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I know what you are saying. When I read this I thought the same way. But the reality is that these so called dumb analysts control the stock movement in short run. These folks also control the sentiment.
Intel’s ‘Medfield’ Has no Edge on QCOM ‘Snapdragon,’ Says Nomura
By Tiernan Ray
Nomura Equity Research‘s Romit Shah today reiterates a “Reduce” rating on shares of Intel (INTC), and a $19 price target, writing that the company’s “Atom” smartphone chips are trailing offerings from Qualcomm (QCOM), Nvidia (NVDA), and other companies that license the chip designs of ARM Holdings (ARMH).
Shah takes as his point of departure remarks by Intel management to the effect that the “Razr i” smartphone from Google‘s (GOOG) Motorola Mobility unit, running Intel’s “Medfield,” offers superior performance and battery life to phones using Qualcomm’s “Snapdragon” family of chips.
Writes Shah, his firm’s comparison of phones, specifically the Razr i versus the “Razr M” using Snapdragon, suggest Intel is not factoring in the greater drain on battery of the “long term evolution,” or LTE, 4G wireless radio in the Qualcomm models:
The battery life comparison for RAZR-I versus RAZR-M does not factor in the difference in cellular radios. LTE radios can consume 25-30% more power than 3G radios. And it’s our understanding that all of Intel’s offerings lack LTE support. This difference could explain the 10-15% better battery life for the RAZR-I. In addition, when looking at aggregate performance benchmarks, Medfield doesn’t seem to be ahead in performance. Furthermore, the current OEM design pipeline is based on next generation ARM SoCs, which are two times better in performance than Medfield.
As for performance, some benchmarks show there’s no advantage for Intel outside of raw Web browser speed on phones, he writes:
Some of most frequently used JavaScript based benchmarks include SunSpider, V8, and Octane. These benchmarks are generally useful when optimizing the JavaScript engine and making them run faster generally leads to better performance for many of the web applications. These benchmarks’ results are often available from various third-party sources such as AnandTech. While Medfield appears to have superior performance on SunSpider (50% better than Snapdragon), it scored below Snapdragon and Tegra 3 on the other two benchmarks. We also note that Intel has always fared better in browser speed based benchmarks like SunSpider. If we look at the aggregate performance across these three benchmarks, Medfield doesn’t seem to have performance advantage versus Snapdragon.
Shah expects Intel will continue to make progress as it moves its chips to 22-nanometer feature sizes, but he thinks Intel faces other obstacles, including “vertical integration, convincing OEMs to essentially use a single source for x86 chips, and likely unwillingness from customers to split
R&D resources between ARM and x86 based designs.”
Intel shares today are up 10 cents, or half a percent, at $20.75. Qualcomm shares are down 60 cents, or 1%, at $63.75.
I agree with this and has been stating the same. Intel should not give away its process advantage just to get Apple's business.
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Intel: Goldman Sees Margin Hit if They Took Apple’s Foundry Biz
By Tiernan Ray
Goldman Sach‘s James Covello late yesterday reiterated a Sell rating on shares of Intel (INTC) in a note to clients that wades into the discussion over whether the chip giant might get some of Apple‘s (AAPL) contract manufacturing business away from Samsung Electronics (005930KS), a prospect, he writes, that should concern investors if it were to come to pass.
Writing that he has been fielding “a significant amount of investor interest regarding Intel becoming Apple’s foundry given Intel’s current excess capacity and Intel’s manufacturing ability,” Covello goes on to opine that getting Apple’s business would be bad for Intel’s gross margin, at an estimated 25% to 30%, or what he deems a “drag of about 400 basis points” to Intel’s gross margin, on a blended basis with the rest of Intel’s business. That’s assuming total revenue of perhaps $8.9 billion come 2016, if it were to happen.
Covello relies in part on estimates from Goldman’s Samsung analyst, Michael Bang, who predicts Samsung will see as much as 80% of its foundry business with Apple go away over the next five years.
The rumors about such a deal remind Covello of the bounce Intel saw when it started making NAND memory chips with Micron Technology (MU) in 2005, only to be followed by an 11.5% decline in the three months that followed.
