1.31.2007

AMD is anti-progress

In response to the claim that Intel is anti-progress, allow me to cite just one example of how much of a progressive company AMD is:
http://tinyurl.com/2o52d2

With the drought of technical ideas, the clever folks at AMD came up with the idea of selling 2 crappy processors at the same time. Unless AMD bought shares in the energy sector, I have no clue why anyone would ever think this was a good idea.

And I’m not going to start about the useless, waste of marketing money 64-bit PCs. Anyone who’s planning to replace their “future-proofed” 4 year old PCs should thank AMD for the amazing progress that 64bit is.

1.30.2007

Q4 2006 market share

Overall
Intel down 74.4% from 76% in Q3'06
AMD up 25.3% from 23.3%

Servers:
Intel up 77.7% from 76.3% in Q3'06
AMD down 22.3% from 23.7%

Desktop:
Intel down 70.4% from 72.45 in Q3'06
AMD up 29.1% from 26.6%

Mobile:
Intel down 80.6% from 83.2% in Q3'06
AMD up 19.4% from 16.85

AMD margins fell to 40% in the last 3 QTRs from 57% a year ago.

Not all that bad then for AMD assuming of course that thier long-term strategy of "breaking the monopoly" is on course and will work before they run out of money and creditors.

1.26.2007

How AMD can stop playing 2nd fiddle

“You can always expect AMD to screw things up” – former AMD employee.

This may sound cruel and simplistic to some AMD followers but I am quite sure that a small part of their brain agrees with it. It is the part that AMD frustrates consistently that we’re never surprised whenever AMD falls back hard from the top. But one shouldn’t forget the other side of that coin: that AMD, in some weird way, manages to survive and occasionally demonstrate a spark of brilliance. But then they go off and celebrate and party and then the wheels on the bus go round and round.

In simple terms, AMD’s problem lies deep within the company. If all things were made equal except the employees, I think Intel will continue to stay on top.

Having worked in one of these companies and other multinational corporations throughout my career, I have seen stark differences on how people work and the way things are done within a company. Success boils down to leadership, collective confidence and the culture it tends to foster. Intel has always had great leaders that breed and cultivate a leadership culture throughout the company. Intel is comfortable leading in terms of technology or design. Intel knows it is the leader and acts accordingly. AMD’s response to leadership is quite different. When AMD is in front, it doesn’t feel comfortable and therefore not confident being in that position. This is why when AMD gets into the lead, they celebrate. When Intel gets into the lead, they get busy (except of course the last Core2Duo success – I think AMD rattled their confidence in a large way).
AMD’s execution and planning is usually designed as a response to Intel’s move. AMD needs Intel to show the way before it can start to act and sometimes design a better way. It is something that AMD doesn’t necessarily need; but then, it is something they “think” they need.
The question of company motivation is also an issue. I think AMD’s lack of consistency and momentum especially when they ahead of Intel show where the two companies are quite opposite each other.

I personally think that AMD is aware that they have a culture problem. We’ve seen them try to think differently and independently. They started off with the Athlon design, then the Hammer series. The fusion concept and the open platform management architecture are just some of the ways where AMD demonstrated leadership. It is a positive sign that they doing things their way. All they need to do now is identify themselves as deserving and worthy leaders. 30 years of being a follower is a hard habit to break, but acknowledgement of the problem is indeed the first step.

Success breeds success and hopefully when they come out on top once again, they stop trumpeting their success too much. If you want to beat a giant you need to stop letting it know you’re actually hurting it.

1.23.2007

AMD posts Q4 loss, cries Monopoly!

AMD said late Tuesday it swung to a fourth-quarter loss due to charges related to its purchase of ATI Technologies - a good cover for an obviously lousy quarter. AMD reported a fourth-quarter net loss of $574 million, or $1.08 a share, compared with net income of $96 million, or 21 cents a share, a year ago. Sales were $1.77 billion vs. $1.84 billion a year ago -- matching Wall Street's estimate. And that's including ATI.
Excluding the ATI Tech deal, AMD said its operating income was $63 million on sales of $1.37 billion compared with operating income of $272 million on sales of $1.35 billion. AMD offered a soft sales forecast for the first quarter of $1.6 billion to $1.7 billion as if ATI isn't expected to make sales.

