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:
sharikou180@gmail.com
Wednesday, April 25, 2007
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:
http://biz.yahoo.com/rb/070424/intel_amd.html?.v=7
http://money.cnn.com/2007/04/24/technology/bc.intel.amd.reut/index.htm
http://www.linuxworld.com/news/2007/042007-intel-retakes-market-share-from.html
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.
http://biz.yahoo.com/rb/070424/intel_amd.html?.v=7
http://money.cnn.com/2007/04/24/technology/bc.intel.amd.reut/index.htm
http://www.linuxworld.com/news/2007/042007-intel-retakes-market-share-from.html
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:
http://biz.yahoo.com/ap/070423/amd_notes_offering.html?.v=1
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.
http://biz.yahoo.com/ap/070423/amd_notes_offering.html?.v=1
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.
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
AMD Q1
Before you read this, please have a look at the earnings and read the webcast transcript:
http://www.amd.com/us-en/assets/content_type/DownloadableAssets/Q107Results.pdf
http://seekingalpha.com/article/32901
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:
http://www.fabtech.org/content/view/2739/2/
(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.
http://www.amd.com/us-en/assets/content_type/DownloadableAssets/Q107Results.pdf
http://seekingalpha.com/article/32901
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:
http://www.fabtech.org/content/view/2739/2/
(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:
http://phx.corporate-ir.net/phoenix.zhtml?c=101302&p=irol-earningsresults
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:
http://sharikou180.blogspot.com/2007/04/amd-q1-pre-announcement.html
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!
http://phx.corporate-ir.net/phoenix.zhtml?c=101302&p=irol-earningsresults
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:
http://sharikou180.blogspot.com/2007/04/amd-q1-pre-announcement.html
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:
http://biz.yahoo.com/ap/070410/advanced_micro_devices_outlook.html?.v=1
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:
http://sharikou180.blogspot.com/2007/03/two-strikes-for-amd.html
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.
http://biz.yahoo.com/ap/070410/advanced_micro_devices_outlook.html?.v=1
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:
http://sharikou180.blogspot.com/2007/03/two-strikes-for-amd.html
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 $s:
http://www.theinquirer.net/default.aspx?article=38487
While they are right that Intel is re-gaining sever share, they are fantasizing how miraculously Barcelona combined with AMD's new graphics/chipsets are going to magically recover their Q3/Q4. I would not be surprised if this is yet again fuzz being thrown around by AMD to continue to make Wall St and investors believe they have things under control. Probably in a moment of laxity having slipped out from under the watchful eyes of his PR and investor relations folks, Hector himself admitted Barcelona would not impact their financials in 2007. But apparently the Inquirer knows more and AMD has magic bullets which will allow them to deliver large volumes of Barcelona.
Here's my take. Yes...AMD is working frantically on getting Barcelona right and delivering as much volume as they can in 2007. Yes...Barcelona will give AMD a (slight) performance edge over Intel - but probably not as big as they are walking around claiming. The net result is AMD may recover some server share if they can get any reasonable volume out. But once Penryn comes in, it's going to be a level playing field and Intel will use pricing and capacity to negate AMD's performance advantage until they can launch Nehalem.
To re-cap - AMD will become a sub 10$ 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.
http://www.theinquirer.net/default.aspx?article=38487
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!):
http://news.digitaltrends.com/article12517.html
http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2007/03/21/financial/f125540D90.DTL
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...
http://news.digitaltrends.com/article12517.html
http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2007/03/21/financial/f125540D90.DTL
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.
http://www.statesman.com/business/content/business/stories/technology/03/08/8amd.html
Second...AMD is reviewing their plans to build the NY fab:
http://timesunion.com/AspStories/story.asp?storyID=570662&category=BUSINESS&BCCode=HOME&newsdate=3/10/2007&TextPage=1
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.
First...AMD delays moving into their new facility to defer costs to 2007...and they state not to disrupt the Barcelona launch.
http://www.statesman.com/business/content/business/stories/technology/03/08/8amd.html
Second...AMD is reviewing their plans to build the NY fab:
http://timesunion.com/AspStories/story.asp?storyID=570662&category=BUSINESS&BCCode=HOME&newsdate=3/10/2007&TextPage=1
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:
http://biz.yahoo.com/ap/070305/amd_warning.html?.v=8
http://www.forbes.com/2007/03/05/amd-guidance-lower-markets-equity-cx_af_0305markets06.html
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:
http://www.theinquirer.net/default.aspx?article=37982
http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?FilingID=5007928&Type=HTML
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.
Two things happened this weekend to drive this:
1. AMD again pre-announced that it would miss it's Q1 numbers:
http://biz.yahoo.com/ap/070305/amd_warning.html?.v=8
http://www.forbes.com/2007/03/05/amd-guidance-lower-markets-equity-cx_af_0305markets06.html
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:
http://www.theinquirer.net/default.aspx?article=37982
http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?FilingID=5007928&Type=HTML
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:
http://www.crn.com/sections/breakingnews/dailyarchives.jhtml?articleId=197007770
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.
http://www.crn.com/sections/breakingnews/dailyarchives.jhtml?articleId=197007770
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.
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.
http://theinquirer.net/default.aspx?article=37562
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.
http://theinquirer.net/default.aspx?article=37562
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.
http://www.intel.com/pressroom/archive/releases/20070128comp.htm
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!!!
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.
http://www.intel.com/pressroom/archive/releases/20070128comp.htm
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!!!
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