell below cost to compete in this segment.

Tuesday, June 05, 2007

Barcelona...oh Barcelona...wherefore art thou Barcelona?

Day 1 of Computex and no Barcelona announcement. I'm still waiting!

Saturday, May 26, 2007

World's thinnest notebook

Not bad - though the strap makes it look a bit too much like it's designed for women IMHO:

World's thinnest laptop

Thursday, May 24, 2007

Are the Doctor and I the same person?

Ok - since you guys are pushing me, here's the truth about whether Sharikou and I are the same person. We're not - what we are is a genetic experiment by a secret government agency investigating the effects of creating the psychological and intellectual anti-images of a person.

The theory in question here is to test the fundamental nature of human interactions to see whether humans are basically intelligent or you know (psssst - like him) and hence gravitate to a virtual social interaction of like minded organisms. Unfortunately, he's winning as you can see from the number of comments on his web site.

Nooooo!!! - of course we're not the same person. For goodness sake's man - do you think I would be able to retain my sanity if I had to write that drivel and that too with such poor command of language and sentence structure. If I could maintain two such faces for so long old boy, I wouldn't be out here writing this blog. I'd be President somewhere.

Barcelona - game over?

Read these two articles on Uberpulse (thanks Anonymous for the link):

8 Intel cores faster than 16 AMD cores

Barcelona recent lack of performance and why AMD should start to worry

It is extremely concerning that AMD continues to be unspecific about the Barcelona launch date (I mean come on...we're a few days short of mid 2007) and the absence of samples for the tech press to do independent benchmarking persists.

Tuesday, May 22, 2007

Penryn will massacre Barcelona

AMD did another sealed demo of Barcelona where the press couldn't inspect the systems. They ran POV-Ray and Barcelona was able to do 4000 pixels.

An anonymous reader sent in this link (thanks) showing how existing Intel Xeon's can best that.

Link to Yahoo message board

Barcelona can't even compete with Intel's existing products. It will be history when Intel introduces Penryn. AMD will bleed money like water this year. If Barcelona can't give Penryn a fight, AMD could lose another billion $s through the rest of the year. I'm still waiting for proper Barcelona benchmarks so that I can make my forecast.

Intel dumps flash business

I had discussed how Intel should/would dump it's loss making flash business some time this year way back in Q3/Q4 last year. It's finally happened.

Intel JV with ST Micro

This will add back 5-10 cents to their EPS in 2008 (assuming deal closes late 2007) and will also boost their gross margins.

It boggles the mind - Part 2

A few days ago I had written part 1 of this post about how Doug Freedman at American Technology Research (ATR) had made a buy rating on AMD as a result of his belief that AMD will now lose a little less money than he had earlier anticipated. I then heaved into the credibility of the Wall Street hacks. I thought I'd have a look at Mr Freedman's track record to make my point:

January 12th, 2007 - - Mr Freedman releases a report headlined...

Advanced Micro Devices, Inc. ($20.18, Buy)
(AMD: We Think the Bottom is Near; Street Numbers Likely Move Close to Our Preview)
Investment Opinion: Maintain Buy rating as opportunity presents itself; we are active buyers at $18.

His EPS projection for FY07 is +77 cents (down from +80 cents) and his 1Q07 forecast is +10 cents (down from +11 cents).

January 24th, 2007 - Mr Freedman next releases the following report...

Advanced Micro Devices, Inc. ($17.51, Sell)
(AMD: Extreme ASP Erosion Leads to Disappointing Gross Margin Results and Outlook)
Investment Opinion: We are downgrading from Buy to Sell and reducing our price target from $27 to $12

His EPS projection for FY07 is now 7 cents (down from 77 cents) and his 1Q07 forecast is -22 cents (down from 10 cents).

His opening para in that report would have got most regular people fired but I guess Wall Street has different rules:

"We have clearly been wrong over-weighting the fundamental market conditions and have missed the bold fact that both sides are simply growing units at the expense of ASPs."

(Which is hogwash considering Intel's ASPs rose in Q406 and are holding stable still.)

April 9th, 2007 - in his next report Mr Freedman now proclaims...

Advanced Micro Devices, Inc. ($12.86, Sell)
(AMD: Is This A Sign We Hit Bottom? We Wish It Was - But Still Need Cash)
Investment Opinion: We maintain our Sell rating and $12 price target as the
company still needs cash to compete.

His EPS projection for FY07 is now -83 cents (he has removed his previous numbers from this report) and his 1Q07 forecast is -34 cents (previous number removed).

April 16th, 2007 - here we go...

Advanced Micro Devices, Inc. ($13.57, Sell)
(AMD: Pre-announcement Leads to Numbers Cut; Reinforces Need for Cash)
Investment Opinion: We maintain our Sell rating and $12 price target as the
company still needs cash to compete.

His EPS projection for FY07 is now -$1.82 (down from -83 cents) and his 1Q07 forecast is -82 cents (down from -34 cents).

April 20th, 2007 - he now says...

Advanced Micro Devices, Inc. ($14.28, Sell)
(AMD: "Something of a Perfect Storm" Hits AMD Results)
Investment Opinion: We maintain our Sell rating and $12 price target as the company faces an uphill battle against a revitalized 45nm wielding Intel.

His EPS projection for FY07 is now -$2.41 (down from -$1.82) and 1Q07 comes in at -$1.01 (against his final forecase of -82 cents).

May 14th, 2007 - we finally come to the report which started my tirade...