Covello thinks that rather than going after foundry business, Intel ought to just rein in capacity to boost margins:
We believe that Intel should reduce capex and capacity, which should allow margins to recover to 60% plus during the next cycle by keeping its factories full with its own higher-margin MPUs.
Intel’s CEO, Paul Otellini, who is stepping down in May, said in an interview at a Sanford Bernstein conference last Wednesday in San Francisco that Intel is interested in expanding the foundry business, but that it depends on getting the right kinds of strategic customers and not getting paid on the same “cost-plus” basis as Taiwan Semiconductor (TSM) and other contract manufacturers.
Previously: Samsung: Minimal Downside if Apple Walks Away, Says Bernstein, December 10th, 2012.
Intel: Raymond James Cuts to Sell; ‘Gross Margin Nightmare’ Possible, December 5th, 2012.
Some one did say that these new processors will not effect margins. In fact it was stated that Intel will care little if customer chooses ATOM or Xeon.
I am pleasantly surprised to see the announcement play out very well. It is covered by every news organizations/websites. There are comments from major software companies and top hardware companies as well.
Here is more from software companies about S1200 ATOM product line
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http://download.intel.com/newsroom/kits/atom/s1200/pdfs/Intel_Atom_S1200_ISV_Testimonials.pdf
Considering 20 companies are using this product family, it is in volume production. The only question is whether CT/CT+ is in volume or not.
Yes. It will stop ARM momentum if it had any. It also kills AMD strategy to go with ARM. Intel products are available now when ARM based will not be available till 2014.
The following comments from the article on baron.
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http://blogs.barrons.com/techtraderdaily/2012/12/07/this-morning-cisco-talks-software-services-sex-aapl-in-the-u-s-a/
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Shares of Advanced Micro Devices (AMD) are up a penny at $2.35 following last night’s announcement the company cut back on how much it expects to buy from manufacturing partner GlobalFoundries. Although the company expects that to help it get cash flow positive, some were skeptical this morning.
Craig Berger with FBR Capital reiterates a Market Perform rating, writing that the company is going from being almost “cash neutral” last year to debt-heavy, “suggesting management will need to raise additional financing for AMD before exiting 1H13,” a scenario that is “not enticing” for investors, he thinks.
I doubt it can compete on graphics. Based on your mail from yesterday integrated graphics from Intel is eating AMD and Nivdia lunch.
On tablets, it is too late to the markets. Even Intel is having its trouble.
The only hope is micro server strategy which Intel has already covered through ATOMs. It might give AMD a few more years but
I believe the game is over.
Exactly. Why pay $115M+$320M(fine) for $500M+? The only way you will do it as you could not sell these parts for penny.
I was going to post as well but you beat me to it. What impact it has on Intel? Is this related to AMD products or in general PC market is really bad.
It is Intel choice to have some one use its factories. It has a right to charge what it thinks is appropriate. I understand factory utilization is low but to help your most fierce competitor is not acceptable.
That Intel will not build/fab parts for its competitors and apple is its biggest competitor in my mind.
The only way Intel will allow for Apple to use its process if it agrees to use x86 along with some of its own IP which will create a unique x86 processor.
Elmer,
You are right that is not clear but I believe it will not happen and this reporter is also thinking on those lines.
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As I mentioned this morning, there’s been speculation for some time now that Intel might take some of Apple’s foundry business from Samsung Electronics. Nothing about Otellini’s remarks, however, indicates that will necessarily happen.
------------------------------------------------
There was a link to audio in the same article. I will recommend listening to that.
Intel lead on trigate(22nm) is so huge that PO clearly stated that no one has it and not even close.
It is quite clear from the article that it will not be Intel competitors and Apple is its customer and its competitor.
Elmer,
That is what I was trying to say in one my post whether Intel will offer foundry services to Apple just to fill the factories even in exchange for future design in ipad.
Building chips for Apple has to stand on its merit as Intel does offer the best in class. Why offer that on cost basis and not on value basis.