Some CC highlights:

  • Hector Ruiz "spoke from the gut" and in a predictable AMD manner, called Intel a monopoly on a down quarter. It's always good to have a monopoly to blame whenever you need one.
  • Hector admitted that they forced Intel to be "efficient" and were caught off guard.
  • AMD promised to focus on cost and shift product mix as a way to fight the ASP decline
  • AMD will not bundle products, unlike intel. OEM platform design bundle offering only.
  • Quad Core server out in summer and expected to get back "perform, perf/watt crown"
  • Looks like AMD will lose more server share as they shift to 4P

Generally it was a gloomy conference call with AMD nothing much to offer in easing investor concerns.

1.22.2007

Sun's reasons for trampling on the AMD partnership

From the Sun announcement slide (with my comments on this colour):

Intel In The Enterprise
• Moore's Law strong as ever
> Higher performance, lower power, lower costs
> Transistor budgets enabling integration of enterprise technologies on to the chip
• Time to market with leading products
> First to quad core (Sun doesn't buy the 'native' quad core excuse from AMD)
> Xeon processors break broad performance records (This should be the last word on performance - OEM adoption)
• New investments, technology
> 45nm technology is healthy. Coming late 07


Why Intel?
• Technical excellence (meaning AMD is severely behind)
• Processor roadmap (meaning AMD's K8L and future proucts are poor)
• Tremendous brand and reach (AMD's useless in marketing)
• Market expansion (Demand for the Opteron has saturated, if not shriking)
• Common vision (AMD's fusion and lack of vision going forward frightens SUN)


The frightening bit about this is that SUN knows what AMD has to offer. SUN would have been in close communication about the progress of K8L. We don't know what SUN knows, but all we know is that it isn't convince with what AMD have and made a decision to go Intel.

Another Rat Jumps the AMD Ship

Can’t say we all saw this coming. It must be that AMD based SUN servers was losing market share so bad that SUN had to eat crow, swallow its pride and get in bed with its arch-rival, Intel. One could still remember the Itanium and Xeon bashing from a year ago. Again this isn’t just another design win for Intel, this is a complete admission of defeat for SUN.
From Reuters:

SAN FRANCISCO, Jan 21 (Reuters) - Computer maker Sun Microsystems Inc. will announce on Monday plans to use microprocessors from No. 1 chip maker Intel Corp., according to a source familiar with the situation, in what would be a
blow to Intel's smaller rival Advanced Micro Devices Inc.
Under the agreement, Sun Microsystems will buy Intel's Xeon chips to power its servers, in addition to AMD's Opteron chips that Sun uses, the source said.
Sun has scheduled a news conference for Monday morning at a San Francisco hotel but declined to give further details.

An Intel spokesman declined to comment. Sun has used the Opteron chips over the past two to three years exclusively in its servers, because of what has been AMD's power and performance advantages over Intel until recently, analysts said. Servers are the workhorses of computer and carry far higher profit margins than do personal computers.
… "Intel has come back and has a very credible roadmap and product line and customers are asking for it," Brookwood said.

Now with SUN relying on Intel’s market reach to push for SUN/SOLARIS, I doubt SUN will be making any more Opteron based servers. One would be na├»ve to think that there is no under the table agreement with Intel to drive customer conversion from AMD to Intel based servers.