Advanced Micro Devices, Inc. ($14.68, Buy)
(AMD: Upgrading to Buy from Sell, Time for a Tradable Rally)
Investment Opinion: Upgrading to Buy from Sell and increasing our price target
to $18

His EPS projection for FY07 is now -$2.27 (up from -$2.56) and 2Q07 forecast is -73 cents (up from -89 cents).

So back to my rant. How on earth does anyone buy on the predictions of these analysts??? The same guy has gone from a Buy at $20 to a sell all the way down to $13 and has catalysed a short term uplift for the stock by creating a Buy rating at $14.68. His EPS estimates have consistently been off. His ratings are just whacked. From a Buy at $20.18 going to a Sell all the way down to $12.86 and becoming a Buy at $14.68. I thought you were supposed to buy low and sell high. Someone needs to inform Mr Freedman that his job is give his clients the info to do this.

Now I know you can't always get it right. But come on...this is the job for which Mr Wall Street gets paid millions of $s. And the basis for the last recommendation to buy till $18 just amazes me. As far as I'm concerned, these guys are mostly a bunch of quacks or simply duping average Joe's who blindly follow the recommendations of the so called Pundits of Wall Street.

Friday, May 18, 2007

Barcelona schedule in flux

It seems like the Barcelona schedule may again be pushed out to August or September with bugs still being uncovered:

AMD Barcelona launch schedule up in the air

This is not good news for AMD. And if this happens then the confidence of not just the ODM guys in Taiwan and China but also the OEM manufacturers who are building their server SKU line ups for 2H will be shaken. Which would result in cancelled orders for AMD and most probably those orders being moved to Intel. Who it appears are doing a bang up job of managing their product launch schedules and have been beating those schedules over the last 9-12 months.

It now seems highly unlikely that Barcelona will have any kind of impact for AMD in 2007 and with Penryn most likely to launch in Q407, it appears they are giving away any window of opportunity they may have had with Barcelona.

Right now, it seems like Intel's tick-tock is the sound of impending doom for AMD.

Thanks to Anonymous and Sheepshagger for the link.

Thursday, May 17, 2007

Ha Ha - I can't stop laughing

For the ardent followers of Fudzilla - read this and weep:


There's a reason that site is called Fudzilla. FUD = fear/uncertainty/doubt.

All pillars of journalism beyond reproach.

As I had said, Intel will accelerate their quad core ramp by dropping prices. This is now confirmed:


By bringing quad core down to an entry point of 266$, they will be placing immense pressure on AMD to put their latest and greatest product at a competitive price point. Now of course AMD would like to enjoy a premium on their K10's for 6 months or so while product is scarce. However, Intel's price move coupled with the arrival of Penryn means they must do the following:

1. Have competitive pricing which results in them being able to not command as much of a premium for their new flagship technology.
2. Accelerate their own quad core mix which has implications all the way down to the factory floor.
3. Put additional resource behind Barcelona to make it successful which means lower focus elsewhere.

I think AMD made a mistake letting go of sales guys in their recent lay-offs. First, they will need every sales guy they can muster to compete against Intel. Specially since in their Spring Analysts Meeting Intel said they increased their sales team during the re-structure. Second - it does not help that the sales guys are working with the possibility of Damocles sword falling yet again and possibly many people inside AMD are more focussed on writing their resumes and seeking opportunities outside.

Tuesday, May 15, 2007

It boggles the mind - Part 1

Today I get to marvel at Wall Street and the investment community. Analyst Doug Freedman at ATR upgraded AMD from a "Sell" rating to "Buy" based on the fact that he thinks AMD instead of losing $2.56 per share in 2007 will now lose only $2.27.


The mind boggles at the insanity that prevails on Wall Street. The company is losing money. Essentially Mr. Freedman said instead of losing 1.2 billion $ they will lose about 900 million $s this year. Yes...LOSE!

First of all - If I were a client I'd fire him on the spot. Who in their right mind makes a buy recommendation on a company based on the fact that they will lose less money this year. At best, I can understand a "Hold" as he gets to see how Q2 and then the rest of the year starts to turn out. But knowing that he will be making another call in 2 months post the Q2 results, it's the act of sheer greed that drives this community that allows them to make recommendations like this.

Based on this news primarily (I'm assuming these guys are not stupid enough to drive up the price because they announced the Phenom brand name), the stock is up 4.5% as I write.

I told you a couple of days ago why Johnny Wall Street was eager to drive up the price. So they can artificially boost prices to tempt ordinary Joe's into the market and recover the losses they made buying AMD at 20$ +.

I mean really, they should make these guys back up the trades they are making with their clients money with their own too.

Well - what can I say. Imagine driving up the price of a business that's going to lose money. If it stinks like a dead fish - it probably is and I'd skip straight to desert.

Friday, May 11, 2007

AMD lay offs

As I had predicted, AMD has laid off 430 people or as they say 2.6% of their workforce.


However, this is probably not enough and they will need to bring their employee base down closer to 15k people from the 16.5k they had post the ATI merger very quickly.

AMD also filed their 10Q today. While we already calculated the true loss to the CPU biz, it also reveals a 10% decline in ASPs.


AMD management is handing out some blatant horse's manure. At the analyst call they said inadequate supply to channel and that the Q1 inventory build up was desired. Huh - if they had inadequate supply, why is it Q406 inventory was stable at the same level compared to the period when AMD was selling out and make solid profits. You can read more about my assessment on the inventory:


Essentially, AMD is seeing soft demand because they have non competitive parts and by pulling the Pentium brand down the pricing stack Intel has made it difficult for them to sell even when they are almost giving the product away for free.

