Folks - I'm in the process of my analysis on the Q3 earnings but stopped to make a point on how everyone is using YOY (year on year) or QOQ (qtr on qtr) results selectively. They both serve different purposes and with some astute (non-biased) interpretation can be used together to give you a good read. However, don't ignore the changes in the marketplace:
1. AMD will start using 65nm which will give them cost and capacity boosts.
2. Core 2 has smaller die sizes than Netburst...and even some of AMD's line up.
3. Intel has a brand new top-to-bottom product line that kicks ass. AMD does not have a response till mid 2007.
4. AMD has a huge new customer - Dell. But Dell is losing share and more importantly their strategic direction.
5. Intel also has a new customer - Apple. Who is growing their own PC client columes at a fast clip. But is probably getting mobile parts significantly cheaper than anyone else from Intel.
6. AMD has a new strategic acquisition - ATI. But it is unlikely we will see a corporate platform from them in 2007. But they will now have the ability to make life very difficult for Intel in the short term on the integrated graphics business through bundling and pricing. Also, ATI has a strong brand...I'd venture to say perhaps even stronger than AMD in the high end consumer space.
Bottom-line, there isn't a deciding factor to who wins. Some well rounded analysis will engender some good discussion. A single data point (i.e. gross margin) doesn't mean victory for one side or the other (in this case I mean the pro Intel/AMD folks).
I'll be back shortly with my look at the Intel earnings.
Monday, October 23, 2006
Sunday, October 22, 2006
Intel Q3 06 earnings analysis
Been busy this weekend and just able to grab a little time to listen to the earnings properly:
1. Server revenue, double digit unit growth and ASP growth - this is a very healthy sign. As I had said earlier, Intel is starting to win back their big losses in servers...specially in the DP space. Combine that with the fact that Woodcrest is already 40% of the server market by volume in 3 months (as announced at IDF first). However, the impact of this may be felt less to AMD if they decide to retain premium pricing on Opteron and really focus on the MP server market where margins are higher.
2. Mobile too had record shipments - at the cost of desktops which continue do decline as a share of overall market. Not unexpected as Intel does have a significant lead over AMD in mobile. Will be interesting to see the impact of Dell in this space in Q4. But with Merom ramping incredibly fast considering it would be the bulk of the volume in the Core 2 6 million units shipped, feels like they're in good shape here.
3. Inventory in microprocessors down QoQ. Chipsets and flash were up. Overall inventory was ~4.45 billion...a gain of 120 million over Q2. They also took a 100 million $ write off. But most importantly, all the WIP is 65nm. Which means the transition is happening quite rapidly.
4. Q4 outlook - revenue between 9.1 to 9.7 billion. Gross margin around 50%. On track to hit 95,000 heads from 102,500. About 500 million savings on capital spending and R&D against the original plan. MG&A costs to be about flat QoQ even as revenue increases. Overall, it looks like the effects of the re-structure are kicking in to the upside. The worrying thing here is the gross margin staying at 50%. Which means either the price war will continue or they will get hit with the 65nm and 45nm transition costs. Since the indication from Bryant is they expect to see prices firm n Q4, this is probably the former.
On the face of it, the qtr came through pretty much as I expected. Otellini believes they gained overall share but as I said earlier, we'll have to wait for Gartner/IDC to confirm. The most critical piece in here is servers and the Woodcrest ramp. The more share they re-gain here, the harder they hit AMD's margins and hence free cash which is very important as AMD takes incremental debt to fund the ATI acquisition. The price war should stabilize in Q4. Obviously Intel had planned for this when they forecast their margin at 49%. Overall, it feels like Intel is holding in mobile, winning back in servers and losing in desktop. While it's important to win back the desktop market just because of the sheer size, I think we will see the true impact of the price drops and the Core 2 introduction in Q4 due to the lack of lower cost motherboards.
My nett take away is the qtr went as planned. Woodcrest is the bright spot and some marginal upside in terms of revenue but nothing to write home about. A concern on margins for Q4 and the discussion on share still up in the air as Otellini claims they gained overall share and it isn't clear from a quick glance at AMD's call whether they believe they gained any. However, I'll be reviewing that in detail next and will see if we can call it. For now, Intel needs to stay the course and focus on ramping Core 2 desktop, get the right chipsets/boards into the channels and help their OEM customers get off to a quick start as they introduce products this quarter for Christmas.
I'll be reviewing AMD's results next and will be able to figure out what I think Q4 will look like based on that.
1. Server revenue, double digit unit growth and ASP growth - this is a very healthy sign. As I had said earlier, Intel is starting to win back their big losses in servers...specially in the DP space. Combine that with the fact that Woodcrest is already 40% of the server market by volume in 3 months (as announced at IDF first). However, the impact of this may be felt less to AMD if they decide to retain premium pricing on Opteron and really focus on the MP server market where margins are higher.
2. Mobile too had record shipments - at the cost of desktops which continue do decline as a share of overall market. Not unexpected as Intel does have a significant lead over AMD in mobile. Will be interesting to see the impact of Dell in this space in Q4. But with Merom ramping incredibly fast considering it would be the bulk of the volume in the Core 2 6 million units shipped, feels like they're in good shape here.
3. Inventory in microprocessors down QoQ. Chipsets and flash were up. Overall inventory was ~4.45 billion...a gain of 120 million over Q2. They also took a 100 million $ write off. But most importantly, all the WIP is 65nm. Which means the transition is happening quite rapidly.
