A few days ago I had written part 1 of this post about how Doug Freedman at American Technology Research (ATR) had made a buy rating on AMD as a result of his belief that AMD will now lose a little less money than he had earlier anticipated. I then heaved into the credibility of the Wall Street hacks. I thought I'd have a look at Mr Freedman's track record to make my point:
January 12th, 2007 - - Mr Freedman releases a report headlined...
Advanced Micro Devices, Inc. ($20.18, Buy)
(AMD: We Think the Bottom is Near; Street Numbers Likely Move Close to Our Preview)
Investment Opinion: Maintain Buy rating as opportunity presents itself; we are active buyers at $18.
His EPS projection for FY07 is +77 cents (down from +80 cents) and his 1Q07 forecast is +10 cents (down from +11 cents).
January 24th, 2007 - Mr Freedman next releases the following report...
Advanced Micro Devices, Inc. ($17.51, Sell)
(AMD: Extreme ASP Erosion Leads to Disappointing Gross Margin Results and Outlook)
Investment Opinion: We are downgrading from Buy to Sell and reducing our price target from $27 to $12
His EPS projection for FY07 is now 7 cents (down from 77 cents) and his 1Q07 forecast is -22 cents (down from 10 cents).
His opening para in that report would have got most regular people fired but I guess Wall Street has different rules:
"We have clearly been wrong over-weighting the fundamental market conditions and have missed the bold fact that both sides are simply growing units at the expense of ASPs."
(Which is hogwash considering Intel's ASPs rose in Q406 and are holding stable still.)
April 9th, 2007 - in his next report Mr Freedman now proclaims...
Advanced Micro Devices, Inc. ($12.86, Sell)
(AMD: Is This A Sign We Hit Bottom? We Wish It Was - But Still Need Cash)
Investment Opinion: We maintain our Sell rating and $12 price target as the
company still needs cash to compete.
His EPS projection for FY07 is now -83 cents (he has removed his previous numbers from this report) and his 1Q07 forecast is -34 cents (previous number removed).
April 16th, 2007 - here we go...
Advanced Micro Devices, Inc. ($13.57, Sell)
(AMD: Pre-announcement Leads to Numbers Cut; Reinforces Need for Cash)
Investment Opinion: We maintain our Sell rating and $12 price target as the
company still needs cash to compete.
His EPS projection for FY07 is now -$1.82 (down from -83 cents) and his 1Q07 forecast is -82 cents (down from -34 cents).
April 20th, 2007 - he now says...
Advanced Micro Devices, Inc. ($14.28, Sell)
(AMD: "Something of a Perfect Storm" Hits AMD Results)
Investment Opinion: We maintain our Sell rating and $12 price target as the company faces an uphill battle against a revitalized 45nm wielding Intel.
His EPS projection for FY07 is now -$2.41 (down from -$1.82) and 1Q07 comes in at -$1.01 (against his final forecase of -82 cents).
May 14th, 2007 - we finally come to the report which started my tirade...
Advanced Micro Devices, Inc. ($14.68, Buy)
(AMD: Upgrading to Buy from Sell, Time for a Tradable Rally)
Investment Opinion: Upgrading to Buy from Sell and increasing our price target
to $18
His EPS projection for FY07 is now -$2.27 (up from -$2.56) and 2Q07 forecast is -73 cents (up from -89 cents).
So back to my rant. How on earth does anyone buy on the predictions of these analysts??? The same guy has gone from a Buy at $20 to a sell all the way down to $13 and has catalysed a short term uplift for the stock by creating a Buy rating at $14.68. His EPS estimates have consistently been off. His ratings are just whacked. From a Buy at $20.18 going to a Sell all the way down to $12.86 and becoming a Buy at $14.68. I thought you were supposed to buy low and sell high. Someone needs to inform Mr Freedman that his job is give his clients the info to do this.
Now I know you can't always get it right. But come on...this is the job for which Mr Wall Street gets paid millions of $s. And the basis for the last recommendation to buy till $18 just amazes me. As far as I'm concerned, these guys are mostly a bunch of quacks or simply duping average Joe's who blindly follow the recommendations of the so called Pundits of Wall Street.
