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.
AMD:
* 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:
* 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.
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180, I think there's a good chance there'll be shakeups at ATI over the coming quarters (see my post here about why I think Dave Orton is likely toast). ATI have a track record of missing deadlines and disappointing stock analysts. They often focus on niches (stream) and leave out major categories (no AMD or Intel chipset until years after Nvidia). As such, they're very bad at execution and given the increasing competitive challenge from Intel, AMD can't afford ATI's messups any more
* I think this will be an ok to down quarter for AMD…
AMD already declared a dilutive 2007. Q4 results will be down significantly due to ATI’s loses. I predict it won’t bring AMD to red though just because AMD still had a good quarter. Maybe next quarter.
* They will grow well in notebooks (primarily helped by Dell)…
I expect them to loudly declare their growth in mobile, more so in the consumer space. I agree with your point of easy increased in market share but soon this will normalize to the standard 80-20 Intel-AMD allocation.
* 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. ...
More importantly I think Intel is now gaining back all the high ASP segments. AMD’s commercial acceptance boasting smells budget PCs to me.
* ATI will be a big drag on profits and will continue to lose money….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.
I don’t think AMD will see red this quarter. It was a strong quarter industry wide. AMD inventories will hit them next quarter. AMD is now competing with Intel’s Netburst. While CoreDuo and Core2 are unchallenged in their segments.
Well, I disagree. BTW, I don't sift through the numbers trying to find some bright spot so I can proclaim that I can somehow claim a gain when none exists. AMD's ATI numbers are irrelevant just as Intel's motherboard and chipset sales are. I only talk about processor share and revenue. This does not include VIA's processor sales which has been and still is irrelevant.
So, I don't expect AMD to lose any processor share. However, Intel could gain temporarily if the market surges. Therefore, Q4 may or may not be accurate. Q1 is more likely to be accurate. Q2 should be accurate unless the market contracts severely as it did this year. Okay, let me see if I can explain this.
AMD Gain/Intel Loss
Falling Market - could be temporary
Neutral - accurate
Rising Market - accurate
AMD/Intel No Change
Accurate.
AMD Loss/Intel Gain
Falling Market - accurate
Neutral - accurate
Rising Market - could be temporary
When changes can be temporary you have to wait another quarter or two to tell for certain. I was concerned that AMD's gain in Q1 and Q2 could have been temporary because of the falling market but they lasted into Q3 so it was genuine.
I do not expect Intel to regain share. I expect Intel to slowly lose share all through 2007.
Scientia - how about you back up your position with some logic and a little less posturing.
A shocker that you disagreed, Scientia. We all know you are "with" AMD, only.
Time will tell, but I have a feeling we won't se much change from Q4.
Scientia wrote:
AMD's ATI numbers are irrelevant just as Intel's motherboard and chipset sales are. I only talk about processor share and revenue.
We’ll the discussion was about the conference call overall. If you wish to focus on CPU sales, that’s fine. But calling ATI revenue as irrelevant is quite inaccurate as business decisions such as the approval of the start of the NY Fab relies on the performance of the company financially as a whole.
So, I don't expect AMD to lose any processor share. However, Intel could gain temporarily if the market surges. Therefore, Q4 may or may not be accurate. Q1 is more likely to be accurate. Q2 should be accurate unless the market contracts severely as it did this year… I do not expect Intel to regain share. I expect Intel to slowly lose share all through 2007.
Blaming the market is only an excuse and you’re clearly already making one for AMD. The rules to measure market share is an established one and it’s surprising that you’re adding rules into it now. It’s not the only financial measure out there but it is a widely accepted, “end result” yard stick that is, at the end of the day, equal to all. Revenue share or ASP or margins needs to be reviewed along side market share to make the information more meaningful.
If AMD does not gain market share on an up market because they are capacity constraint, then not having the capacity while Intel has, shows AMD to be poorly prepared.
Furthermore, if AMD shows an increased market share but a significant drop in ASPs resulting to weaker sales then that reflects badly on AMD because of poor product mix.
Everybody knows that AMD cannot charge the same amount of money for their products when they entered Q4. I feel revenue share and ASP will be more important this quarter than market share. It seems to me AMD has no option but to drive for more market share. Supplying Dell seems leave them with no option. Worst case they don't increase their MS and margins drop.
You guys really don't know anything about the CPU market. Intel's ASPs CAN'T go up because they are still dropping prices.
There share can't go up because AMD is basically undercutting them everywhere. Even Dell is selling AMD at 100s less.
Neither company can do too much with Intel's fire sale, but AMD has the advantage of not having 90,000 employees that have to get COLA while profits shrink.
ATi's major advantage is that they have 2 out of the three consoles. The Wii and Xbox360 are big sellers. ATi also has several lucrative cell phone deals that will help override the losses in GPU share.
All in all, AMD should look pretty good. Intel profits will be shrinking like they have been.
Its official! AMD has pre announced that they are gonna miss 4Q numbers.