4. Q4 outlook - revenue between 9.1 to 9.7 billion. Gross margin around 50%. On track to hit 95,000 heads from 102,500. About 500 million savings on capital spending and R&D against the original plan. MG&A costs to be about flat QoQ even as revenue increases. Overall, it looks like the effects of the re-structure are kicking in to the upside. The worrying thing here is the gross margin staying at 50%. Which means either the price war will continue or they will get hit with the 65nm and 45nm transition costs. Since the indication from Bryant is they expect to see prices firm n Q4, this is probably the former.
On the face of it, the qtr came through pretty much as I expected. Otellini believes they gained overall share but as I said earlier, we'll have to wait for Gartner/IDC to confirm. The most critical piece in here is servers and the Woodcrest ramp. The more share they re-gain here, the harder they hit AMD's margins and hence free cash which is very important as AMD takes incremental debt to fund the ATI acquisition. The price war should stabilize in Q4. Obviously Intel had planned for this when they forecast their margin at 49%. Overall, it feels like Intel is holding in mobile, winning back in servers and losing in desktop. While it's important to win back the desktop market just because of the sheer size, I think we will see the true impact of the price drops and the Core 2 introduction in Q4 due to the lack of lower cost motherboards.
My nett take away is the qtr went as planned. Woodcrest is the bright spot and some marginal upside in terms of revenue but nothing to write home about. A concern on margins for Q4 and the discussion on share still up in the air as Otellini claims they gained overall share and it isn't clear from a quick glance at AMD's call whether they believe they gained any. However, I'll be reviewing that in detail next and will see if we can call it. For now, Intel needs to stay the course and focus on ramping Core 2 desktop, get the right chipsets/boards into the channels and help their OEM customers get off to a quick start as they introduce products this quarter for Christmas.
I'll be reviewing AMD's results next and will be able to figure out what I think Q4 will look like based on that.
Thursday, October 19, 2006
Come back on the weekend
I'm still kind of tied up so don't have time to do an in depth analysis on Intel's earnings right now. A couple of things that caught my attention:
1. They exceeded targets slightly which was kind of in line with my overall prediction that they would be on track to hit their target. They exceeded the mid point by 100 mln $ which is ok. But the bigger take away is Intel is focussed on executing again and we will begin seeing mometum return to them in Q4.
2. Market share - Otellini is now reserving market share comments till folks like Gartner/IDC confirm in 2-3 months. I guess he learned his lesson from the Q1 fiasco not to trust his sales guys on this number. He did however say he believed they gained market share in DP server (which is the volume) with Wodcrest. Let's see if Hector provides an indication or we'll have to wait some more for this data.
3. Q4 gross margins - this was the most disappointing piece that margins would remain around 50%. This either means the price war will continue or incremental costs in the factory...possibly due to the 45nm costs kicking in. There was some discussion on this during the analysts call but I didn't have time to hear it completely.
Come back on the weekend. I'll be reviewing Intel and AMD's results in some more detail. Meanwhile, I've had to help Sharikou by correcting some basic flaws in his calculations on capacity and cash flows.
My comment on capacity can be found far down here:
http://sharikou.blogspot.com/2006/10/charlie-showed-some-wisdom.html
My comment on cash flows will show up here if the post is authorized. In all fairness, I think only one of my posts was not put up so I don't want to make it appear like all my comments are being filtered:
http://sharikou.blogspot.com/2006/10/another-look-at-intels-balance-sheet.html
Hopefully, see ya on the weekend.
1. They exceeded targets slightly which was kind of in line with my overall prediction that they would be on track to hit their target. They exceeded the mid point by 100 mln $ which is ok. But the bigger take away is Intel is focussed on executing again and we will begin seeing mometum return to them in Q4.
2. Market share - Otellini is now reserving market share comments till folks like Gartner/IDC confirm in 2-3 months. I guess he learned his lesson from the Q1 fiasco not to trust his sales guys on this number. He did however say he believed they gained market share in DP server (which is the volume) with Wodcrest. Let's see if Hector provides an indication or we'll have to wait some more for this data.
3. Q4 gross margins - this was the most disappointing piece that margins would remain around 50%. This either means the price war will continue or incremental costs in the factory...possibly due to the 45nm costs kicking in. There was some discussion on this during the analysts call but I didn't have time to hear it completely.
Come back on the weekend. I'll be reviewing Intel and AMD's results in some more detail. Meanwhile, I've had to help Sharikou by correcting some basic flaws in his calculations on capacity and cash flows.
My comment on capacity can be found far down here:
http://sharikou.blogspot.com/2006/10/charlie-showed-some-wisdom.html
My comment on cash flows will show up here if the post is authorized. In all fairness, I think only one of my posts was not put up so I don't want to make it appear like all my comments are being filtered:
http://sharikou.blogspot.com/2006/10/another-look-at-intels-balance-sheet.html
Hopefully, see ya on the weekend.
Saturday, October 14, 2006
A few days of silence
I'm going to be away and kind of busy for a few days. May not get to post but will definitely make time to come back and look at Intel's Q3 results on the 17th. I will however check in and ensure comments get through. Till then, remember my prediction:
Intel will regain market share and momentum (share + margins) in Q4. If you wanted my advice, I would have told you to buy Intel at 17$. Now, buy AMD when it goes below 22 and hold till they re-gain traction. Remember - I'm not qualified to give you this kind of advice and you are not expected to take it. But hey...it's the Internet and heaven knows what other kooky things you may have been learning on it.