Showing posts with label technology. Show all posts
Showing posts with label technology. Show all posts
Tuesday, May 22, 2007
Monday, September 18, 2006
The Apple effect
It's been a few days since my last post. Things have been a bit hectic - yes, yes...I really do have a job. I'm going to deviate a bit from this incessant wrangling on whether AMD or Intel will secure world domination first. Instead, I'm going to take a look at where Apple is heading, it's impact on Intel and more importantly how it changes the landscape for companies like Dell, HP & even Microsoft.
Clearly, Apple is on a path to become the Sony of the Digital World. The key difference is Sony could never string together their different businesses to feed one another and Apple is making that their operating model. Let's examine the pieces Apple has:
1. Hardware - while the iPod is their claim to fame, they have used this small device to open the doors to Apple computers again. That coupled w/ their adoption of Intel allowing Windows to operate on their systems is a powerful way to gain trial of Apple's hardware and more importantly software (inc OS). When Apple ran the Switch campaign couple of years ago, they didn't have the substance but I have to say now they do. With designs like the Mac Mini and the new set top box, Apple is beginning to address the convergence of PC & CE.
2. Software - undoubtedly Apple's OS and software are miles ahead compared to the Window's franchise...specially in terms of realiability and usability. And now with the ability to run Windows they are a phenomenal solution for consumers.
3. Content services - with iTunes and Jobs' ability to negotiate with Hollywood and the music industry, Apple will soon become the largest distributor/re-seller/retailer of content in the world. It's just a matter of time.
When you start to string these pieces together, what you get is a picture of the digital home - h/w, s/w and content along with peripherals through the iPod brand. While Rahul Sood in his blog obliquely refers to how Michael Dell didn't understand Apple's strategy with the iPod but didn't clarify, I'm going to lay out what I believe it is even though Steve and I are not on first name terms.
Apple's strategy is exactly the same as Gillette's razor/blade strategy. Their long term goal is to get a razor into every house so that they can make a ton of money on the constant replacement of blades. This is also HP's strategy for their printer and cartridges. It is every mobile phone operators strategy around the world where they subsidise hardware to earn recurring revenue on service.
The key question here is once my brand enters your existence, how do I continue to monetize that relationship. And for Apple "it's not the hardware stoopid - it's the content". Apple's goal is to become the largest distributor of digital content in the world. They will become the Walmart of digital music & movies & perhaps even games over time. As Apple's user base grows, Steve's ability to command pricing and content will grow. The key difference between Apple and Walmart will be that content unlike household groceries cannot be commodotized because every piece of content is unique.
The path to this is to make the Apple hardware ubiquitous. Which means expect more and more devices of every kind to serve every need over time. From PC's, to set top boxes and at some point even ultra-mobile PCs. If it's a way to experience connected content, Apple hardware will get there.
The impact of this on Dell and HP and every other hardware supplier is that they now risk getting further commoditized and as a result marginalized in the mind of the consumer. The hardware becomes a little more (not completely) irrelevant since all you really want anyways is the content. When was the last time you worried about what the configuration of your set top box was? The one chance the OEM boys do have is if people want to take that connected content and experience or manipulate it offline. Because to do that you need hardware capabilities. However, many non techie consumers will probably be happy to experience the content on demand and be able to transfer it to a device easily.
So if Michael Dell didn't get it, I hope he does now. As for Microsoft, boy oh boy are they in trouble yet again. If Apple owns the content experience and the hardware to deliver it, they have the opportunity to own everything behind it over time including...all the other software. Of course, Google knocking on the other side giving away free software for ad space isn't helping.
So ladies and gentlemen - kiss your stock price good bye to any technology player who doesn't have a long term strategy to earn revenue from service. And this includes AMD and Intel. Having said that, in this world of connected content, Intel has a key piece of their strategy called Wimax. And this is an opportunity for them to earn service revenue. Because people care about the brands they carry and starting Q107 the Centrino brand has a Wimax product. I'm hypothesizing but we could see a replication or version of the cellphone model where Intel works with service providers to take a share of revenue to enable their service directly onto the hardware...or variations thereof.
So for the dudes stuck on the "my micro-processor is better than your's" argument, welcome to a place where hardware is a commodity, content & services are king and Apple defines the future of the consumer technology industry. And will they dump Intel. Nope - not any time soon = the next 10 years. Because Intel is bending so far backward for Apple they can kiss their own ass. And Steve has an ego...and that ego means he doesn't give a damn if AMD offers him cheaper prices like Dell does. Because Intel probably has a thousand engineers helping him customize their products for his super cool machines.
