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.

Wednesday, January 10, 2007

Even more Intel inside Apple

I saw the Apple TV specs and sure enough it had an Intel CPU. I was trying to see if there was any Intel silicon inside the iPhone but couldn't confirm that till now:
Apple says Intel to supply iPhone CPU

I had expected there to be Intel flash in the iPhone. But gosh - a CPU. Just when Intel got out of the smart phone business. I'm betting this is another customized product built off an extremely low voltage Intel CPU. There's more here than we know.

It appears this story has now been re-called. Intel was first to say their silicon is not inside the iPhone and Apple now agrees. I'd expect it the other way around but whatever...

Friday, January 05, 2007

What's the quarter going to look like

In a couple of weeks, our two protagonists of this epic saga will release their Q406 results. Unfortunately I don't have all the tools and info sources of a Wall Street analyst but it's time to make some kind of prediction.


* I think this will be an ok to down quarter for AMD. Which means they will either come in at what they said they will do when they announced Q3 or do worse than what they said. I'm not forecasting any upside.

* They will grow well in notebooks (primarily helped by Dell) and the fact they are coming off a very small base. However desktop and server volume growth rates will continue to shrink with potential negative growth in desktops.

* I am now reiterating my earlier prediction of a reversal of share loss from Intel to AMD and Intel re-gaining share from AMD some time between Q406-Q107. I think there is a reasonable chance that will have happened in Q4 but wouldn't bet the farm on it yet. Simply because AMD had been growing so rapidly at Intel's cost that just stemming the share loss for Intel takes a certain amount of time.

* ATI will be a big drag on profits and will continue to lose money. Having made 50+ million $s last quarter on CPUs, they will find it difficult to top that substantially even though Q4 is the best quarter of the year due to slowing or reversing market share gains & declining ASPs. The ATI graphics business will potentially wipe out most of the CPU profits. Having lost 50+ million in Q3, they will probably continue to lose even more.


* Intel will probably have an ok to up quarter. Which means they will either come in as per their projections or beat them. They will benefit from either a slowing of AMD's share gains or possibly a reversal coupled with higher ASPs as a result of strong growth in servers and mobile.

* Servers will continue to grow well due to their having a competitive product in the 2P space w/ Clovertown and mobile from the holiday buying season along with possibly more supply of C2D mobile parts.

* They will also benefit from smaller die sizes for Conroe and an increasing 65nm mix...all of which will help drive costs down. Couple this with the re-structuring efforts and I think unless there are unexpected costs associated with the re-structure we will see their net profits at a higher % than we have in some time.

* As above, I reiterate that some time in Q406-Q107 we will see Intel re-gain share from AMD.

The tide is turning. After seeing Intel beat up badly over a couple of years, they are in the process of a resurgence. AMD has to deal with the ATI acquisition which is critical to their long term survival. However, it will result in mid-term pain financially. Unless they can turn this acquisition into something profitable, they will find it difficult to fund all the R&D and capacity build out they need to compete agressively and hence grow agressively.