I am glad Intel clarified that
alan81,
You must have seen WMBW response to my post. That was link I was going to post.
Yes that is true. Now it is a question of demand in Q4. Having worked in Intel along with some other folks on this forum, Intel is a very conservative company. I do believe in its management but analysts don't buy the argument and to them it is dooms day scenario.
WBMW,
Utilization is around 50% per Intel CC from last quarter. How Intel responds to that is very critical to GM. How much it drops-no one knows. I think it is the biggest concern of the market and as the result you see it reflected in Intel stock price.
Extreme view from one analyst
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AAPL: Sundal Collier Starts at Sell, $400 Target; ‘Cycle of Vogue’ Ending
By Tiernan Ray
Per Lindberg of Oslo, Norway-based investment bank ABGSC Sundal Collier yesterday published a rare thing: an initiation of coverage of Apple (AAPL) with a Sell rating and a $400 price target.
Writes Lindberg in his lengthy report (102 pages), Apple’s products “are no longer unique,” phone companies are looking for alternatives, and customers are “suffering from ‘fashion fatigue’.”
“For all its commercial success, marketing prowess and brand image, Apple is bound to enter a phase of much stiffer competition, far tougher comparisons, and, materially less generous operator subsidies,” writes Lindberg.
Apple’s problems in the last few months with the change in its mapping application is the indication of a broad decline, he suggests:
The maps fiasco – affecting hundreds of millions of users of iOS 6 – serves as a crude reminder that all cycles of vogue eventually come to an end, as spirits of innovation give way to acts of protection – in quite vivid display today. Anticipating sharply decelerating earnings growth next year, followed by absolute erosion thereafter […] At this juncture, there is also another common force which may rouse concerns about Apple to vigorous life. Competitors are stepping up their campaigns to not only close the lead that the Cupertino company has enjoyed, but also to displace it as the architect of the world’s most popular ecosystem of software and services. The facts speak for themselves: (i) Google’s Android outsells Apple’s iOS by a factor of 4-5x in terms of monthly smartphone activations, (ii) Samsung ships nearly twice as many units of smartphones on an annualised basis (with sales values on a par with Apple’s), (iii) the iPad is quickly ceding market share to the tablets powered by Android and Microsoft’s freshly launched Windows 8. The patterns discerned are illuminating and ominous in equal measure. Apple may have fostered the rush of upgrades from feature phones to smartphones and from laptops to tablets through its eye-opening creation of the iPhone and the iPad, but the mass industrialisation process is progressively taken over by others willing to embrace a horizontal model. Unlike Apple, which remains tightly proprietary on both the hardware and software/services fronts, Google and Microsoft are making their ecosystems available to third parties (competitors and customers alike). We take the view that in a market as large, as commoditised and as complex as consumer electronics, open systems will eventually push those that are closed, into obsolescence. The upshot is that the day Apple fails to make leap-frog innovations, then it is highly exposed to wars of attrition in contention with dozens of manufacturers powered by operating systems, value-added applications and online services controlled by its arch-rivals Google and Microsoft. As judged by the lacklustre reception of Apple Maps (wholly inadequate in terms of accuracy and completeness), iPhone 5 (plagued by iOS 6, manufacturing difficulties) and the mini-iPad (a rather immaterial size reduction of iPad 2), there are tangible signs that Apple no longer moves ahead at a pace required to avoid vicious price wars.
Amidst a raft of problems — including “Microsoft (MSFT) getting its act back together with Windows 8? — Lindberg sees substantially lower revenue and earnings per share in coming years versus consensus.
For 2013, Lindberg models $180.6 billion in revenue and $44.90 per share in net profit. That’s below the consensus $193.09 billion, and $49.95 per share.
For 2014, his numbers drop to $186.35 billion and $40.17 per share versus the Street’s average $223 billion and $58.62. Lindberg also sees gross margin that year dropping from 42% in fiscal 2013 to 39%, below the Street’s 41% average estimate.