What baffles me is how the Wall Street hucksters continue to prop the stock up at 13.50+. But I guess the guys who bought at 40 have no choice but to pour good money after bad to try and keep their investments afloat for as long as possible.

Q2 - expect AMD to lose a big dollop of change again. Not as much as Q1 but probably half or a little more than half of their Q1 loss.

Tuesday, May 08, 2007

Silverthorne - Intel's silver bullet

Check out this article on Businessweek.

Both the analysts and the press are failing to realise the true value of Silverthorne. A SOC that's as powerful as today's computers at a fraction of the size and power consumption but most importantly ridiculously cheap to manufacture. At 2500 chips per wafer which is roughly 10x today's CPU's, Intel is basically able to manufacture Silverthorne at 1/10th the cost of say a Conroe CPU today. I know this is a gross over-simplification but I'm just approximating here to set the context. Let's assume a Conroe CPU costs anywhere between 50-80$ to manufacture. Hence, Silverthorne could end up costing as little as 5-8$ to manufacture. So even if Intel sells the part at 30-40$, that's a really sweet profit and some awesome gross margin.

Now think about all the places you could put a small, low power, high performance IA CPU:

- Ultra mobile PC's
- MIDs - the new devices Intel is touting.
- Consoles
- Handheld gaming devices
- Education devices for developing countries.
- Cheap PC's or laptops for emerging markets.

Man...the possibilities are phenomenal. Now consider the tremendous pricing advantage Intel will have. No matter how much AMD cuts prices, they can't win if Intel has a part where they turn a hefty profit even if they sell at AMD's cost price.

What Intel is creating here is the Toyota Corolla of the CPU market. Affordable, reliable, reasonable performance and fantastic value for money. They finally figured out that's it's not enough to trim headcount and operating expenses to bring down costs. They must have a true low cost part and not keep down-selling their best technology by reducing cache or removing features and selling it as a Celeron. The low end of the market is a reality and to win it, you must build the right products and brands for it.

If the analysts thought Otellini was only referring to re-structuring when he was talking about profits growing faster than revenues at the analysts meeting last week, they missed the point completely. Silverthorne if handled right will bring awesome profits even if it doesn't grow revenue at the same proportionate rate as the traditional CPU biz.

Hector and team instead of borrowing money and still shooting for 30% market share should be reducing costs and trimming headcount. They are too far behind Intel in terms of products for where the market is going. Barcelona will not save them this year as it will really begin to impact the financials next year...and Penryn is looking pretty good too. Intel is flanking them from all sides - product, manufacturing, cost and just plain old managing the business.

Expect AMD to lose another 500 million or so in the next two quarters.

Wednesday, May 02, 2007

I re-named the blog

Today, I decided to re-name the blog after living with Sharikou 180 for around 8 months. I thought something a little grandiose would be nice. What do you guys think...?

Sunday, April 29, 2007

AMD takes on more debt to sink company

AMD closed their 2.2 billion $ 6% loan:


Which basically means another 120 million $ of interest payments they need to make every year not counting principal. In addition, their is stock dilution potential. Essentially putting an even greater burden on their ability to turn quarterly profits any time soon.

What should they have done...

They should have taken a smaller loan to help them tide over any immediate operating expenses while trimming back the company to focus on their core CPU biz. They should have tried to now consolidate their market share gains over the lat two years and at least try to stem the huge share losses and stabilize at a little over 15% until they've had time to bring out Barcelona. Instead, Hector is still playing for 30% market share and is going to give the company away to the banks.

Thursday, April 26, 2007

Apple has a big quarter

Apple blew away the quarter with an EPS of 87 cents. They shipped over 10 million iPods (when is this thing going to slow down????) and...they shipped 1.5 million Macs. Representing 36% YoY growth. Gross margins were up 6.5% to about 35%. This is not because of the iPods but it's all those high priced notebooks they are selling.


They grew their notebook shipments and revenue by about 80% YoY. Their notebook ASP is a little over 1500 USD. Considering the phenomenal pricing they must be getting from Intel and their other vendors, these guys are creaming the PC market. They are growing volumes and even ASPs on notebooks are up about 15% YoY.

Now do you see a reason for Apple to switch from Intel right now? While that doesn't mean Intel should become complacent, Apple is rapidly becoming a sizable and high value customer for them probably helping them maintain ASPs quite a bit. On the flip side, Dell and others are dragging AMD's ASPs down. I said before, Dell is sucking AMD dry by blocking their capacity and taking parts at throw away prices. AMD under-valued their technology to secure Dell and this was a mistake.

Wednesday, April 25, 2007

Testing Google Ad Sense

Folks - I am testing Google Ad Sense to see how it works. I've placed a couple of non product specific small banners unobtrusively in the left nav. Not asking anyone to click. What I'm trying to do here is figure out how the system works, what Google's revenue sharing is like, how smart is the system is placing ads that are relevant to the content of the blog, etc.

This is just a heads up. I will not be posting any comments that try to flame me on my experiment here. If you have an issue, write to me at:


Intel retakes market and revenue share

First - let me (with great humility) gloat a little on yet again being right that Intel would begin to retake share by Q107. I just had no idea how right I was going to be:


With iSuppli claiming 4.5% and Mercury saying 6%...these are very big gains - far more than Intel could have expected to win back. So in spite of ASPs holding and big share gain they couldn't beat their topline number. That's concerning and could indicate a slight slow down in the PC market. If that's the case, with so much built out capacity, winning share is going to be a huge focus for Intel & AMD. Expect AMD to drop prices further and perhaps start bundling their new ATI products with old AMD CPUs to help things along. However, AMD can't go much further down on pricing without probably starting to giving parts away at a loss. As mentioned below, they will possibly retake some share in the channel but at the cost of ASPs.

