Ok - I did not see it coming the way it did finally. I did mention earlier that AMD might start giving stuff away at close to cost to fill their factories and win share - every unit they sell is a unit Intel doesn't sell. However, this is the weirdest result I've every seen.
Significant revenue and gross margin growth in spite of which losses that were similar to Q1. Get the details here:
Q2 Results
Q2 Earnings Call Transcript
So here's what I think really happened.
1. AMD sold as much as they could at the low end to maximize their factory utilization to improve GM's.
2. Their transition to 65 nm coupled with the fact that they are not incurring 45nm start up costs improved margins.
3. I had mentioned mobile earlier - this did help somewhat. More importantly, they were able to ride the overall growth in mobile through Toshiba.
4. They also seem to have made some recovery in servers.
So what went wrong - how did they lose almost the same amount of money as Q1:
1. The ATI acquisition. Graphics revenues down YoY. Losses continue. And...the acquisition costs hit their profits.
2. They are selling at the low end. So even though they seem to have improved margins QoQ, the reality is those are not due to improving ASPs but more a function of higher units to fill the factories and some mobile/server uplift.
3. The had 30 million additional MGA expenses. Now how much of that do you think are sales/marketing kickbacks to some of their customers to off load the additional volume.
This was a weird quarter for AMD. If they have stuffed inventory into their customers again, then Q3 might be a tough quarter for them again.
Monday, July 23, 2007
Wednesday, July 18, 2007
Intel Q207 actuals - and impact to AMD
I haven't had much time to listen to the Intel announcement. However, the gross margin was disappointing and as I said below, if Intel misses then the stock is heading down about 5 points which it did after hours. However, I think this will stabilize and possibly go back up 1-2 points as folks look at the results with a cooler head. What was really disappointing was Intel's Q3 revenue forecast and even though they did pop the margin number back up, what it says to me is they are unable to capitalize on the technology lead they have and proportionately converting it into revenue. Unless AMD is doing what I said they might earlier and almost give away their low end at cost. In which case Intel would have had to decide to stem the bleeding at some point and not fight AMD all the way down to the mud.
The impact to AMD is that their GM's are going to be awful. Further down from the 29% they had in Q1. It feels like Intel took more share in server and desktop and potentially lost some more in mobile. The impact of a further hit on servers along with unit pressure on desktop is not going to be completely offset by mobile upside considering the small base of mobile AMD is coming off. Otellini did say they felt pricing pressure on the low end of desktop and mobile. Which was AMD trying to salvage unit share and hence hit their revenue number. So expect the revenue to be at risk. More importantly, with the margin hit their EPS numbers will be worse than forecast so I think they will lose more money than the 85 cents per share Wall Street is predicting. My earlier call was around half of their Q1 loss and I think that's now back in play. Expect somewhere in the region of a 200-250 million $ loss. The other thing to consider is the start up costs of Barcelona. If the product is pushed to Q4 effectively then some of those ramp costs will hit them in Q3 thereby suppressing margins further.
Right now - I have nothing positive to say about AMD. But Intel's execution while good, is not as good as it could have been. I think they have made the critical mistake of allowing AMD to get established - both with the OEM customer base and to some extent their brand. Which is allowing the OEMs to move their parts even if they're inferior which allows the OEMs in turn to take a tougher stance at the negotiating table with Intel.
On the market share, we won't see the results this week but I think we're on track to see some minor upside for Intel. I'm still comfortable with a point as I called it below.
The impact to AMD is that their GM's are going to be awful. Further down from the 29% they had in Q1. It feels like Intel took more share in server and desktop and potentially lost some more in mobile. The impact of a further hit on servers along with unit pressure on desktop is not going to be completely offset by mobile upside considering the small base of mobile AMD is coming off. Otellini did say they felt pricing pressure on the low end of desktop and mobile. Which was AMD trying to salvage unit share and hence hit their revenue number. So expect the revenue to be at risk. More importantly, with the margin hit their EPS numbers will be worse than forecast so I think they will lose more money than the 85 cents per share Wall Street is predicting. My earlier call was around half of their Q1 loss and I think that's now back in play. Expect somewhere in the region of a 200-250 million $ loss. The other thing to consider is the start up costs of Barcelona. If the product is pushed to Q4 effectively then some of those ramp costs will hit them in Q3 thereby suppressing margins further.