Intel will regain market share and momentum (share + margins) in Q4. If you wanted my advice, I would have told you to buy Intel at 17$. Now, buy AMD when it goes below 22 and hold till they re-gain traction. Remember - I'm not qualified to give you this kind of advice and you are not expected to take it. But hey...it's the Internet and heaven knows what other kooky things you may have been learning on it.
Friday, October 13, 2006
AMD + ATI to cut 2000
The combined AMD/ATI will cut 2000 jobs:
http://www.theinquirer.net/default.aspx?article=35046
While it's sad that even two companies who seem to be on a roll will hack of 15% of their combined workforce, I think this is a smart move. It is better to remove the excess now when they can afford it. However, I wonder how the 800 AMD employees who are going to be laid off must be feeling. Undoubtedly some of them will feel they have given their blood+sweat+tears to bring AMD so far and will feel betrayed to be dropped like an old shoe. Alas, such is life.
----------------------------------------------------
UPDATE
This rumour from the Inquirer was false. The rumours have died. I've come back to update this because there are some folks who read this blog and take every comment rather personally. They've been rather insistent so I thought I'd give in. Having said that, anyone who can mis-read this post as a prediction of doom for AMD needs to get out for a bit. I mean how many ways can you mis-interpret a post where I say this is a smart move. Anyways...for some strange reason I think I'll actually be able to get on with my life even after this -:)
http://www.theinquirer.net/default.aspx?article=35046
While it's sad that even two companies who seem to be on a roll will hack of 15% of their combined workforce, I think this is a smart move. It is better to remove the excess now when they can afford it. However, I wonder how the 800 AMD employees who are going to be laid off must be feeling. Undoubtedly some of them will feel they have given their blood+sweat+tears to bring AMD so far and will feel betrayed to be dropped like an old shoe. Alas, such is life.
----------------------------------------------------
UPDATE
This rumour from the Inquirer was false. The rumours have died. I've come back to update this because there are some folks who read this blog and take every comment rather personally. They've been rather insistent so I thought I'd give in. Having said that, anyone who can mis-read this post as a prediction of doom for AMD needs to get out for a bit. I mean how many ways can you mis-interpret a post where I say this is a smart move. Anyways...for some strange reason I think I'll actually be able to get on with my life even after this -:)
Thursday, October 12, 2006
Dell sucking AMD's capacity (& life) dry
In spite of dialling down the cache from 1MB to 512kb and removing some SKUs it appears AMD is running into a capacity shortage thanks to Dell having first right of refusal on supply:
http://www.theinquirer.net/default.aspx?article=35004
I was beginning to think they had avoided this pitfall but it appears not (scroll down the comments here).
http://sharikou180.blogspot.com/2006/09/amd-won-dell-2-years-too-late-im-not.html
The implications of this are two fold:
1. Dell probably buys on shorter cycles than most other customers to keep inventory low. However, due to their size AMD and Intel probably have to keep a buffer aside for Dell in order to meet their contractual obligations. What this means is if Dell is not moving their SKUs, they still have to hold the inventory for some time thereby starving other customers when capacity is constrained.
2. The fall out of #1 above in this case for AMD is that distribution and unbranded channel without stock will be ticked off that they are losing sales to someone else and begin to put their weight behind someone who can guarantee supply. In this case Intel. The key issue is their "faith" in the supplier is lost. This is exactly why Intel lost significant market share when they had a chipset shortage. And now AMD is going to lose the trust of the channel and they will put their sales push behind Pentium & Core 2 where availability is less of an issue. In addition, they will be further ticked because Dell will be under-cutting them so now AMD is not only starving them of supply but helping the big OEM eat their breakfast.
As the shortage escalates, this becomes a proportionately bigger and longer term issue for AMD. Think about it - the small unbranded DIY guy sitting in his store, customer walks in and asks for PC - what's he going to do...push AMD when he doesn't have stock or push Intel.
The INQ article links to this post on Hexus.net:
http://www.hexus.net/content/item.php?item=6890
Which links to this apology to customers from Mesh Computers in the UK. As you can see, they don't appreciate being on the back foot and willing to push Intel instead:
http://forums.hexus.net/showthread.php?t=87080
So I had a look at the Mesh web site to see whether they had indeed increased their Intel push. The answer is yes - only 6 out of 30 desktop SKUs on offer are AMD...everything else Intel:
Mesh Computers All Desktops
So it appears winning Dell may not only be too late, it may be at an awkard time. It would have been better to win Dell once their 65nm was ramped and reducing any capacity issues. Even 2 quarters of shortage will be a problem as channel momentum will swing Intel's way and re-gaining that momentum across hundreds of thousands of channel players across the world is a BIG task that takes time.
If this capacity shortage is true, it is potentially a big issue for AMD. Specially if Dell is squeezing them on margins and then dropping systems at super low prices as it appears they are. It's a double edged sword with just one head to cut.
I repeat, AMD will lose market share in Q4 if not earlier. Momentum will swing back toward Intel with market share gain from Q4 as well as margins improving from the projected 49% in Q3.
http://www.theinquirer.net/default.aspx?article=35004
I was beginning to think they had avoided this pitfall but it appears not (scroll down the comments here).
http://sharikou180.blogspot.com/2006/09/amd-won-dell-2-years-too-late-im-not.html
The implications of this are two fold:
1. Dell probably buys on shorter cycles than most other customers to keep inventory low. However, due to their size AMD and Intel probably have to keep a buffer aside for Dell in order to meet their contractual obligations. What this means is if Dell is not moving their SKUs, they still have to hold the inventory for some time thereby starving other customers when capacity is constrained.