What may negate this is the rather substantial price drop Intel just effected:
Intel Price List

It appears this will be an interesting quarter. Intel has strategically dropped prices in certain desktop and server parts while maintaining mobile prices. It's obvious in desktop they are using this opportunity to gain as much market share with Conroe before Barcelona appears in any substantial volume. They will be hoping the window between Barcelona availability in any reasonable volume and the launch of Penryn in reasonable volume is very small. If this happens and the performance gap is not too high, they will be in a phenomenal position to defend AMD attempts to retake share with Barcelona. If Barcelona performs much better than Penryn, Intel will drop prices so that the price/performance equation is in their favour and will hasten their own quad core ramp (already visible in the new price drop). Keep in mind that their process lead coupled with the advantage of an approach of sticking two dual cores together which means not having to throw a part away if one die is defective gives them substantial cost advantage.

Tuesday, April 24, 2007

AMD heads back to the capital markets

AMD is going to borrow another $1.8 - 2.2 billion. Of which half will probably go to Morgan Stanley to pay off the earlier loan:


Bottomline - AMD's debt rating is going to be almost junk status after this. For all intents and purposes they're borrowing about 1 billion $s probably at a higher rate of interest simpply to part pay a loan they took barely 4 months ago. I thought re-financing works the other way around.

I wouldn't be surprised if the devious b@$#@%&$ at Morgan Stanley buy these notes too and in exchange for a lower interest rate than the market cuts a sweet deal where they end up with a huge stock conversion should AMD slip again. Thereby gaining a significant chunk without having to buy out the existing shareholders.

Sunday, April 22, 2007

AMD - cash and debt management

There's an interesting story here on the restrictions AMD has from any further funding they may raise in the market:

AMD fund raising restricted

After their abysmal quarter, AMD's stock price shot up on the speculation of a private equity buy out rumor that's been floating around. However, a cursory look at their Q107 consolidated balance sheet shows that at current stock prices AMD is not really worth buying if the intent is to re-sell the assets unless someone thinks they can sell the IP inside the company. The other reason a private equity firm may be interested is if they think they can turn the business around. However, for a company that's already lost $1.11 in the first quarter and nowhere near any kind of profit, again this requires a huge leap of faith. Now these kind of long shots are ok when the deal is a few hundred million. But we're talking something that could end up being a close to 10 billion $ deal. Even though the guys with the money live on planet "unreal", I think there are limits to their insanity. Also, shareholders will be pissed that they are having to sell when the stock is $14...when barely a year ago it was $40.

But the real issue here is if there's no private equity deal, then AMD has to raise 2X the amount of money they actually need. And this time round the money will not be as cheap as it was when they were making profit and the stock was seeing the good times.

I have been saying since the announcement of the ATI deal that AMD would have a difficult time managing cash and debt. It feels to me that AMD management was pretty confident they would continue to make money and not have to raise further debt when they closed the deal with Morgan Stanley. The same sense of infallibility seems to be pervading how they have been guiding the market on quarterly results since the December analysts call. And it seems like they have not learnt their lesson and continue to guide flat to up for Q2. It appears they have painted themselves into a corner and if they do dilute shareholder equity through a share offering, I can see some ticked off institutional investors demanding that heads roll.

Saturday, April 21, 2007


Before you read this, please have a look at the earnings and read the webcast transcript:


1. CPU biz revenue is down 31% YoY and 38% QoQ. Not only has there been ASP decline but significant share loss. iSuppli indicates a massive 4.5% share gain for Intel though I'm sceptical it's such a large swing in 1 quarter. Intel would not have bet on such a large gain and considering ASPs are stable they would have come in above their guidance if this had happened:

(Thanks Ho Ho for the link)

2. Inventories are up 15% from 814 mln to 937 mln. The explanation is this is desired build up in the channel to ensure stable supply and that these are products the market still wants. There are a couple of gaps in this theory. First - if the market wanted these products they would not have lost share and missed their unit targets by such a large margin. Second, 40% of this build up is 65nm parts. This doesn't make sense. The first thing you'd want to sell off are lower cost 65nm parts which means takers for the parts are hard to find. Essentially if you add 30% gross margin back to the inventory number AMD already has all the parts they need to fill their Q2 demand. Last year when they were making money inventory was running at around 30% of revenue. Now it's running at 76%.

AMD has two choices here - drop prices further to clear inventory. In fact, they might start giving away some parts at cost simply to re-gain market share which prevents Intel from making a corresponding sale. Alternatively, they will have to take a big write down in the next couple of quarters.

3. Accounts receivable are down QoQ from 1.14 bln to 667 mln which is more in line with what the number was through most of last year. Which means even units in the channel have been worked through and yet inventory is building = lowering demand for parts.

I am extremely sceptical at AMD's confidence on the quarter being flat to up. They are displaying their naivete or mis-leading the market yet again because in a seasonally down quarter what this means is they will have to re-take significant share. However, Intel will not be standing still and the impending Core 2 price cuts along with the Conroe single cores being introduced as Pentium and Celeron parts will squeeze AMD. Specially since the die size on that single core part is going to be super small making it super easy for Intel to price AMD at the lower ends if necessary.