Right now - I have nothing positive to say about AMD. But Intel's execution while good, is not as good as it could have been. I think they have made the critical mistake of allowing AMD to get established - both with the OEM customer base and to some extent their brand. Which is allowing the OEMs to move their parts even if they're inferior which allows the OEMs in turn to take a tougher stance at the negotiating table with Intel.
On the market share, we won't see the results this week but I think we're on track to see some minor upside for Intel. I'm still comfortable with a point as I called it below.
Tuesday, July 17, 2007
Q2 - for Intel and AMD
In a short while Intel will announce their Q2...followed by AMD a couple of days later. I've been busy to really do any analysis but I'm going to put some thoughts down anyways with an eye on what would happen to the stock.
Intel
I see two possible scenarios for Intel.
1. They hit the numbers (revenue/gross margin) they gave Wall Street at the end of Q1. In addition, EPS comes in as forecasted by the Street. This is a no win situation for them. The stock has grown significantly in the last few months. They will not be rewarded for this and expect a close to 5% drop almost instantly. If AMD pulls off a relatively "not so bad" quarter, then the Intel stock will get hammered.
2. They exceed their revenue numbers. They also beat Street forecast on EPS. If they can blow this away, they're heading north to the tune of 2-3% and the stock may even flirt with 27$. I think this is a high possibility because I think they were ultra conservative with their numbers. Since Intel always reports before AMD, they had no way of knowing how much AMD was bleeding in Q1. As a result of which I think they were conservative.
AMD
I think AMD has an easier quarter. After the abysmal Q1, there's no way but up. The question is how much up?
What AMD needs to do is meet or beat Q1 revenue Considering they had stuffed the channel in Q4 and the inventory should have worked itself out in Q1, they can expect some upside. However, balance this with seasonality where Q2 is usually the lowest quarter and this might balance things out. The key things to watch for are how Intel calls their server and desktop shares. If they call a big increase in servers, then AMD's revenue share is at risk. If they call a big desktop share increase then AMD's unit share is at risk. If both then AMD's entire quarter is at risk.
Either ways, I think AMD's price has not dropped sufficiently since the Q1 debacle with an uptick in the last couple of days. I think the stock will be static unless they really surprise pleasantly...which I think is unlikely.
One last thing, I'm also expecting Intel to win back another point or so of market share over the 5 points they won in Q1. Reason - it takes time to win back the channel so that market share momentum should carry them at least this quarter.
We'll see shortly.
Intel
I see two possible scenarios for Intel.
1. They hit the numbers (revenue/gross margin) they gave Wall Street at the end of Q1. In addition, EPS comes in as forecasted by the Street. This is a no win situation for them. The stock has grown significantly in the last few months. They will not be rewarded for this and expect a close to 5% drop almost instantly. If AMD pulls off a relatively "not so bad" quarter, then the Intel stock will get hammered.
2. They exceed their revenue numbers. They also beat Street forecast on EPS. If they can blow this away, they're heading north to the tune of 2-3% and the stock may even flirt with 27$. I think this is a high possibility because I think they were ultra conservative with their numbers. Since Intel always reports before AMD, they had no way of knowing how much AMD was bleeding in Q1. As a result of which I think they were conservative.
AMD
I think AMD has an easier quarter. After the abysmal Q1, there's no way but up. The question is how much up?
What AMD needs to do is meet or beat Q1 revenue Considering they had stuffed the channel in Q4 and the inventory should have worked itself out in Q1, they can expect some upside. However, balance this with seasonality where Q2 is usually the lowest quarter and this might balance things out. The key things to watch for are how Intel calls their server and desktop shares. If they call a big increase in servers, then AMD's revenue share is at risk. If they call a big desktop share increase then AMD's unit share is at risk. If both then AMD's entire quarter is at risk.
Either ways, I think AMD's price has not dropped sufficiently since the Q1 debacle with an uptick in the last couple of days. I think the stock will be static unless they really surprise pleasantly...which I think is unlikely.