2. The fall out of #1 above in this case for AMD is that distribution and unbranded channel without stock will be ticked off that they are losing sales to someone else and begin to put their weight behind someone who can guarantee supply. In this case Intel. The key issue is their "faith" in the supplier is lost. This is exactly why Intel lost significant market share when they had a chipset shortage. And now AMD is going to lose the trust of the channel and they will put their sales push behind Pentium & Core 2 where availability is less of an issue. In addition, they will be further ticked because Dell will be under-cutting them so now AMD is not only starving them of supply but helping the big OEM eat their breakfast.
As the shortage escalates, this becomes a proportionately bigger and longer term issue for AMD. Think about it - the small unbranded DIY guy sitting in his store, customer walks in and asks for PC - what's he going to do...push AMD when he doesn't have stock or push Intel.
The INQ article links to this post on Hexus.net:
http://www.hexus.net/content/item.php?item=6890
Which links to this apology to customers from Mesh Computers in the UK. As you can see, they don't appreciate being on the back foot and willing to push Intel instead:
http://forums.hexus.net/showthread.php?t=87080
So I had a look at the Mesh web site to see whether they had indeed increased their Intel push. The answer is yes - only 6 out of 30 desktop SKUs on offer are AMD...everything else Intel:
Mesh Computers All Desktops
So it appears winning Dell may not only be too late, it may be at an awkard time. It would have been better to win Dell once their 65nm was ramped and reducing any capacity issues. Even 2 quarters of shortage will be a problem as channel momentum will swing Intel's way and re-gaining that momentum across hundreds of thousands of channel players across the world is a BIG task that takes time.
If this capacity shortage is true, it is potentially a big issue for AMD. Specially if Dell is squeezing them on margins and then dropping systems at super low prices as it appears they are. It's a double edged sword with just one head to cut.
I repeat, AMD will lose market share in Q4 if not earlier. Momentum will swing back toward Intel with market share gain from Q4 as well as margins improving from the projected 49% in Q3.
Thursday, October 05, 2006
Intel to buy Nvidia
Speculation that Intel will announce acquisition of Nvidia today:
Intel to take over Nvidia
My own instinct is that an acquisition is probably not the best solution if all they're after is technology. A stake in Nvidia or even a JV or a MOU type arrangement to co-develop certain technologies are better paths to gaining advantage of Nvidia's technical capabilities. However, from a business standpoint having Nvidia's comprehensive product line up and brand will be a good counter to how AMD may try to leverage the huge strength of the ATI brand. Whatever it is...any kind of alliance between Intel and Nvidia is BIG!
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UPDATED
The weekend is here and Intel has still not bought it's bagful of (graphic) chips. I think this deal is not a deal. But something is in the works between the two. Collaboration is inevitable. The enemy of my enemy is my friend. Neither Intel nor Nvidia will want AMD/ATI to strengthen because they are now going to feed each other. Nvidia also does not want Intel to strengthen because it is also a competitor...though the lesser of the two evils. However, with Intel's intention to get into discrete graphics, they are heading for a collision. What choices does Nvidia have - become an end to end CPU+GPU company. Easier said than done. Or find a partnership with someone else who can help them get there. As I said in a post earlier, Nvidia and Intel will get closer. I'm sure something will happen by the end of the year.
Intel to take over Nvidia
My own instinct is that an acquisition is probably not the best solution if all they're after is technology. A stake in Nvidia or even a JV or a MOU type arrangement to co-develop certain technologies are better paths to gaining advantage of Nvidia's technical capabilities. However, from a business standpoint having Nvidia's comprehensive product line up and brand will be a good counter to how AMD may try to leverage the huge strength of the ATI brand. Whatever it is...any kind of alliance between Intel and Nvidia is BIG!
--------------------------------------------------------------------------------
UPDATED
The weekend is here and Intel has still not bought it's bagful of (graphic) chips. I think this deal is not a deal. But something is in the works between the two. Collaboration is inevitable. The enemy of my enemy is my friend. Neither Intel nor Nvidia will want AMD/ATI to strengthen because they are now going to feed each other. Nvidia also does not want Intel to strengthen because it is also a competitor...though the lesser of the two evils. However, with Intel's intention to get into discrete graphics, they are heading for a collision. What choices does Nvidia have - become an end to end CPU+GPU company. Easier said than done. Or find a partnership with someone else who can help them get there. As I said in a post earlier, Nvidia and Intel will get closer. I'm sure something will happen by the end of the year.
Wednesday, October 04, 2006
The battery (non) issue
I had a few comments asking for a post on this issue of "batteries are exploding because of Intel CPUs" theory Sharikou has propogated. Here are my thoughts:
1. Do you seriously believe Sony has not closely investigated the issue to analyse root cause and would replace millions of $s of batteries thereby hammering what looked like a reasonable financial year after a long time if they could pass the blame to someone else? Do you think Sony is subservient to Dell, HP, Apple that they would take a 400+ (and counting) million $ hit. Sony is not dependant on these companies to survive unlike AMD, Intel and Microsoft. If they could save the money and more importantly their reputation for manufacturing excellence which affects their brand and hence other parts of their business, we would see a court case of humungous proportions.
2. If the issue were the thermals on Centrino and not a manufacturing glitch in the batteries, how would a battery re-call help? The risk of explosions persists by the same formula and the OEMs are waiting for the biggest consumer class action law suit ever to happen. I think not!