Lindberg values the stock based on a sum-of-the-parts model, after mapping out what he expects to be revenue declines in each of the company’s divisions by 2020:
Our sum-of-the-parts analysis, extending until 2020, makes explicit assumptions on levels of revenues, operating profits (a proxy of cash), pay-out ratios, return requirements and exit multiples (based on normalised returns at the end of the forecasting period. As set out in the summary table below, we arrive at an aggregate market value of USD ~380bn, equivalent to around USD 390- 400 per share, of which nearly 45% is attributable to the surplus on the balance sheet, around a third to iPhones, about a seventh to other operations, notably the value added applications and services, and a rather modest 6% and 3% to iPads and Macs respectively. It is noteworthy that from the perspective of the enterprise value, the iPhone represents close to 60% of the total, other operations approximately a quarter, leaving ca 15% for hardware design typical traditional computer screens.
Apple shares today are up $3.12, or half a percent, at $588.40.
I get that but why would any one especially when you have a leg up on every one else from process point of view agree to favorable terms to Intel.
Best things in life gets cost you more and the same is true in this case. Premium process should get you premium pricing.
Intel is also in talks with Cisco. That should take care of some the excess capacity.
Apple is ruthless negotiator and it approaches from position of power. It would like to get the best price and so would Intel would like to get best price for the wafer. Intel will not do deal just to fill its factories. There is down size to that and if there is no way to utilize those factories, Intel GM will come down bring Intel stock with it.
If Apple would agree to certain products to have Intel inside, then it might work. The problem with that approach is one is dependent on the success of that products. If that products does not do well in market place, what is the value in that.
I also agree that some special variants of Atom for Apple is the proper way to do that.
Agreed. Intel has Lenova and Motorola in China where the volumes are. I believe ZTE is als0 in China.
He may be biased. But you can't argue with his reasoning. Even Intel admitted that factory utilization has come down significantly.
Yes, if it can be done then it will be fine. But at the moment, the extra capacity is not being utilized with mobile chips and PC chips are not needed in the original qty. planned.
That is why I believe the reasoning of Goldman Sach is correct. It may be wrong in estimating Intel target price of $16.00
I don't like it but reality is that Intel GM will come down.
Surface RT not doing that great.
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Microsoft (Nasdaq: MSFT) shares are lower Thursday morning amid speculation out of Digitimes surrounding Surface RT orders.
According to the report, upstream suppliers to Microsoft for its debut tablet said that orders have been sliced in half. Digitimes' sources said that it isn't the quality of product that is losing sales, rather that the Windows 8 platform may not be performing as well as expected.
In total, Digitimes thinks that orders currently sit at 2 million units, half of the four million Microsoft expected to sell by the end of 2012.
With sales of Surface RT lagging, Microsoft might need to debut its Intel (Nasdaq: INTC)-based Surface Pro sooner than expected. The Surface RT runs on an ARM Holdings (Nasdaq: ARMH) chipset design.
To strengthen sales, Digitimes sources suggested the Microsoft might cut the price of the Surface Pro to make it more competitive.
Again, this is just chatter from one source. Microsoft is seeing a little pullback today following its annual meeting held yesterday, with shares down about 0.3 percent on the session.
Samad,
The reason is over capacity if Intel does not sell what it can produce. It is poor utilization of factories which brings margin down.
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In keeping with their negative view of the stock, analysts at Goldman Sachs maintained a Sell rating on Intel (Nasdaq: INTC) and lowered their price target to $16.00 (from $20.00). The problem, in the view of Goldman, is margins.
"We expect excess supply as Intel and AMD (NYSE: AMD) have record inventory," warned analyst James Covello. "Our hardware team expects the PC unit CAGR to be zero from 2011-2014E, and we believe the full extent of Intel's new capacity has yet to come online,"
Corvello noted that Intel stock is highly correlated to gross margin, which could take a hit as supply builds.
"Intel's 3Q12 capex was its second highest ever, suggesting that significant supply will come online for several more quarters and exacerbate current excess capacity," added Covello.
For the record, Covello's Sell rating on Intel is based on cyclical concerns. In other words, it is not a call related to the so-called 'death of the PC'.