One last thing, I'm also expecting Intel to win back another point or so of market share over the 5 points they won in Q1. Reason - it takes time to win back the channel so that market share momentum should carry them at least this quarter.
We'll see shortly.
Wednesday, July 11, 2007
AMD cuts prices again
AMD cuts prices again at the same time trimming their product line of single core at the bottom.
This is pre-empting Intel's July 22 price cut. It will reduce their Q3 margins so they will need to re-gain share to balance this out. However, the key issue here is once again they are shafting their channel by dropping prices at short notice. All the guys who bought inventory in the last couple of weeks are going to be ticked off that they are going to be stuck with parts that are about 15-20% more expensive and thus hard to move.
AMD is making it harder for themselves to re-take the DIY channel. I'm also surprised that they are dropping prices across the desktop stack when Intel's cut is only on Quad Core. The only thing I would think they'd have to be worried about is the Q6600 at $266 which was a little too close to their 6000+ part originally at $229. Which leads me to believe AMD has not been as successful as they would like in re-taking share in the channel in Q2 and they're using this opportunity to try and do so.
More losses for AMD is all I can say...!
This is pre-empting Intel's July 22 price cut. It will reduce their Q3 margins so they will need to re-gain share to balance this out. However, the key issue here is once again they are shafting their channel by dropping prices at short notice. All the guys who bought inventory in the last couple of weeks are going to be ticked off that they are going to be stuck with parts that are about 15-20% more expensive and thus hard to move.
AMD is making it harder for themselves to re-take the DIY channel. I'm also surprised that they are dropping prices across the desktop stack when Intel's cut is only on Quad Core. The only thing I would think they'd have to be worried about is the Q6600 at $266 which was a little too close to their 6000+ part originally at $229. Which leads me to believe AMD has not been as successful as they would like in re-taking share in the channel in Q2 and they're using this opportunity to try and do so.
More losses for AMD is all I can say...!
Tuesday, July 10, 2007
Friday, July 06, 2007
Barcelona and AMD continue to get slammed
George Ou from ZDNet posted a scathing review of not just the Barcelona benchmarks but also AMD's ethics.
He outright calls them dishonest. I've been saying for some time now that AMD is spending too much time trying to PRtheir way out of the mess they're in instead of focusing on execution.
Once again Hector and his boys - stop focusing on bringing Intel down. Focus on building and bringing to market innovative and reliable technology. Forget the 30% market share. Focus on doing the right thing for your shareholders.
With the sad results emerging for Barcelona until AMD can scale the MHz, it looks like this year is going to be a total wash out for them. And if Penryn can ensure Intel maintains the performance lead then I don't see any hope for AMD even in 2008 unless they can bring Fusion to market successfully. It's time for them to get back their focus - kill the peripheral projects and have laser focus on their bread and butter.
UPDATE
AMD has removed the benchmarks and replaced it with some marketing pooh pah.
Hat's off to George - and to the power the Internet gives individuals.
He outright calls them dishonest. I've been saying for some time now that AMD is spending too much time trying to PRtheir way out of the mess they're in instead of focusing on execution.
Once again Hector and his boys - stop focusing on bringing Intel down. Focus on building and bringing to market innovative and reliable technology. Forget the 30% market share. Focus on doing the right thing for your shareholders.
With the sad results emerging for Barcelona until AMD can scale the MHz, it looks like this year is going to be a total wash out for them. And if Penryn can ensure Intel maintains the performance lead then I don't see any hope for AMD even in 2008 unless they can bring Fusion to market successfully. It's time for them to get back their focus - kill the peripheral projects and have laser focus on their bread and butter.
UPDATE
AMD has removed the benchmarks and replaced it with some marketing pooh pah.
Hat's off to George - and to the power the Internet gives individuals.
Friday, June 29, 2007
Barcelona is a dud...?
It's up to you whether you want to believe the Inquirer. But Charlie the AMD loving penman himself is dissing Barcelona and is writing off AMD being able to compete with it against Penryn.