3. Sharikou believes he can pull off a cheap magic trick by simply saying because all batteries must be turned on to explode and all laptops have Intel CPUs consuming power...hence 1+1 = 3. Actually, the trick is if he says it often enough, with sufficient vehemence and calls you stupid then it will be true. Bottomline - there is a big fat ZERO impact to Intel from this.
4. Finally, this is a waste of time - mine and everyone else with two ounces of intelligence which is all you folks on this blog. Let's get past it and move on to topics that merit discussion. If I wanted to do a blog on things that lacked intelligence - we'd be discussing world politics.
---------------------------------------------------------------------------------------------
UPDATE
I think it's time to end this discussion once and for all. All 3 Apple notebook models affected by the re-call are G4's - not Macbook or Macbook Pro's. Hence, Sharikou's argument that the battery explosions are due to Intel CPUs is now officially dead & defunct. My advice to him - "Get over it quickly! Or your blog will lose credibility."
1. Do you seriously believe Sony has not closely investigated the issue to analyse root cause and would replace millions of $s of batteries thereby hammering what looked like a reasonable financial year after a long time if they could pass the blame to someone else? Do you think Sony is subservient to Dell, HP, Apple that they would take a 400+ (and counting) million $ hit. Sony is not dependant on these companies to survive unlike AMD, Intel and Microsoft. If they could save the money and more importantly their reputation for manufacturing excellence which affects their brand and hence other parts of their business, we would see a court case of humungous proportions.
2. If the issue were the thermals on Centrino and not a manufacturing glitch in the batteries, how would a battery re-call help? The risk of explosions persists by the same formula and the OEMs are waiting for the biggest consumer class action law suit ever to happen. I think not!
3. Sharikou believes he can pull off a cheap magic trick by simply saying because all batteries must be turned on to explode and all laptops have Intel CPUs consuming power...hence 1+1 = 3. Actually, the trick is if he says it often enough, with sufficient vehemence and calls you stupid then it will be true. Bottomline - there is a big fat ZERO impact to Intel from this.
4. Finally, this is a waste of time - mine and everyone else with two ounces of intelligence which is all you folks on this blog. Let's get past it and move on to topics that merit discussion. If I wanted to do a blog on things that lacked intelligence - we'd be discussing world politics.
---------------------------------------------------------------------------------------------
UPDATE
I think it's time to end this discussion once and for all. All 3 Apple notebook models affected by the re-call are G4's - not Macbook or Macbook Pro's. Hence, Sharikou's argument that the battery explosions are due to Intel CPUs is now officially dead & defunct. My advice to him - "Get over it quickly! Or your blog will lose credibility."
Tuesday, October 03, 2006
HP does Voodoo
Last week HP decided to buy Voodoo PC. Rahul wrote a long blog post on how it all happened and what the future could hold:
http://voodoopc.blogspot.com/2006/09/project-vampire-is-about-to-fly_28.html
While this makes sense if HP's motivation is purely to have a rebuttal or instrument to counter Dell should they get smart and begin to use the Alienware acquisition more strategically. The big question running through my head is the BIG numbers in the gaming segment are in markets like PRC and Korea. PRC will by far be the biggest market in a few years. But the Voodoo model - top of the line, super expensive niche products is not going to help them make traction in PRC. So what changes will they bring to the Voodoo brand and it's business model? Will they take it more downscale and mass market? Does that work - or does it just dilute Voodoo's equity for it's existing premium customer base?
My guess is they will do exactly that. Slot Voodoo as slightly high end brand targetted at gaming but make sure the average system price point becomes much more affordable compared to what Voodoo is today. The second thing they will do is use the brand to extend beyond PC gaming and begin to introduce other devices - not becessarily consoles but consumer electronic devices (i.e. TV's). For the die hard Voodoo fans today, this company and brand will not be the same 3 years from now.
My only other observation is Rahul seems to floating on cloud 9. His two entries on this are absolutely euphoristic. I just hope this isn't fleeting. Once they're part of the big "corporate" HP, many of their ideas and aspirations hopefully will not fall prey to corporate politics. I wish them all the best!
http://voodoopc.blogspot.com/2006/09/project-vampire-is-about-to-fly_28.html
While this makes sense if HP's motivation is purely to have a rebuttal or instrument to counter Dell should they get smart and begin to use the Alienware acquisition more strategically. The big question running through my head is the BIG numbers in the gaming segment are in markets like PRC and Korea. PRC will by far be the biggest market in a few years. But the Voodoo model - top of the line, super expensive niche products is not going to help them make traction in PRC. So what changes will they bring to the Voodoo brand and it's business model? Will they take it more downscale and mass market? Does that work - or does it just dilute Voodoo's equity for it's existing premium customer base?
My guess is they will do exactly that. Slot Voodoo as slightly high end brand targetted at gaming but make sure the average system price point becomes much more affordable compared to what Voodoo is today. The second thing they will do is use the brand to extend beyond PC gaming and begin to introduce other devices - not becessarily consoles but consumer electronic devices (i.e. TV's). For the die hard Voodoo fans today, this company and brand will not be the same 3 years from now.
My only other observation is Rahul seems to floating on cloud 9. His two entries on this are absolutely euphoristic. I just hope this isn't fleeting. Once they're part of the big "corporate" HP, many of their ideas and aspirations hopefully will not fall prey to corporate politics. I wish them all the best!