Goldman lowered Intel's 2013/2014 EPS estimates to $1.60/$1.90 from $1.70/$2.05.
For an analyst ratings summary and ratings history on Intel (Nasdaq: INTC) click here. For more ratings news on Intel click here.
Shares of Intel closed at $20.09 yesterday, with a 52 week range of $19.23-$29.27.
Very good article. Even the comments from various readers were amazingly good.
May be our Brits friends can comment on this rumor
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ARM Holdings plc (NASDAQ: ARMH) is seeing upside action Wednesday on rumors Intel (NASDAQ: INTC) might just throw in the towel on mobile and buy the UK-chip company who's technology is licensed by Apple and other leading smartphone makers.
The U.K. Mail Online reported that, "Dealers heard whispers that off-the-record talks have been held between the two companies."
While this publication is well known for spinning a yarn or two, they should be given the benefit of the doubt in this case since the company in question is headquartered in their own backyard.
Adding fuel to the fire is the recent news that long-time Intel CEO Paul Otellini will be stepping down in May of next year. As the U.K. Mail put it - "A move for ARM could prove to be Otellini's swan-song and word is he would be prepared to go hostile should the two boards not agree on a 'friendly' deal."
And a good buy it would be. Royalties for ARM are picking up while the industry is slowing down. In Q3, royalties rose 27 percent and the company is gaining share in its mobile segment in addition to TV and MCU. The company's Cortex A processor was the big driver of growth, although growth elsewhere has proven illusive. ARM's backlog was up 6% sequentially in Q3 and royalties rates per unit are on the rise (4.9c vs 4.8c).
Shares of ARM are up 1.5 percent Wednesday to $36.95, while Intel is flat at $19.90.
Intel: VMW’s Gelsinger or Moto’s Jha Would be Decent CEO Picks, Says Argus
By Tiernan Ray
Reflecting on the retirement next May of Intel (INTC) CEO Paul Otellini, Argus Research’s Jim Kelleher this morning reiterates a Buy rating on the shares, while cutting his price target to $25 from $30, writing that among the many potential candidates to replace Otellini, both inside and outside the company, he thinks former Intel VP Pat Gelsinger, age 51, now CEO of VMWare (VMW), has the kind of data center expertise that Intel might need.
Kelleher’s lower price target follows a cut in projected EPS this year to $2.21 from $2.26, reflecting what he describes as “the slow Ultrabook adoption,” referring to the slim, sleek notebook computers that Intel has been pushing with partners.
“We believe that Intel will require or at least prefer an individual with CEO experience; familiarity with Intel’s culture; and most pressingly, first-hand experience in the technology reshaping the data center,” writes Kelleher.
“That leads us to former Intel hand Pat Gelsinger, though there is no guarantee that Intel can pry Mr. Gelsinger from VMware.”
Kelleher handicaps the possible appointments. He dismisses rumors in the blogosphere of names such as Scott Forstall, the recently departed software luminary from Apple (AAPL), Microsoft’s (MSFT) former Windows veep Steven Sinofsky, and former Advanced Micro Devices (AMD) CEO Dirk Meyer, all of whom seem to him “curious” picks.