(P.S. - I made a few comments bold so that the folks who don't get it hopefully will find it easier to see the big picture I'm talking about. I'm hoping to keep this discussion strategic)
Clearly, Apple is on a path to become the Sony of the Digital World. The key difference is Sony could never string together their different businesses to feed one another and Apple is making that their operating model. Let's examine the pieces Apple has:
1. Hardware - while the iPod is their claim to fame, they have used this small device to open the doors to Apple computers again. That coupled w/ their adoption of Intel allowing Windows to operate on their systems is a powerful way to gain trial of Apple's hardware and more importantly software (inc OS). When Apple ran the Switch campaign couple of years ago, they didn't have the substance but I have to say now they do. With designs like the Mac Mini and the new set top box, Apple is beginning to address the convergence of PC & CE.
2. Software - undoubtedly Apple's OS and software are miles ahead compared to the Window's franchise...specially in terms of realiability and usability. And now with the ability to run Windows they are a phenomenal solution for consumers.
3. Content services - with iTunes and Jobs' ability to negotiate with Hollywood and the music industry, Apple will soon become the largest distributor/re-seller/retailer of content in the world. It's just a matter of time.
When you start to string these pieces together, what you get is a picture of the digital home - h/w, s/w and content along with peripherals through the iPod brand. While Rahul Sood in his blog obliquely refers to how Michael Dell didn't understand Apple's strategy with the iPod but didn't clarify, I'm going to lay out what I believe it is even though Steve and I are not on first name terms.
Apple's strategy is exactly the same as Gillette's razor/blade strategy. Their long term goal is to get a razor into every house so that they can make a ton of money on the constant replacement of blades. This is also HP's strategy for their printer and cartridges. It is every mobile phone operators strategy around the world where they subsidise hardware to earn recurring revenue on service.
The key question here is once my brand enters your existence, how do I continue to monetize that relationship. And for Apple "it's not the hardware stoopid - it's the content". Apple's goal is to become the largest distributor of digital content in the world. They will become the Walmart of digital music & movies & perhaps even games over time. As Apple's user base grows, Steve's ability to command pricing and content will grow. The key difference between Apple and Walmart will be that content unlike household groceries cannot be commodotized because every piece of content is unique.
The path to this is to make the Apple hardware ubiquitous. Which means expect more and more devices of every kind to serve every need over time. From PC's, to set top boxes and at some point even ultra-mobile PCs. If it's a way to experience connected content, Apple hardware will get there.
The impact of this on Dell and HP and every other hardware supplier is that they now risk getting further commoditized and as a result marginalized in the mind of the consumer. The hardware becomes a little more (not completely) irrelevant since all you really want anyways is the content. When was the last time you worried about what the configuration of your set top box was? The one chance the OEM boys do have is if people want to take that connected content and experience or manipulate it offline. Because to do that you need hardware capabilities. However, many non techie consumers will probably be happy to experience the content on demand and be able to transfer it to a device easily.
So if Michael Dell didn't get it, I hope he does now. As for Microsoft, boy oh boy are they in trouble yet again. If Apple owns the content experience and the hardware to deliver it, they have the opportunity to own everything behind it over time including...all the other software. Of course, Google knocking on the other side giving away free software for ad space isn't helping.
So ladies and gentlemen - kiss your stock price good bye to any technology player who doesn't have a long term strategy to earn revenue from service. And this includes AMD and Intel. Having said that, in this world of connected content, Intel has a key piece of their strategy called Wimax. And this is an opportunity for them to earn service revenue. Because people care about the brands they carry and starting Q107 the Centrino brand has a Wimax product. I'm hypothesizing but we could see a replication or version of the cellphone model where Intel works with service providers to take a share of revenue to enable their service directly onto the hardware...or variations thereof.
So for the dudes stuck on the "my micro-processor is better than your's" argument, welcome to a place where hardware is a commodity, content & services are king and Apple defines the future of the consumer technology industry. And will they dump Intel. Nope - not any time soon = the next 10 years. Because Intel is bending so far backward for Apple they can kiss their own ass. And Steve has an ego...and that ego means he doesn't give a damn if AMD offers him cheaper prices like Dell does. Because Intel probably has a thousand engineers helping him customize their products for his super cool machines.
(P.S. - I made a few comments bold so that the folks who don't get it hopefully will find it easier to see the big picture I'm talking about. I'm hoping to keep this discussion strategic)
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