Overall, Q2 will continue to be tough for AMD. There is no reason for them to re-gain share unless they start giving the product away at cost. They may see some desktop share recovery in the channel but the revenue upside could be offset by having to lower prices even further as Intel cuts prices on their Conroe parts for the first time. They will feel either share or revenue pressure on mobile with Intel's new Santa Rosa launch coming up as the OEMs replace older SKUs which means with nothing new from AMD, some of their Turion based SKUs may get bumped off. Server is also all pricing for them now...if they can go low enough then they might get some share back there. But Intel will not give in so easily and what I would be expecting AMD to do is try and stall the market to wait for Barcelona. Unfortunately, the absence of a public demo till date makes their claimed performance numbers unverifiable.

I think AMD will have to make a choice on whether they try and re-gain share or hold ASPs and hopefully revenues. Either way, up is unlikely. Flat is possible if they get relief from the new ATI products. While it was unsaid in the Intel call, I can bet you Intel has tasted blood and will continue to try and re-gain market share using their upcoming price drop.

At the end of the day, Intel's real advantage is not just they have a kick-ass new product, it is they have a product that is significantly cheaper (smaller die size, more flexibility due to common uarch, etc) to manufacture running on a process that is close to a year ahead of their competitor. This gives them tremendous room to navigate on pricing/performance/watt and that's what the market has become about.

Thursday, April 19, 2007

Intel Q1

I'm not going to repeat the numbers here so please read the earnings release (PDF) and listen to the webcast before jumping in:


Intel came in more or less on forecast though revenue was a bit below mid-point which is concerning. If AMD is going to miss their revenue forecast by a mile and Intel is gaining share and holding ASPs and still can't hit it's mid-point then I'm wondering if we're seeing a bit of a slow down in the PC market. Anyways - not a topic for this post.

Margins were slightly up on reduced costs of manufacturing and they made good progress to their reduced headcount numbers getting there 1 qtr earlier. Inventory seems to be ok overall - in the details WIP is actually down and raw materials are up which may be a good thing. Server ASPs were down explained by Otellini as an increasing mix of DP compared to MP in the Conroe liine up. Hmmm...not sure I buy that completely. I'm sure the price war is hurting them to some extend. Desktop and notebook ASPs held which is interesting.

We'll really need to see what happened to AMD on most of these to understand what's really going on. Bottomline - Intel making progress. Q208 BK still not in sight. Their increased focus on cost and managing the business effectively is putting pressure on AMD. It does appear they re-gained market share but didn't confirm. We'll know soon enough but if they did, I won't be eating crow and yet another of my predictions will have come through.

For some insight into what I think AMD will present, have a look at the comment here:


As I've said before, AMD has already suffered a GAAP loss and will probably suffer an operating loss within 6 months. It appears that will happen this quarter. They are going to start wiping out cash in the bank pretty quickly and will be forced yet again to raise money in the market. See the comments in the link above for my stock price prediction. AMD is now in a death spiral of not having the cash to fund their medium-long term strategies as they entered a price war they just could not afford. With no real impact of Barcelona this year, they are going to suffer record losses this year. Nett result - some pretty ticked off shareholders!

Tuesday, April 17, 2007

AMD Q1 Pre-announcement

I've been busy and only had time to get back to the blog today. It's a nice segue to my last post however. AMD pre-announced a big revenue miss in Q1 = revenue coming in at 1.23 billion on a projection of 1.6-1.7 billion:


They also announced a re-structuring with more details to come shortly. In simple English - cost cutting. As I said earlier, AMD cannot go from being a company of 10k people to 16.5k people with lower revenues and no profits. The pre-announcement says a head count freeze is going to happen. My prediction as below continues to be lay-offs are coming:


I'm always sorry to see hard working employees who have to pay the price for poor management decisions with their jobs. Just as Intel's management should have seen heads roll last year during their re-structuring, I think so should AMD's. It's sad to see that they have gone from being on a 40$ high a year or so ago to this position so rapidly.

Anyways, in the next days we shall see how Intel and then AMD's quarters turn out and how much of my predictions in my earlier posts were true or not. I still have this quarter to see Intel begin to re-take market share from AMD.

Monday, March 26, 2007

AMD to miss Q1 targets by 30%

According to the Inquirer who aren't necessarily the gold standard in journalism, rumour is AMD will miss the quarter by 300-400 million $s:


While they are right that Intel is re-gaining sever share, they are fantasizing how miraculously Barcelona combined with AMD's new graphics/chipsets are going to magically recover their Q3/Q4. I would not be surprised if this is yet again fuzz being thrown around by AMD to continue to make Wall St and investors believe they have things under control. Probably in a moment of laxity having slipped out from under the watchful eyes of his PR and investor relations folks, Hector himself admitted Barcelona would not impact their financials in 2007. But apparently the Inquirer knows more and AMD has magic bullets which will allow them to deliver large volumes of Barcelona.

Here's my take. Yes...AMD is working frantically on getting Barcelona right and delivering as much volume as they can in 2007. Yes...Barcelona will give AMD a (slight) performance edge over Intel - but probably not as big as they are walking around claiming. The net result is AMD may recover some server share if they can get any reasonable volume out. But once Penryn comes in, it's going to be a level playing field and Intel will use pricing and capacity to negate AMD's performance advantage until they can launch Nehalem.

To re-cap - AMD will become a sub 10$ stock very shortly after the earnings announcement. Intel will regain market share in Q1 while bringing in the quarter either in line or above their forecast.

Thursday, March 22, 2007

Dell's new strategy - old wine in an old bottle?

Michael Dell is in China today. And announced his brave new initiative. A low cost PC for the China market (what a unique idea!):


The reason I'm underwhelmed is Dell's revenue slide began early last year when they over-emphasized low end systems which crashed their margins. So...while chasing the China market is ok, it needs to be only a small part of Michael Dell's strategy to re-vitalize the company and win market/revenue share back from HP.