Kelleher also breezes past recent VP promotions, including Stacy Smith, Intel’s CFO; Brian Krzanich, the COO, and Renee James, head of software, instead focusing on Gelsinger and former Motorola Mobility CEO Sanjay Jha:
If Intel’s issue is mobility, why not take Sanjay Jha, idled by Google’s acquisition of Motorola Mobility? […] Mr. Jha, presiding over the birth of [Qualcomm's (QCOM)] Snapdragon, is arguably the man who made ARM cores into a mobility monolith. And by bringing the first Android phones to market (we remember him walking around a table at a Motorola analyst day, showing off the first Droid), he set Android on its way to market dominance. But Intel believes it has a mobility strategy built around its ATOM line. The company has too much invested in its x86 architecture, its “tick-tock” timing, and its relentless push to get smaller, to complicate the issue with a man whose paycheck says Intel but whose heart belongs to ARM […] In 2009, Pat Gelsinger left a leading role at Intel because the path to the CEO post appeared closed […] Mr. Gelsinger, it should be noted, does not come from the mobility side, though we believe that Intel is confident it can reach its goals in the mobility space with its existing engineering and architectural roadmap. As it deploys its “tri-gate” three-dimensional architecture and shrinks even further down from the 22-nm process of Ivy Bridge, Intel CPUs should begin to compete with ARM-licensed products on power-thriftiness. If Intel can differentiate beyond computing and application processing, for example into tighter graphics-compute integration with hard-wired (McAfee) security, it could have a competitive product without having to steer off the roadmap. Mr. Gelsinger has been immersed in virtualization and cloud at EMC and VMware, and it is here in the data center that Intel needs to lead. There are risks to the Xeon line as ARM will make its belated push into PCs and the data center. Far up the food chain in the semiconductor capital equipment space, Applied Materials CEO Mike Splinter reports that while mobility is fueling current memory demand, the adoption of cloud-based storage is tempering memory demand growth for the long term. Utility-based data storage, like utility based electricity, requires less local content as data needs are met from central repositories. In short, fewer servers, data storage arrays, and PCs will eventually be required in the era of virtualization and cloud. With Mr. Gelsinger, Intel would have an experienced hand immersed in virtualization, cloud, big data, and all the other next-generation data center developments currently transitioning from first-mover trend to status quo. If Mr. Gelsinger says no, and there is at least a 50-50 chance he would, we would expect Intel to consider Mr. Jha.
Part of Kelleher’s argument lies in the notion that Intel may have to stop depending on merely appointing those with familiarity with manufacturing. It will have to consider not just its own x86 products but also accommodating devices based on ARM Holdings (ARMH) chip technologies:
Intel has historically operated as a vertically integrated semiconductor company, making expertise in factory operations a key consideration in the CEO search. In the future, we could see Intel adopt more of a hybrid approach (what Motorola used to call “asset light”) and even make ARM-interoperable products. Even as ARM is pushing into the data center, we think that Intel’s belated push into smart devices and tablets holds more opportunity.
Intel shares today are up 36 cents, or 1.9%, at $19.72.
http://blogs.barrons.com/techtraderdaily/2012/11/23/intel-emcs-gelsinger-or-motos-jha-would-be-decent-ceo-picks-says-argus/?mod=BOLBlog
Design wins have a limited value. OEMs still need to produce products. These new design wins are on top of the existing design OEMs have. so it is a dilemma if OEMs decide not to make enough. Intel has no infrastructure to produce them and move the market under such circumstances.
But it will happen over the next a few months, I am certain about it.
That is exactly my point. These door busters sale are for a very limited amount of qty. Sometimes less than 100. So it is not a big deal at all.
But Intel not having a presence in tablets does hurt big time.
I would like to see that but unfortunately time has run out for this holiday season as far as Intel is concerned.
I see a lot of TV ad for convertible laptop/tablet combo. They really look good.
Yes. You are correct. May be to bring the cost down below $200.0, it had to go ATOM.
This might also explain the volume of Intel selling billions of SOC-for smart phone and tablets/cheap laptops.
This Chromebook has Intel inside-dual core ATOM.
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DateLine: Nov 23 (Reuters) - Acer's $199 Chromebook Sports Surprise Inside Time/Date: 11:30 GMT - Fri, 23 Nov 2012 Title: Acer's $199 Chromebook Sports Surprise Inside Source: The Street Description: Acer's $199 Chromebook Sports Surprise Inside View Show: http://insider.thomsonreuters.com/link.html?cn=share&cid=997352&shareToken=MzU6NWMyN2Y1MjItZTIwMC00MmFmLTg0OTQtYmUyOTg2ZDFmNzA4&playerName=ReutersNews (To access all exclusive Reuters Insider programming visit: http://insider.thomsonreuters.com) Short Link: http://reut.rs/TfThwF
Who ever thinks he was forced out should read this.