1.16.2007

Intel beats market expectations

Key highlights and comparison to AMD's warning;

  • revenue at $9.7B, net income of $1.5B, operating income of $1.5B
  • 11% increase Q/Q (vs AMD's 3%)
  • ASP significantly up on mobile and servers, along with record shipments overall
  • margins up 49.6% from 49.1 (should be higher because of factory underutilization)

'Congratulations on the market share gains!' - Goldman Sachs

2006 key events:

  • Intel completed the development of its next-generation 45nm process technology which is scheduled for production in the second half of 2007.
  • Intel launched the industry’s first quad-core microprocessors for volume servers and PCs, further extending the performance records established by the Intel® Core™ microarchitecture. Since launch, Intel’s dual- and quad-core processors based on the Intel Core microarchitecture have received more than 50 awards from publications and magazine editors worldwide.
  • Apple* announced a new Apple TV product that uses a low-power Intel processor and chipset to help stream premium music, TV shows, movies and photos from personal computers to widescreen TVs.
  • Intel demonstrated its first mobile WiMAX silicon which is being designed into solutions that will give future laptops and mobile devices broadband access over both WiFi and WiMAX networks, automatically seeking the best available connections.
  • Intel began volume shipments of the industry’s first 65nm NOR flash chips featuring multilevel cell technology that stores two bits of data in each transistor.

Overall 2006 was not a good year compared to 2005 in terms of profits. But it appears that Intel ended 2006 in a better position that AMD. It looks like 2007 will be flat as the competetive environment with AMD will continue. The question is, how much more can AMD take any of this as Intel continues to ramp Core2 and at the same time start 45nm.

1.15.2007

Intel earnings sneak peak

Here’s a sneak peak on tomorrow’s Intel earnings report. I can't tell where I got it from.

Intel margins back in the 50’s (approx 50.9%) due to strong demand on high ASP parts (specifically, mobile and servers). Intel’s revenue is up 10% from the previous QTR at the high end of guidance at ~$9.68B. Intel predicts strong 2007. FY07 outlook raised 2 cents on EPS from previous estimate as it predicts to take back significant share from AMD.

Unofficial Intel response to AMD’s claim that their poor quarter is due to the ongoing price war: “What price war? Intel is not in any war of any type.”

I guess if you warn in a supposedly good quarter while the competition outpeforms, you’re really in a lot of trouble.

1.12.2007

Sharikou responds to AMD's warning

How do you respond to a situation when the essence of your blog, to preach Intel’s bankruptcy in QX’XX, falls flat on its face? What do you say when the company you lay claim will become the industry leader fumbles and reports a warning?
One way is to present information that suggest that AMD is going through a difficult but temporary situation and another way is, well, if you don’t really know anything, is to make up a childish fictional phone call conversation between the rival’s CEO and Chairman.

Looks to me like a very poor attempt to rid the people who support Intel the joy of seeing AMD suffer. Who the hell cares about Paul not getting his bonus?
Try again Sharikou, because we can still remember “AMD frags 75% of Intel’s”, “Intel frags itself with Core2Duo”, “Intel BK in Q2’08”. Absolute classics.

AMD Warns!

From the Washington post:

SAN FRANCISCO (Reuters) - Microchip maker Advanced Micro Devices Inc. warned on Thursday that fourth quarter revenue would fall short of analysts' estimates and operating earnings would be substantially lower than in the third quarter, citing lower average prices for its chips.
AMD said that it now expects revenue in the fourth quarter to rise about 3 percent from the third quarter, implying revenue of about $1.37 billion.
Partnership

In mid-October, Wall Street analysts, on average had projected fourth-quarter sales of $1.44 billion, which excluded revenue from graphics chip maker ATI, which AMD acquired later the same month.
It said fourth quarter operating income, excluding acquisition related charges and certain results from the purchase of ATI, "is expected to be positive but substantially lower than in the third quarter."
Shares of AMD, Intel Corp.'s smaller rival in the processor business, fell more than 2 percent in extended trade after the company issued a two-paragraph statement late in the day.


The scary bit is they're just talking about AMD revenue separately from ATI which we all know by know is increasingly losing money. AMD's profitability in 2007 is really questionable with nothing in sight to turn things around.

For those of you who doubted my predictions, don't worry. I'm not the type of guy that says "I told you so".