What is surprising is they've chosen to go with Intel Celeron CPUs and not AMD. Yowsa...they must be getting a fantastic deal from Intel on this. Which may be part of the price Intel is paying to get back other SKUs from Dell. Alternatively, Michael Dell has returned and brought with him the tenets on which he built his multi-billion $ business. One of which was a blind partnership with Intel.

I'm not saying this is good...or bad for either Intel or AMD. But I am surprised that while AMD is suffering inventory problems because their OEM customers cancelled late at the end of Q4, yet their biggest/newest customer chose to go Intel on a low cost system. Something ain't right here folks...

Sunday, March 11, 2007

AMD cutting back...and how Q1 will turn out for them

Couple of interesting reports:

First...AMD delays moving into their new facility to defer costs to 2007...and they state not to disrupt the Barcelona launch.

Second...AMD is reviewing their plans to build the NY fab:

I'm pretty sure the report will come back in 12 weeks a little less upbeat than AMD has sounded in the past on building this fab but will defer any decision till late this year or next. Their game plan here is to give themselves a face saving exit strategy from this investment as they continue to lose money and will undoubtedly have to go back to the capital markets.

As I have been saying...and saying. AMD will have a tough time managing cash and debt as they invest in ATI and start losing money again. Defering non-essential expenses is the right thing to do. However, as they lose money, they will be forced to resort to lay offs. It is not feasible for a company of 10K people making money to become a company of 16K people losing money and sustain their work-force.

Q1 will see them hit hard as they lose server market share which reduces their ASPs, their margins and hence their ability to sell client CPUs at low prices. They will gain unit share in mobile but unfortunately not a proportionate amount of revenue share due to deep discounting. Specially to Dell. They will lose desktop market share primarily in the channel but the overall ASPs in this segment are declining rapidly so this might be a good thing. The one reason it may not be good is if they are not using up all their mfg capacity. The other thing that will drag them down is they now need to combine the lower margins in the graphics business. Though I'm pretty sure Bob Rivet will continue to show the CPU and graphics businesses together and seperately in an effort to show that their CPU business remains robust.

AMD started this as a street-fight and they were winning through a series of sharp paralyzing jabs that were weakening Intel. However, Intel has now turned this into a full scale battle. Unfortunately for AMD, they have not upgraded from the knife they had in the street-fight (read - the ATI acquisition should have been done earlier) and Intel has brought out the entire arsenal. Had they acquired ATI 12 months earlier, they would be in a position to buffer their losses in the CPU only biz right now with a platform approach. Alas...hindisght is 20/20, even for me.

You can read the frustration of AMD management who have made significant (and commendable) progress through they way they continue to spin Barcelona without a real demo, complain about Intel's benchmarking when their own dubious practises have allowed Intel to use their outdated benchmarks against them and the whining tone of voice over the lost Intel records. All these signals indicate they don't really know what to do next and should Barcelona not be the all out winnner they predict it is, they will be a 10$ stock for a long...long time.

Tuesday, March 06, 2007

Two strikes for AMD

A few posts ago I had commented that AMD would have to get used to being a sub 20$ stock again. At which point I was corrected by S that the real number would be $10. I must now bow to S's presience.

Two things happened this weekend to drive this:

1. AMD again pre-announced that it would miss it's Q1 numbers:


2. AMD has filed a motion to increase the outstanding common stock from 750 million to 1.5 billion shares. While the Inquirer reported this first, I've also provided the link to the filing:


The phrasing of the filing interestingly says it is not intended to discourage potential buyers of AMD...and existing shareholders must vote against in order to stop the motion from passing...abstaining will mean support for the motion.

Basically, the rumours of AMD being acquired by a private equity firm coupled with their need to secure more cash as they start to lose money has sucked the wind out of Hector and team.

Either the AMD management is displaying serial incompetence or they are consistently not revealing all the facts. Starting with sticking behind their Q4 numbers on Dec 14th...even as they were hitting the banks up for cash, to mis-calling their Q1, to Hector's interview with CRN below where some of the things he said were just unbelievable. All that's left I can think of is for Barcelona to slip or not be as good as AMD has been saying it is. I suspect when Q1 is reported, AMD's margins will not recover as Bob Rivet had predicted and any credibility this management team has will be hosed.

I repeat my predictions of layoffs at AMD within the next 6 months and the New York fab commission decision pushed to 2008. Further, AMD will be forced to raise capital again and should they continue to mis-call or mis-represent the true state of affairs, like ATI they will be facing a class action suit from disgruntled stock-holders. I also expect any institutional investors with a large AMD position to try and stop AMD from pushing the additional 750 million share proposal from going to vote.

Once again, AMD has not only had the GAAP loss I predicted, it is heading to an operational loss within the next 6 months. AMD's stock price is now trading below it's 52 week low.

Thursday, February 22, 2007

Hector continues to spin it

I've gotta say, as AMD moves along, Hector is beginning to sound like Intel did a few years ago. In denial that they had messed up and spinning his story like everyone else has the IQ of a pea:


Here are some of the good bits:

"The one thing that's hard to do is trying to correlate the stock price to anything a company does. It is very difficult. We're disappointed that our stock isn't performing better, but I won't correlate it to anything other than it's just one of those things."

Ha ha - the slumping stock price is not related in any way to what's happening in the marketplace. Though I'm sure when the stock was 40 he was saying the market recognises the value of AMD.

CRN: You mentioned the importance of Barcelona. What will be its impact on AMD this year?