Thursday, September 28, 2006
AMD won Dell 2 years too late - I'm not alone
I have mentioned in several places that I think AMD winning Dell would have had far more significant impact 2 years ago. Today Dell is struggling to find direction, they no longer hold a significant price advantage over their competitors and are still focussing on squeezing every ounce of cost from their supply chain and suppliers and this is exactly what they are using AMD for. To deliver ultra cheap systems. Unfortunately, in the process they are probably hammering AMD's margins. Meanwhile Intel has moved to a uniform pricing on desktop parts for all their customers. What this means is everyone get's the same price...from Dell...to HP...to their distribution channel. So Dell is unable to squeeze Intel and as a result they will suck AMD dry even more. AMD can't say no because they have been waiting to get entry to Dell for donkey's years.
My opinion is borne out by ThinkEquity analyst Eric Ross. Ross of course has access to more information than I do so he's got more facts to substantiate the argument:
http://biz.yahoo.com/seekingalpha/060928/17679_id.html?.v=1
Bottom line...Dell is going to be a drag on AMD's margins. AMD going to Dell will be counter-balanced by HP getting more comfy with Intel. You can read more about it at my earlier post:
http://sharikou180.blogspot.com/2006/09/new-bed-fellows.html
My opinion is borne out by ThinkEquity analyst Eric Ross. Ross of course has access to more information than I do so he's got more facts to substantiate the argument:
http://biz.yahoo.com/seekingalpha/060928/17679_id.html?.v=1
Bottom line...Dell is going to be a drag on AMD's margins. AMD going to Dell will be counter-balanced by HP getting more comfy with Intel. You can read more about it at my earlier post:
http://sharikou180.blogspot.com/2006/09/new-bed-fellows.html
AMD law suit runs into set back
The judge presiding over AMD's lawsuit just tossed out a chunk of the complaint that pertains to dealings in Europe and Japan:
http://www.forbes.com/2006/09/27/intel-amd-earnings-markets-equity-cx_rs_0927markets02.html
This is a set back for AMD since their last effort to bring Intel down in Japan resulted in a strongly worded letter and Intel agreeing to modify certain business practises without admitting wrong doing. Ironically, AMD is crying foul on behalf of the Sony business who are 100% Intel and seem to give no indication of even letting AMD in the door.
As I said before, this law suit will stretch for years under the wonderful American judicial system. The only people who will win are the lawyers at AMD and Intel who will pocket some nice fat fees. If AMD slides to a loss as I have predicted, their shareholders will want to know why they are pursuing an expensive lengthy legal battle with Intel 3 years too late when they should be focussed on growing further the market share they have won. And if they lose market share as I am predicting will happen in Q4, their shareholders will be even less happy.
http://www.forbes.com/2006/09/27/intel-amd-earnings-markets-equity-cx_rs_0927markets02.html
This is a set back for AMD since their last effort to bring Intel down in Japan resulted in a strongly worded letter and Intel agreeing to modify certain business practises without admitting wrong doing. Ironically, AMD is crying foul on behalf of the Sony business who are 100% Intel and seem to give no indication of even letting AMD in the door.
As I said before, this law suit will stretch for years under the wonderful American judicial system. The only people who will win are the lawyers at AMD and Intel who will pocket some nice fat fees. If AMD slides to a loss as I have predicted, their shareholders will want to know why they are pursuing an expensive lengthy legal battle with Intel 3 years too late when they should be focussed on growing further the market share they have won. And if they lose market share as I am predicting will happen in Q4, their shareholders will be even less happy.
Wednesday, September 27, 2006
An eventful day...?!!
I thought I'd sum up what I thought were the key points Otellini made on day 1 of IDF. To watch the webcast, go to:
http://www.intel.com/idf/us/fall2006/webcast.htm
1. 5 million Core 2 shipped - this icludes desktop and notebook parts. This should put an end to speculation on yields. Specially the discussion over on Rahul Sood's blog where I commented on Merom notebook availability at launch being higher than usual while desktop being held back due to chipset availability issues:
http://voodoopc.blogspot.com/2006/09/be-on-lookout-for-pink-bunny-at-idf.html
It should also put an end to Sharikou's conjecture that Intel can't sell 400k Conroes:
http://sharikou.blogspot.com/2006/09/intel-needs-to-lay-off-80-of-its.html
2. Quad Core launch - Otellini announced the launch of their quad cores in two phases. November for servers and high end desktops. Q107 it becomes mainstream under the moniker Core 2 Quad. He claimed a 70% SPECINT increase for quad core over the Conroe Extreme version. This don't mean much until we see a series of robust benchmarks across. However, what this means is a 6 month lead over AMD...enough time to stabilise manufacturing and bring this into mainstream availability and pricing in Q1. As far as I'm concerned, in theory K8L should trounce 2 Core 2's integrated in the same package. However, this is not a done until we see K8L which is still months away. Even 4x4 is still to come. The demo from Remedy showing their new game Alan Wake was cool - http://www.alanwake.com/.
3. 45nm - 40 million 65nm processors shipped. But more importantly cross over from 90nm to 65nm completed. 45nm will give a 20% performance increase and a 5x reduction in power leakage. I'll deal with the market implication of this in a later post but let me tell you that it makes Penryn (the 45nm shrink derivative) due in 2H07 very interesting and potentially may give AMD a headache. Otellini showed 3 fabs in development to go online b/w 2H07 and 1H08 at an investment of 9 bln $s. First 45nm processor design to be complete in Q406 and 15 in total in development. 32nm comes in 2008 and he showed again the strategy to have a new m-architecture every 2 years. The biggie here is the 300% increase in performance per watt by 2010.