1.10.2007

Intel tapes out 45nm Penryn while AMD stll at 65nm birth pains

Report from Dailytech:

http://www.dailytech.com/article.aspx?newsid=5657

"Sources inside Intel have confirmed the company recently received the taped-out 45nm Penryn processor. Reports from the ensuing champagne toast claim the first Penryn boot was capable of booting Windows."

Intel's core architechture that obliterated AMD's processors from the gamers and enthusiast landscape is coming soon for another round of beating. Already competing against intel at 3 price points down, this will further drive AMD to the Celeron market.

1.08.2007

AMD 2006 CC Prediction

Here is my prediction for AMD’s financial report.

AMD will report record shipment. In reality this isn’t as good as it sounds as this is the nature of the industry. AMD will also report record earnings. But what AMD will not report is the proportion of increased shipment to the actual profit. In fact, AMD’s profit in Q4 will drop 40-50%.
But, as much as I wish it, I cannot agree with Sharikou180 that ATI will put AMD in the red.

AMD said that they will be dilutive at the beginning of the year and accretive exiting 2007. This is hard to believe as I don’t see the ATI branch of AMD becoming profitable now that they’re slowing losing the Intel platform business. If they honestly believe that Fusion will turn anything around, they should look at how they thought 64bit adoption is widespread by now.

AMD gross margins will be in the 40’s, thanks to ATI. ATI’s gross margin for 2006 was at 23%. Now AMD will understand the hard way the real reason why Intel refuses to compete in a 3-way discrete graphics competition. Intel only wants high-margin businesses.
AMD’s operating expense will look ok for the last time this quarter. They will admit how their depreciation cost it will double in 2007 as Fab36 is year+1. They themselves predicted at $1.5B, up from $700M. Again revenue isn’t predicted to double next year.

Overall, 2006 will be a good year for AMD but the outlook will dampen investor confidence.
You will hear inventory questions during the CC but I don’t think this will affect the Q4 results. This will hit AMD in Q1’07 as OEM inventories are paid for. OEM cancelled orders will hit AMD in 2007. You can only sell inferior products up to some point.
As per advice from their legal team, you will hear vague description of market share gain as AMD will become increasingly aware that they are in fact losing to Intel. Listen to what weird market segment they will describe now as the area where they gained. Probably something like how they gained market share in the Green Home Business Enterprise er… Network segment. Similar to how they coined the dead-on-arrival platform 4x4 as for the MEGA-TASKING users.
You will hear AMD talk more about its business model and commercial market acceptance and less about product performance and how their ASPs are continually being driven down to compete with P4’s.
You will hear AMD talk more about their business strategy and coming product releases and less about current ones.
Again, it will be an average CC earning report in spite of the benchmark mauling AMD is getting from Intel. But it get’s harder and harder for AMD to put up a happy face and try and cover up the obvious fact that they have a pissed 800lb gorilla of a competition to contend with.

My grim prediction for AMD is the cancellation of the NY Fab for 2007. This will be pushed to 2009 and most likely be cancelled by then. Intel’s 45nm in late 2007 and 32nm in 2009 will finally relegate AMD into a pseudo-competitor similar to early 90s.

1.07.2007

Another Bad Prediction from Computer Business Review

It's funny when you think that Intel is supposed to go bankrupt two quarters after 2007 according to some delusional blogger.

From Computer Business Review:
Advanced Micro Devices Inc faces new pricing worries and increased competition from arch rival Intel Corp during the next few quarters, according to new research from Wall Street investment firm Goldman Sachs.
The upshot will be weak fiscal results throughout the year for AMD, said the banker in a research note.