RUIZ: This is an incredibly important product transition. We don't expect the ramp [this year] to be dramatic because it's a new core, new micro architecture and platform. The biggest impact it will have is that we'll see a large number of customers and partners align themselves behind the technology.

So at last he admits Barcelona will have no impact on their financials this year.

CRN: When will Barcelona ship?

RICHARD: It's slated for introduction at the end of the second quarter and will be in the market in the third quarter.

Q3 folks...Q3! Around the same time Penryn launches.

Monday, February 12, 2007

The Doctor is shaken

The Doctor has disabled anonymous posting at his blog. This is primarily due to the fact that some clever bloke was posting anonymously on his blog and here using the Doctor's and Penix's psuedonyms.

Obviously the Doctor didn't like the fact that his cage was being rattled.

Penryn pull in?

The Inquirer is reporting a possible Penryn pull into 1H07.


Pulling in this process by 6 months is unlikely. However, I'm predicting a 1 quarter pull in to end Q307 for the first Penryn to ship. For the people who want clarity - what this means is product will be shipped to OEM &/or channel but does not necessarily mean widespread availability. It also will not be across the board Penryn up and down the product line up. The fact that the sillicon was able to boot 5 OSes and 2 factories seem to be on schedule to ramp in 2H07 means this is quite possible. And Intel needs to continue to show Wall Street and their customers they are executing at every step.

Friday, February 09, 2007

Two things - for the AMD fanboys

Two things I wanna say to the AMD fanboys:

1. Where in heavens name did you get the impresion Penryn is going to be late to Q108??? It's coming on schedule in 2007. Read the Intel press release. Penryn was scheduled for end 2007. Intel is obviously ahead of schedule as they have booted 5 different products with multiple OSes. Which is why I'm sure they will pull it into end Q307 with such good silicon.


2. Will everyone stop jerking off on the lack of an integrated memory controller please. I'm not an engineer but I have some common sense. This lack of a controller does not seem to change the fact that Conroe kicks AMD's ass so why the hell would it be such an issue moving forward. It's obvious Intel's engineers designed an architecture that works pretty darn well in spite of this. I can understand if the discussion is around other new features on the Barcelona architecture but for goodness sakes...stop talking about the IMC. It doesn't matter.

The way I understand this simplistically, the IMC on AMD's chips is a faster link to a smaller cache which means quick access but the possibility of the instruction coming up empty handed in the cache and hence the cache needing to be refreshed more often. Whereas for Intel they have a bigger cache (which means fewer cache refreshes) but a narrower tunnel through the FSB which could limit the number of instructions travelling through at any given time. It appears to me from the simple fact that Conroe wins all the benchmarks that Intel's engineers figured out how to optimise this since Athlon/Opteron are getting their ass whooped on every benchmark.

So...get over it!!!

Saturday, February 03, 2007

Figured it out...

Ok - I figured it out. And even left a clue in my comment dated 1st Feb here:


"Not penix" kind of picked up on it. When you get in to post a comment, you choose the "Other" option. This allows you to leave a post name of your choice and link to any URL. Which is what I did posting under the "fake" Doctor and linking back to this blog.

But I'm still curious why/how the posting was shut down at the Doctor's?

BTW Roborat - good one -:)

Wednesday, January 31, 2007

Someone explain this to me

There are two really weird comments from Penix and the Doctor here denouncing AMD. Someone tell me what's going on:


1. Have they finally flipped their lid.
2. Has someone stolen their passwords.
3. Has an international spy ring of Intel fanbois seduced them and hacked into their computers while they were asleep.
4. Or am I just unable to comprehend their wit because it is at a level I cannot reach...or perhaps stoop to.


Ok - someone has definitely hacked the Doctor's password. He says he's shut down the comments below. But he's making clear and correct sentences.

Boy...oh...boy! The Doctor must be either furious or frantic.

Doc - you're welcome to come here and make your outrageous claims since it seems you won't be able to do it on your own blog. What can I say...I miss ya Doc. But this is definitely funny.

Monday, January 29, 2007

AMD is toast - Penryn to give Barcelona a run for it's money

In spite of the micro-architecture being a year older than Barcelona, Core on 45nm is going to give AMD a hard time. I'm sceptical that Barcelona will sweep every benchmark. Intel is really pulling out all the technology stops in the last 6 months. I think Penryn will make the performance/watt playing field level between AMD & Intel and when Nehalem comes out in 2008 AMD is toast.


I am now predicting lay offs at AMD within the next 6 months as well the high probability that the New York fab commission decision will be pushed to 2008 as AMD struggles to manage their cash & debt and continues to see their quarterly profits decline.

Saturday, January 27, 2007

Intel back in Google servers

Intel has won Google back as a server customer:


There are two things in here:

1. Intel continues to strike at AMD where it hurts them the most. On their high margin server business. As I've said below, this will restrict AMD's profits/margins and hence cash which they need to fund their ATI acquisition, their new fabs apart from all the R&D. With 16 thousand mouths to feed compared to 10 thousand a year ago on a lower revenue base and profits, AMD has to cut back.

2. Intel is now displaying a remarkable flexibility to customize solutions for individual customers. I had mentioned in an earlier post about how the microprocessor and car industry business models would converge in the future. This is one part of what I was referring to. More about it in a later post.

Till then...AMD won TCL in PRC. But probably to fight Lenovo on price which means low margins for AMD. Meanwhile, Intel continues to take high margin server business away from them with the Google/Sun wins. I need to scrutinise the AMD numbers a little more closely before I can commit in a post but I wouldn't be surprised if they head to an operating loss in Q2/Q3 of this year.