When I wrote this post, I was bored. But the reality is if Barcelona cannot give Penryn a run for it's money, AMD is in a lot...I mean a lot of trouble. With Nehalem coming next year, they needed to use Barcelona to win back some share or at least stem the share loss. I said it a few weeks ago - AMD's best medium term bet now is Fusion which will allow them to hyper-segment the market. Hector needs to stop playing offense going for 30% market share. He needs to play defense, consolidate his position and return to fight another day.
With Barcelona coming in below expectations. Intel will ease up the price attack in the second half of the year and focus on milking the margins on their superior product line up. If they gain any further share this quarter...which I think they will gain a little, they can afford to focus on improving the bottomline to help drive the stock price up.
When I wrote this post, I was bored. But the reality is if Barcelona cannot give Penryn a run for it's money, AMD is in a lot...I mean a lot of trouble. With Nehalem coming next year, they needed to use Barcelona to win back some share or at least stem the share loss. I said it a few weeks ago - AMD's best medium term bet now is Fusion which will allow them to hyper-segment the market. Hector needs to stop playing offense going for 30% market share. He needs to play defense, consolidate his position and return to fight another day.
With Barcelona coming in below expectations. Intel will ease up the price attack in the second half of the year and focus on milking the margins on their superior product line up. If they gain any further share this quarter...which I think they will gain a little, they can afford to focus on improving the bottomline to help drive the stock price up.
Thursday, June 28, 2007
Barcelona - at last...?
The Inquirer says Barcelona will grace us on September 10th.
I don't understand a couple of things (he says whimsically):
1. Why are they making such a big deal of pushing server product into the channel. I understand small business probably buys here but surely first thing you want to do is get this into the hands of the OEMs and begin to win back at the large Fortune 500's.
2. What's with the thermals - everything is 95W or 120W.
Finally - I'm glad to see AMD doesn't seem to be giving away the chips at launch. But all this depends on how they perform so bring on the benchmarks dude!
I don't understand a couple of things (he says whimsically):
1. Why are they making such a big deal of pushing server product into the channel. I understand small business probably buys here but surely first thing you want to do is get this into the hands of the OEMs and begin to win back at the large Fortune 500's.
2. What's with the thermals - everything is 95W or 120W.
Finally - I'm glad to see AMD doesn't seem to be giving away the chips at launch. But all this depends on how they perform so bring on the benchmarks dude!
Wednesday, June 27, 2007
iPhone pricing - and my thoughts
iPhone pricing is out.
This is one expensive mother. 4GB phone = 499$. 599$ for the 8GB model. A 36$ activation fee. Service plans start at 60 bucks and go to 80 and then 100 bucks a month.
This is a pretty expensive phone and the service plans sound like a rip off. But the 36$ activation fee really ticks me off personally. That's like a slap in the face. Basically saying to customers - you're desperate and we know it.
My prediction...this phone will have a great launch for the first few months. After which sales will fizzle out until the product is launched outside the US and is sold in regular retail not tied to a service plan.
Rob Enderle has a good article on the iPhone here.
This is one expensive mother. 4GB phone = 499$. 599$ for the 8GB model. A 36$ activation fee. Service plans start at 60 bucks and go to 80 and then 100 bucks a month.
This is a pretty expensive phone and the service plans sound like a rip off. But the 36$ activation fee really ticks me off personally. That's like a slap in the face. Basically saying to customers - you're desperate and we know it.
My prediction...this phone will have a great launch for the first few months. After which sales will fizzle out until the product is launched outside the US and is sold in regular retail not tied to a service plan.
Rob Enderle has a good article on the iPhone here.
Thursday, June 14, 2007
AMD losing workstation share
AMD losing lucrative workstation share to Xeon:
Link
This number is going further south this quarter. AMD will probably end back up at 6 points or so. I already said it - they will still lose money this qtr. Probably around half what they lost in their disastrous Q107.
They need to intro Barcelona fast...but more importantly their biggest medium term hope is Fusion. Until then, Intel will continue to have them on the ropes.
Link
This number is going further south this quarter. AMD will probably end back up at 6 points or so. I already said it - they will still lose money this qtr. Probably around half what they lost in their disastrous Q107.