4. Woodcrest - 1 million Woodies shipped in 3 month. Woody is now 40% of the DP server market and over 50% of Intel's DP shipments. In addition, Rackable CEO gets up on stage and displays a mid sized rack that would put a 40 CPU Intel Quad core cluster in the top couple of hundred super computers and claims he has a bigger rack that would catapult into the top 80.
Sharikou has frequently complained that Woodcrest is nowhere to be seen. Now we know why - because customers are buying them before they hit the shelves -:) (do I need to put the cheeky monkey pic here too?)
5. Teraflop on a chip - Otellini displays a processor w/ 80 micro-cores transferring data to SRAM at over 1 teraflop. Claims technology will be available in 5 years. Speculation is this is the secret sauce for Gesher.
6. Wimax - Anand Chandrasekhar brought a UMPC w/ Wimax which was connnected to a new Volkswagen being developed. What was really cool was the UMPC wirelessly ran 2 video streams at the same time to 2 screens at the back of the car. Sweet...!
Overall - Otellini had some interesting things to show but the only thing close to a rabbit was the teraflop chip. Nett take away:
a) Intel's execution engine seems to be back on track somewhat. Just delivering what they committed is a good thing.
b) The Conroe issue for desktop is definitely not yields - as I said before, it's a chipset issue. 5 million Core 2's on desktop/notebook and 1 million Woodcrest is a good ramp. My prediction stands - Q3 will be better for AMD than Intel though not great for both. Momentum will swing back toward Intel in Q4 with them re-gaining market share. AMD will swing to a GAAP loss by Q207 once the ATI deal goes through.
c) Ultra mobile PC with Wimax has the potential to be a killer app if Intel can drive the system price down to 500$ as they are trying. Wimax is going to be big...and it will be big for Intel. AMD cannot catch them here.
d) Kentsfield will not be just a "we got there first" product as I've been thinking. By Q107 as yields stabilise this is going to kick some serious ass. With the 45nm Penryn derivative in 2H07 it may not be "Game. Set. Match. - AMD" as per current expectations. If K8L is priced in the high end and Kentsfield is lower priced the performance and thermals may not be that disastrous and may provide better value for money. Either ways, Intel has a 6+ month lead to market quad core to end users and position themselves as the leader.
Overall, solid progress though one was hoping to see more innovation. Teraflop on chip and Wimax are the two big things that have the ability to drive a big shift in the tech landscape. And the final thing that will change the tech landscape is Apple who were on stage too. These guys are on fire - HP & Dell look out. Read my post below for the full analysis.
http://www.intel.com/idf/us/fall2006/webcast.htm
1. 5 million Core 2 shipped - this icludes desktop and notebook parts. This should put an end to speculation on yields. Specially the discussion over on Rahul Sood's blog where I commented on Merom notebook availability at launch being higher than usual while desktop being held back due to chipset availability issues:
http://voodoopc.blogspot.com/2006/09/be-on-lookout-for-pink-bunny-at-idf.html
It should also put an end to Sharikou's conjecture that Intel can't sell 400k Conroes:
http://sharikou.blogspot.com/2006/09/intel-needs-to-lay-off-80-of-its.html
2. Quad Core launch - Otellini announced the launch of their quad cores in two phases. November for servers and high end desktops. Q107 it becomes mainstream under the moniker Core 2 Quad. He claimed a 70% SPECINT increase for quad core over the Conroe Extreme version. This don't mean much until we see a series of robust benchmarks across. However, what this means is a 6 month lead over AMD...enough time to stabilise manufacturing and bring this into mainstream availability and pricing in Q1. As far as I'm concerned, in theory K8L should trounce 2 Core 2's integrated in the same package. However, this is not a done until we see K8L which is still months away. Even 4x4 is still to come. The demo from Remedy showing their new game Alan Wake was cool - http://www.alanwake.com/.
3. 45nm - 40 million 65nm processors shipped. But more importantly cross over from 90nm to 65nm completed. 45nm will give a 20% performance increase and a 5x reduction in power leakage. I'll deal with the market implication of this in a later post but let me tell you that it makes Penryn (the 45nm shrink derivative) due in 2H07 very interesting and potentially may give AMD a headache. Otellini showed 3 fabs in development to go online b/w 2H07 and 1H08 at an investment of 9 bln $s. First 45nm processor design to be complete in Q406 and 15 in total in development. 32nm comes in 2008 and he showed again the strategy to have a new m-architecture every 2 years. The biggie here is the 300% increase in performance per watt by 2010.
4. Woodcrest - 1 million Woodies shipped in 3 month. Woody is now 40% of the DP server market and over 50% of Intel's DP shipments. In addition, Rackable CEO gets up on stage and displays a mid sized rack that would put a 40 CPU Intel Quad core cluster in the top couple of hundred super computers and claims he has a bigger rack that would catapult into the top 80.
Sharikou has frequently complained that Woodcrest is nowhere to be seen. Now we know why - because customers are buying them before they hit the shelves -:) (do I need to put the cheeky monkey pic here too?)
5. Teraflop on a chip - Otellini displays a processor w/ 80 micro-cores transferring data to SRAM at over 1 teraflop. Claims technology will be available in 5 years. Speculation is this is the secret sauce for Gesher.
6. Wimax - Anand Chandrasekhar brought a UMPC w/ Wimax which was connnected to a new Volkswagen being developed. What was really cool was the UMPC wirelessly ran 2 video streams at the same time to 2 screens at the back of the car. Sweet...!