Friday, January 26, 2007

AMD suffers GAAP loss

Thought I'd point out that my several month old prediction that AMD would suffer a GAAP loss by Q1/Q2 2007 has come true earlier than I thought. Meanwhile, Intel is yet to suffer the GAAP loss the good Doctor Sharikou had predicted.

Where I will admit I might have to recant is on my prediction on Intel starting to re-gain share. While they've re-gained revenue share in Q4, it seems like they have not yet re-gained unit share. I have till Q1 07 and we shall see how it goes or else I will recant.

But meanwhile I'll enjoy the fact that I called the GAAP loss accurately and will graciously accept any public apology the Doctor wishes to make for mis-calling Intel's GAAP loss (among other things he's mis-called).

Monday, January 22, 2007

Sun to go Intel - AMD's body blow #2

I was writing a post on Intel's Q4 results which I had titled the first body blow. However, I wanted to post this real quick so you'll get #2 before #1.
(#1 is now posted below)


While this doesn't help Intel very significantly in terms of revenues, share or margins - it is a psychological win for them. What this does is reduces AMD's server revenue which lowers their profits/margins and hence the cash they can invest in other areas. As I said before, AMD is using it's server profits to invest in other areas.

So AMD is burning capacity supplying Dell with deeply discounted parts while losing critical server business to Intel. The boys in green are probably turning red.

Thursday, January 18, 2007

Intel & AMD Q4 - the first in a series of bodyblows for AMD

Intel's Q4 was had a few bright spots and a few dark ones as well.

1. On the good side - revenue exceeded forecasts by 300 million. ASPs were slightly up on the microprocessor business. Growth in servers and probably regained share in this segment. They are slightly ahead of their headcount reduction targets and their cost savings for 2007 continue to track to 2 billion $. They also reduced Work in Process by about 10% and increased cash by 1.7 billion.

2. On the dark side - margins did not see a significant improvement and continue to be only slightly up as forecast for 2007. Flash business continues to be a drag on profitability to the tune of 186 million in spit of higher revenues QoQ. Margins were also hit due to under-loading charges on their 90nm capacity.

After several quarters of a good run, AMD had a bad quarter:

1. On the good side - they grew units significantly by 19%. Mobile is up with flat ASPs. Desktop also up but w/ much lower ASPs.

2. On the dark side - revenue for the MPU business was up only 3% in spite of record units. They lost server share and server ASPs declined significantly. Gross margins tanked to 40%. The inventory situation is not looking good. Overall inventory is much higher due to ATI. But more importantly deferred income on shipment to the channel jumped by 50% to 170 million indicating inventory is building up in the channel. The other disturbing issue is AMD is now sitting with almost 16.5k heads as compared to 9.8k a year ago on a slightly lower revenue base. This does include ATI but now they have a loss making unit that's added 5k heads into their P&L.

So here are what I believe are the next moves:

Intel - continue to be agressive on pricing overall using their 65nm lead. Get more agressive on mobile pricing perhaps around the Santa Rosa launch in Q2...if not earlier. Will fight tooth and nail to regain unit share. As undoubtedly they have regained significant revenue share QoQ. Focus on saving the 2 billion $s. I also think Intel will divest the Flash business in the next 2 quarters as I've said before.

AMD - will be forced to now take some hard decisions on whether to continue to face declining ASPs in order to keep the factories full. I suspect they will at this point they will cede units if they have to in order to increase ASPs and hopefully margins. However, they do have a problem as their channel is probably sitting on inventory. The other problem they have is managing their cash & debt as I have been saying all along. The pain they are feeling on servers will continue to impact profit...hence cash...and hence their ability to invest in all the projects they need to. In fact, I would not be surprised if there is a round of lay-offs in the next 6 months. Their hope is to pull in Barcelona to stem the revenue losses as quickly as they can.

I thought I'd also provide this link to a Sep article where I called Q3/Q4. It came out pretty close.


Friday, January 12, 2007

It has begun

Today AMD pre-announced their Q406 would miss Wall Street's expectations quite significantly:

1. They are projecting a 3% growth in revenue on signficant unit growth as a result of declining ASPs.
2. Profits on their CPU biz are positive but substantially lower that Q306. This is excluding acquisition related charges.
3. Gross margins are severely impacted.


My analysis of why I thought they would be flat to down is in the article two stories below. What I did mis-call a few weeks ago was that I thought they would focus on margins and high profit products because they were capacity constrained. However, I think in spite of selling a lot more, they are selling it for a lot less. I reiterate that Dell is sucking them dry and they are feeling the heat on the server business from Intel. They have been using the server business profits to feed the other parts but that ride is coming to an end for now.

So why is it Bob Rivet provided such a positive outlook at the analyst call on Dec 14th barely a month ago. I agree with Charlie for once. They were borrowing money and it's easier to secure the kind of loans you need if your business is looking good. They also tried to keep the bad news under wraps as per Charlie's article:


So now, they've ticked off a bunch of people - their creditors, the analysts and probably the press. I've said this before, if you are going to walk around shouting to anyone who will listen how Intel is a mean and underhanded company and you are the anti-thesis saving the world...then you must hold yourself to a higher standard. Or else your own underhanded tactics will bite you in the @$$ much harder.

Back to the topic of this article. The reversal of fortunes has begun. Intel will have a better quarter than AMD. At the least they will hit their commitment to Wall Street...if not exceed the mid point of their forecast. They may not gain share this quarter (but I do have till Q107 to hit that) but they will definitely see more than a 3% increase in revenue over Q306 and a sweet improvement in EPS. I think there's even a reasonable chance they will see an improvement in gross margins.