They need to intro Barcelona fast...but more importantly their biggest medium term hope is Fusion. Until then, Intel will continue to have them on the ropes.
Wednesday, June 13, 2007
What's inside the EEE PC?
For those who missed it, Asus announced the EEE PC at Computex. A super small 7" notebook running Linux priced at $199.
Press Release
Flash slide show
What Asus and Intel seem to be keeping mum about is what's inside. Folks are guessing it's either an A100 or A110 part. However, I'm curious. These parts are finding their way into several devices. But not one of them comes even close to this price point. Discounting the cost of not handing over a big fat cheque to Microsoft, I'm baffled how Asus managed to hit this price point unless Intel is giving Asus the parts for free.
Now I may be bullish on Intel currently, but I'm not a putz to believe Intel gives their customers free parts. So I'm wondering how difficult is it for Intel to whip out 80 wafers of Silverthorne before they actually get into mass production. I mean that's all they need considering each wafer gives them 2500 CPUs.
So if any of the tech geniuses out there know the answer, I'd be delighted to find out. Can Intel run 80 wafers? How feasible is this considering Otellini first revealed this product perhaps 3 months ago.
Press Release
Flash slide show
What Asus and Intel seem to be keeping mum about is what's inside. Folks are guessing it's either an A100 or A110 part. However, I'm curious. These parts are finding their way into several devices. But not one of them comes even close to this price point. Discounting the cost of not handing over a big fat cheque to Microsoft, I'm baffled how Asus managed to hit this price point unless Intel is giving Asus the parts for free.
Now I may be bullish on Intel currently, but I'm not a putz to believe Intel gives their customers free parts. So I'm wondering how difficult is it for Intel to whip out 80 wafers of Silverthorne before they actually get into mass production. I mean that's all they need considering each wafer gives them 2500 CPUs.
So if any of the tech geniuses out there know the answer, I'd be delighted to find out. Can Intel run 80 wafers? How feasible is this considering Otellini first revealed this product perhaps 3 months ago.
Wednesday, June 06, 2007
AMD continues to spin it
Henri Richard continues with the ultra-positive and probably mis-leading rhetoric:
AMD aims to reverse market share slide
This from the same guy who during their Q1 analyst call said that when the final market share numbers came in, the share numbers would not be as negative as the revenue and profit shortfalls. These guys are giving away any credibility they built. I don't think they understand that being predictable and being able to predict the business accurately is a key indicator of how well the management team is able to run the company.
AMD aims to reverse market share slide
This from the same guy who during their Q1 analyst call said that when the final market share numbers came in, the share numbers would not be as negative as the revenue and profit shortfalls. These guys are giving away any credibility they built. I don't think they understand that being predictable and being able to predict the business accurately is a key indicator of how well the management team is able to run the company.
Barcelona shows up - but not officially
Dailytech got a few seconds with Barcelona - and it does not seem impressive right now:
Quick & Dirty benchmark
An existing Xeon beat the Barcelona even after discounting the clock speed advantage for the Xeon.
Quick & Dirty benchmark
An existing Xeon beat the Barcelona even after discounting the clock speed advantage for the Xeon.
Low cost laptop from Asus
This is interesting:
Intel, Asustek announce plans for low-cost laptop
If they are able to hit these price points even before Silverthorne then imagine the price point for a laptop with reasonable performance and what it can do for laptop penetration in developing markets. As long as Intel can sustain 50% or so gross margins at these price points because they continue to shrink the cost manufacture, AMD will not have any ability to follow them. At these price points, AMD with their current roadmap will be forced to sell below cost to compete in this segment.
Intel, Asustek announce plans for low-cost laptop
If they are able to hit these price points even before Silverthorne then imagine the price point for a laptop with reasonable performance and what it can do for laptop penetration in developing markets. As long as Intel can sustain 50% or so gross margins at these price points because they continue to shrink the cost manufacture, AMD will not have any ability to follow them. At these price points, AMD with their current roadmap will be forced to sell below cost to compete in this segment.
Tuesday, June 05, 2007
Barcelona...oh Barcelona...wherefore art thou Barcelona?
Day 1 of Computex and no Barcelona announcement. I'm still waiting!
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