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12:35 PM
Intel Chair Bryant Tried to Get Otellini to Stay; ‘Cherished’ CEO’s Departure ‘A Hard Day’
By Tiernan Ray
Intel chairman Andy Bryant says it’s a sad day as the company accepts CEO Paul Otellini’s decision to step down in May.
Following Intel‘s (INTC) announcement this morning that CEO Paul Otellini will step down, Intel chairman and former chief financial officer and Andy Bryant , himself a 31-year Intel veteran, was kind enough to spend a few minutes by phone talking with me a short while ago.
He said he was surprised when Otellini told him last week he would retire. Although Bryant had talked with Otellini in past, “We were targeting further out” for a transition, said Bryant. “I thought I would have more time.”
Bryant said he’s been talking with Intel executives and employees, and that “It’s a hard day here at Intel; Paul is extremely cherished and valued.”
Bryant said although he tried to get Otellini to stay, Otellini felt it was time to turn over the reins to a new generation as Intel admittedly faces challenges in the mobile computing arena — challenges, however, that Bryant feels Intel can meet through its superior chip-making technology.
Following are more extensive remarks by Bryant:
He and I talked a lot about this in past. After almost 40 years at Intel, and the Intel CEO job for 8 years, which is a really hard job, he felt it was time to move to the next generation of leadership. We do have big issues in front of us, moving to the tablet and phone markets, and he was ready to let the next generation lead those battles. I did everything I can think of to buy myself another year [of Otellini's leaderhip]. We were targeting further out for this. He surprised me last week when he said this. We do need to look both internally and externally, I think that’s good governance and appropriate. We’ve got five very senior executives, including the three promoted today [Renne James, the head of software; Brian Krzanich, the head of manufacturing; and Stacy Smith, Intel’s CFO] as well as Dadi Perlmutter [head of Intel's mobile efforts] and Arvind Sodhani [president of Intel Capital] who are important to run Intel into the future. We generally think we have a deep and strong bench. Paul made his decision last week and by SEC rules, we have four days to make a public announcement, and so we are just now at the beginning of a process we didn’t expect to have to conduct. Paul has a very strong record of achievement. On the manufacturing front, we’re ahead of Samsung [Electronics (005930KS)] and everyone else in the world. We’re shipping the most advanced [semiconductor] process, and providing chips in smartphones outside the U.S., and in tablets inside the US. The ultrabook is remaking the PC market. We’re pretty comfortable with where we are technically. This year, we have to continue to push the power/performance envelope. We’re the best in the world with the technology and as good as anyone with efficiency. Meaning, one is the best science, and the other is the best process technology. I would expect Samsung and others to continue to make progress, and you never assume people you are competing with will stop the technological advance. But we expect to take advantage of the increasing gap in technology we’ve established. My intention is to be around at Intel for a substantial amount of time. I’ve been talking with quite a few executives and employees at Intel. It’s been a hard day here. Paul is extremely cherished and valued, and above all, this was his decision.
Intel shares are up 3 cents at $20.22, having recovered from earlier losses.
AAPL, GOOG Grab Profits in ‘Disruptive Mobility,’ Says Barclays; Beware ‘Capital Strike’
By Tiernan Ray
Ben Reitzes with Barclays Capital, along with colleagues from different businesses, today offered up a mammoth (151 pages) report on what he claims is “disruptive mobility, changing the face of tech,” in which he claims the winners will be a gaggle of companies that will benefit from “a trend toward ultra-mobility and apps so powerful that it is remaking the technology sector.”
As you’d imagine, from Reitzes’s report earlier this week cutting the outlook for personal computers, the change is all about more people buying smartphones and tablet computers, and getting more work done with cloud computing facilities, and all the infrastructure changes that go with that:
A new generation of consumers and IT workers are figuring out how to compute differently than PC users of the 90s – relying more on mobile devices and the cloud – as PCs and other devices are seeing significant task infringement. As a result, we argue that the PC replacement cycle is being elongated by another 1-2 years, resulting in the loss of 50-100 million units in annualized demand by PCs is not the only subsector impacted in tech as printing is also caught in the wake of mobility. Disruptive mobility also has the ability to alter trends across semiconductors, payments, electronic components, enterprise hardware, software and more. For example, with more tasks being done on mobile devices, more storage and computing capabilities need to move into the cloud – changing corporate behavior (trust in the cloud will change too). There are ramifications in terms of networking traffic and where storage capacity is allocated in organizations and how security is used. Wireless networks will need to be upgraded continuously, but there is also an increased need for WiFi given bandwidth limitations and overall capacity needs.