Now lets see if the same thing happens to intel.
http://www.tgdaily.com/2007/01/12/amd_q4_earnings_forecast/
"You guys really don't know anything about the CPU market. Intel's ASPs CAN'T go up because they are still dropping prices."
Actually it is you that lack the understanding...if there were significant shifts in product mix (i.e move from desktop to mobile or increase in server share), ASP's could EASILY go up. To unequivocally say they "can't" go up shows you lack an understanding of the CPU business.
If AMD's unit shipments went up substantially and at the same time Intel's revenue is up by 10% either:
1. the overall market grew at a ridiculous rate (>10% QoQ) and Intel sold 10% more chips at the same ASP
2. Intel grew market share by 10% (which doesn't jive with AMD saying they increased unit shipments substantially)
3. Intel's ASP went up 10% with unit sales flat
4. Combination of 1&3 (which is likely scenario - we will see if Intel provides detail on server and notebook sales wrt to desktop)
Also consider Dell gets no volume discount anymore and with AMD capacity constrained and eating up some of the Dell business, Intel is now selling these chips at a better price elsewhere.
"ATi's major advantage is that they have 2 out of the three consoles. The Wii and Xbox360 are big sellers. ATi also has several lucrative cell phone deals that will help override the losses in GPU share."
You're joking right? Any idea what the margins are on these products compared to CPU's (even in a CPU price war)? Why is it again AMD has announced they expect an operating loss in the GPU division if they have all these "lucrative" deals?
It's hilarious the amount of armchair financial analysts who don't even spend a second actually looking at data but go by "feel" (heck they own 2 consoles, that must be good right? Cell phones - there are lots of these this has to be a lucrative business no?)
"All in all, AMD should look pretty good. Intel profits will be shrinking like they have been."
Was it not AMD warning profits (earnings) would be "substantially" lower? And this was EXCLUDING ATI business.
What's also scary is that AMD cost structure should be getting much better with 300mm 90nm shipments now fairly substantial? One would think this would help offset some of the price war issues but that does not seem to be the case.
What we will probably never know is just how much AMD is cutting their prices for DELL... this could be a substantial hit to their earnings/ profitability short term as they have given up channel sales (and probably some potential server capacity) to win this business. I can speculate though that Dell is not paying AMD the same price for chips that their Tier 2 OEM's and channel partners were.
Actually it is you that lack the understanding...if there were significant shifts in product mix (i.e move from desktop to mobile or increase in server share), ASP's could EASILY go up. To unequivocally say they "can't" go up shows you lack an understanding of the CPU business.
If AMD's unit shipments went up substantially and at the same time Intel's revenue is up by 10% either:
1. the overall market grew at a ridiculous rate (>10% QoQ) and Intel sold 10% more chips at the same ASP
2. Intel grew market share by 10% (which doesn't jive with AMD saying they increased unit shipments substantially)
3. Intel's ASP went up 10% with unit sales flat
4. Combination of 1&3 (which is likely scenario - we will see if Intel provides detail on server and notebook sales wrt to desktop)
When you consider that the ASPs are up but profits AND gross margins are down even after sales and impairments, it means that PD is either artificially inflated (Newegg bears this out) or sitting in warehouses (no current Newegg sales numbers).
It looks like notebook growth made up some difference since Merom is currently fetching more in retail - and probably slightly inflated in OEM.
AMD also claimed SIGNIFICANTLY INCREASED UNIT SALES so Intel is not regaining share (I'll wait for Mercury and iSupply numbers) since the market only grew by around 10% while AMDs quarter grew 3% even with the artificially lower ASPs.
I can say that AMD has to be planning a serious price restructuring as Barcelona ramps on the desktop (Q1 2008).
BTW, I'm not an armchair analyst, I notice things. Intel has consistently been losing money since Core 2 came out and it will continue until well after Netburst is gone.
They have reached their limit of lowering costs until 45nm is 50% of shipments, especially since quad is planned to drop significantly.
SInce QFX can be considered a precursor to Agena perf (which should increase by at least 20%) Intel will have to depend on the aggressiveness of the ramp before Barcelona (Kuma on the desktop) can move to a majority of 65nm prod (this of course is dependent on how fast they can ramp Chartered 65nm).
Because AMD has guaranteed a drop in replacement for all levels (AM2, QFX, 1207, S1) this will encourage OEMs to move more to AM2 for dual core/single core upgrades.
All families are slated to get the enhanced SSE4 and other Barcelona enhancements (of course single core can't have shared L3) so the hunt will be on again.
I don't think that Opteron had a serious benchmark showing before the samples were sent out, so the naysayers are grasping at straws.
AMD has the person responsible for the Alpha 21264 and people whom he hired. Not to mention some Itanium engineers.
Barcelona will deliver in 2 months. It only has to significantly improve Opteron/X2(it is quad core) so that's why I believe Intel knew they had to release a quad core MCM.
If you guys have listened to the web-cast, you would have heard Bryant tell the analysts that of the 14% QoQ revenue increase, 1/3 was due to ASP upside and the rest due to units. The analysts also believe Intel has re-gained share:
http://chip.seekingalpha.com/article/24486
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