Several factors are at play, warned Goldman.
Notably, excess capacity in the supply chain will continue to weaken prices for CPUs in 2007, it said. While many device makers have increased their semiconductor inventory levels for the past several quarters, Goldman foresees a few more quarters of weak fundamentals as the supply chain corrects for the current build-up of excess inventory.
In their most recent earnings announcements, both AMD and Intel said the bloody pricing war of the past 18 months or so had begun to subside. But Goldman said excess supply may very well persist.
Part of its pessimism is that AMD continues to ramp capacity aggressively, having recently announced that it will grow its capital spending by 32% year-over-year to about $2.5bn this year. The company is adding capacity by ramping its first 300mm fab, called Fab 36, and by transitioning its 200mm Fab 30 to a 300mm fab, which will become Fab 38.
And if Intel's budget, which has yet to be released, is flat or up year-over-year, then Goldman said the supply glut would be further exacerbated.
Goldman also sees higher depreciation expenses at AMD while it ramps capacity this year. "The significant ramp in fixed costs is not absorbed by the share gains that the company expects," Goldman said.
Indeed, Intel will gain market share during the first half of the year, while share gains in the second half are potentially up for grabs, said the banker. Mercury Research has noted that Intel's launch of more competitive products during last year's third quarter saw it gain share for the first time in several quarters.
And while AMD likely got a one-time boost from its new business with Dell Inc during the fourth quarter of last year, Goldman Sachs said it expected Intel to be better positioned than its smaller rival in the first half of '07. In other words, AMD may snatch some market share in the fourth quarter, but Intel will begin to grab some back during the next few months.
During the second half of the year, "the competitive dynamics of the industry may shift again as AMD introduces its quad core processor, which is a true monolithic quad core die while Intel's current quad core product consists of two dual-core die contained in a single package," said the banker.
Goldman said it was too early to call which company will be in the better competitive position in the second half because it will depend on whether Intel launches its "true" quad core earlier than expected and whether it is aggressively adopted by the industry.
The banker also pointed to "significantly higher" interest expenses at AMD this year following the $2.5bn debt it raised to buy graphics-chip giant ATI Technologies Inc last October for $5.4bn.
Also, ATI likely lost "significant" Intel business in the last quarter of 2006 as a result of AMD's acquisition, noted the banker.

1.04.2007

AMD's lack of competitiveness is catching up

From Streetinsider.com:

Advanced Micro Devices (NYSE: AMD) is getting whacked this AM by several negative comments:- Goldman Sachs is downgrading AMD to Sell from Neutral, as they expect a weak P&L throughout the year given the significant ramp in fixed costs, a weak CPU pricing environment in 2007, and increasing competition from Intel in CY1H2007.

- ThinkEquity's Eric Ross notes that inventories at AMD have suddenly built in the channel, andprices are plummeting. The firm believes the channel is angry, and PC OEMs are expressing concern about AMD's roadmap (particularly mobile). They fear this will translate into share loss to Intel. With the price war between AMD and Intel re-igniting, they believe AMD has little opportunity of meeting the high expectations for GM and OM it set on its recent analyst day. With capacity building in the channel and the risks of missteps in executing its merger with ATI, ThinkEquity lowers rating to Sell and price target to $15.

Since Mr. Ross and his team returned from Asia at the beginning of December, AMD inventories have built in the channel from essentially zero to roughly one month. They note inventories were extremely low due to all of AMD's production capacity being allocated directly to PC OEMs. This implies that programs for major OEMs are not going well, or are being cancelled.

The firm has heard from several channel sources that distributors now saddled with AMD parts are rapidly cutting prices to unload these parts. Many distributors are worried they will lose money on these parts (and are not happy about it).

Intel's early release of its new quad core chip at extremely competitive prices will further pressure AMD to lower prices and further impact gross margins. With no real end in sight to the now-beginning price war between AMD and Intel, the firm believes AMD's gross margins could fall into the mid 40% range with little chance of meeting the targets (50% +/- 2%) it laid out for 2007 at its analyst day on December 15.Rating goes to Sell from Buy with tgt cut to $15 from $30.

Notablecalls: Ouch! AMD most likely going sub $20 today. The GSCO downgrade is a non-event but the comments from Eric are just plain ugly.
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I think it's fair to say we've all seen this coming. Someone once said that you can always expect AMD to screw things up. It will never be comfortable being in the front seat. It doesn't have the confidence nor the vision to plot the future.