The long list of winners across industries compiled by Reitzes and the team include Apple (AAPL), EMC (EMC), ARM Holdings (ARMH), Mellanox (MLNX), Radware (RDWR), Ceva (CEVA), Nice Systems (NICE), LG Electronics (066570KS), Samsung Electronics (005930KS), NetSuite (N), Splunk (SPLK), Teradata (TDC), ATOSS Software AG (AOF), Temenos Group (TEMN), Google (GOOG), Priceline (PCLN), Visa (V), Corelogic (CLGX), HCL Technology (), Broadcom (BRCM), Cavium (CAVM), NXP Semiconductor (), MediaTek (2454TW), Canon (7751JP), Hitachi High Technologies (8036JP), Lam Research (LRCX), Qualcomm (QCOM), Cisco Systems (CSCO), Largan Precision (3008TW), ZTE (0763HK), SBA Communications (SBAC), and Liberty Global (LBTYA).
Because the operating system software environments are in Reitzes’s view the heart of the shift, he and the others see Apple and Google continuing to take the lion’s share of profit for some time:
In our pool of selected large-cap tech companies, we see a significant increase in the share of tech income belonging to Google and Apple. Google and Apple’s share of combined selected large-cap IT profits has expanded from a little over 16% in 2007 to over 40% in September 2012. We expect this trend to continue at the expense of former leaders such as Dell, Hewlett- Packard, Xerox and Intel. While not included in this chart – we believe that others that are closely aligned with the guts of disruptive mobility such as QUALCOMM and MediaTek will also be able to expand their level of profits at the expense of PC-related semi players.
Aside from Apple and Google grabbing an increasing amount of profit in this new world — a long term trend he doesn’t see reverting anytime soon — Reitzes sees spending on IT at the moment being victim to a “capital strike” as companies hold of while they await the fiscal cliff:
Earnings reports highlighted incremental U.S. weakness, underscoring the cautious capital spending environment and showing that weak demand and uncertainty around the U.S. elections and tax cliff have manifested in capital spending, which is particularly damaging to the Technology sector. We expected soft capital spending in 2012, due to public policy uncertainty, but were surprised with weak tech spending in 1Q12 reporting season. 3Q12 earnings reports from the Technology and Industrials sectors were particularly weak as weak global demand, in addition to the U.S. elections and tax cliff uncertainty led to weak capital spending, which we don’t think was anticipated given S&P 500 revenue beats were the weakest since 3Q09. On balance the economy looks similar to our Truman’s Third Term scenario: housing is improving, consumption is stable but the business sector has weakened. While we see catalysts for a significant drop in public policy certainty that would boost business confidence and end the capital strike, we believe a market correction is required to force the hands of politicians to reach an agreement on the tax cliff.
Per CNBC Amd denied that is for sale.
AMD Jumps 5% on Reuter’s Report Hired JP Morgan to Explore Options
By Tiernan Ray
Shares of chip maker Advanced Micro Devices (AMD) surged late in the session and closed up 10 cents, or 5%, at $2.09 after an article by Reuters‘s Nadia Damouni and Noel Randewich saying the company has hired JP Morgan to “explore options,” citing three unnamed sources.
Options include sales of AMD’s patent holdings, though an “outright sale” is “not a priority,” the sources tell the authors.
Update: AMD representatives were in contact this afternoon via email to offer their official comment on the matter, without actually affirming nor denying the hiring of any advisors:
AMD’s board and management believe that the strategy the company is currently pursuing to drive long-term growth by leveraging AMD’s highly-differentiated technology assets is the right approach to enhance shareholder value. AMD is not actively pursuing a sale of the company or significant assets at this time.