Overall - Otellini had some interesting things to show but the only thing close to a rabbit was the teraflop chip. Nett take away:
a) Intel's execution engine seems to be back on track somewhat. Just delivering what they committed is a good thing.
b) The Conroe issue for desktop is definitely not yields - as I said before, it's a chipset issue. 5 million Core 2's on desktop/notebook and 1 million Woodcrest is a good ramp. My prediction stands - Q3 will be better for AMD than Intel though not great for both. Momentum will swing back toward Intel in Q4 with them re-gaining market share. AMD will swing to a GAAP loss by Q207 once the ATI deal goes through.
c) Ultra mobile PC with Wimax has the potential to be a killer app if Intel can drive the system price down to 500$ as they are trying. Wimax is going to be big...and it will be big for Intel. AMD cannot catch them here.
d) Kentsfield will not be just a "we got there first" product as I've been thinking. By Q107 as yields stabilise this is going to kick some serious ass. With the 45nm Penryn derivative in 2H07 it may not be "Game. Set. Match. - AMD" as per current expectations. If K8L is priced in the high end and Kentsfield is lower priced the performance and thermals may not be that disastrous and may provide better value for money. Either ways, Intel has a 6+ month lead to market quad core to end users and position themselves as the leader.
Overall, solid progress though one was hoping to see more innovation. Teraflop on chip and Wimax are the two big things that have the ability to drive a big shift in the tech landscape. And the final thing that will change the tech landscape is Apple who were on stage too. These guys are on fire - HP & Dell look out. Read my post below for the full analysis.
Tuesday, September 26, 2006
Silence is boring
Things have been fairly busy last few days. I'm also waiting to see what Otellini says today on day 1 of the Intel Developer Forum before my next post. I'm going to be pretty disappointed if he doesn't say something new - or show us something we haven't seen/heard of before. For the first time in a long time - strangely (& sadly) AMD has not made an attempt to upstage IDF with a big revelation of their own. I was hoping 4x4 would arrive with fanfare...
Friday, September 22, 2006
AMD - two faces...or just two faced
I was thinking about the entire Dell pricing thing I stirred up below but have got side-tracked. I cannot resist this chance to have a dig at my good friend Sharikou.
September 12 - Sharikou posts this extolling AMD's new site and how innovative their marketing is:
http://sharikou.blogspot.com/2006/09/amd-is-so-innovative.html
You can see the AMD site here:
http://virtualexperience.amd.com/
Now look at this report that AMD has hired shillers to go around the web trying to promote this site anonymously...and in the process have got caught big time:
http://www.ngohq.com/home.php?page=articles&go=read&arc_id=112
So Sharikou holds AMD and Hector up as the guys with the conscience, the fellows saving us from Intel. Hell, Hector does it too and is taking Intel to court for their unethical business practises, slamming them for screwing up the world. Now...I'm pretty sure Intel ain't as white as milk. But if you're going to hold yourself up as the voice of the people, then do that. Don't be two faced and violate their trust if you think you can get away with it. Whatever my personal opinions on how this battle is going to play out (you can see them in my previous posts - and there is no hands down winner), I have a tremendous respect for how AMD has turned itself around. That respect just took a deep dive.
Hector should fire Henri Richard who looks after marketing and apologise publicly.
I'm still waiting to see how Sharikou spins this into a an argument that AMD is made of fairy dust. Or he'll just stay quiet when it's outside the scope of his rhetoric.
September 12 - Sharikou posts this extolling AMD's new site and how innovative their marketing is:
http://sharikou.blogspot.com/2006/09/amd-is-so-innovative.html
You can see the AMD site here:
http://virtualexperience.amd.com/
Now look at this report that AMD has hired shillers to go around the web trying to promote this site anonymously...and in the process have got caught big time:
http://www.ngohq.com/home.php?page=articles&go=read&arc_id=112
So Sharikou holds AMD and Hector up as the guys with the conscience, the fellows saving us from Intel. Hell, Hector does it too and is taking Intel to court for their unethical business practises, slamming them for screwing up the world. Now...I'm pretty sure Intel ain't as white as milk. But if you're going to hold yourself up as the voice of the people, then do that. Don't be two faced and violate their trust if you think you can get away with it. Whatever my personal opinions on how this battle is going to play out (you can see them in my previous posts - and there is no hands down winner), I have a tremendous respect for how AMD has turned itself around. That respect just took a deep dive.
Hector should fire Henri Richard who looks after marketing and apologise publicly.
I'm still waiting to see how Sharikou spins this into a an argument that AMD is made of fairy dust. Or he'll just stay quiet when it's outside the scope of his rhetoric.
Thursday, September 21, 2006
Power of sensationalism - learning from the master
Folks - my post below about AMD giving away their processors was a bit of sensationalism ignoring some variables so I could make a dramatic statement. Sounds like someone we all know and love? I admit it - I was feeling lonely and wanted someone to argue with. For further debate and to really understand the insight of that post, see my comments in the post.
I am disappointed I don't have a rebuttal from the real Sharikou. Who I want to say may or may not be a Ph D. but IMHO understands human psyche and marketing. Thanks for lending me this little attention gathering ploy.
For the rest, don't believe everything you read on the Internet...
I am disappointed I don't have a rebuttal from the real Sharikou. Who I want to say may or may not be a Ph D. but IMHO understands human psyche and marketing. Thanks for lending me this little attention gathering ploy.
For the rest, don't believe everything you read on the Internet...
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