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The “street” price is getting better and better:
HP Tablet for sale at $1,678. Courtesy of marketengineer on Yahoo:
http://messages.yahoo.com/bbs?.mm=FN&action=m&board=1602585284&tid=tmta&sid=16025852...
FWIW: fatspidr alluded to a possible enhancement to the caches:
http://messages.yahoo.com/bbs?.mm=FN&action=m&board=1602585284&tid=tmta&sid=16025852...
Roger.
wbmw: the GLW message board on Yahoo is fairly active with a few decent posters. Most or all of your questions can probably be answered by reading selected messages during the past few months. (The convertible financing in August would make a good starting point.)
Yahoo has a feature that allows you to sort messages by the descending number of recommendations. In that way, you can read the one or two messages on each screen of 40 messages that are worth reading and skip the others. All you have to do is click on the “Recs” link in the header of each screen of 40 messages. Note that you do not have to be a registered Yahoo user to read messages. Regards, Dew
>> The Crusoe processor adjusts power on-the-fly, about 200 times per second, providing only the power required at any given moment.<<
My read on this is that only the clock speed, and perhaps a couple of minor features, have been enhanced relative to the earlier Crusoe. I doubt very much that the LongRun logic has been significantly enhanced or the number of voltage states has been increased because such upgrades would be expensive and probably not warranted in terms of their impact on power consumption and battery life. Adjusting power “200 times per second” is probably not a new feature and it is not an especially meaningful metric in any case. JMHO. Dew
OT GLW:
>> That depends on WHEN the upturn in telecoms will happen… Intel indicated that they believe the telecom recovery would happen in 2004, about a year later than the recovery for PC equipment. <<
I believe you are referring to a statement that Craig Barrett made on his recent Asian trip. A 2003,2004 recovery for PCs and telecom, respectively, sounds reasonable to me, and those are the assumptions I am using as the basis for my position in GLW.
Meanwhile, while waiting for the recovery to take root in the overall telecom market, GLW continues to win orders for network buildouts in China and India. (Five of GLW’s top ten customers are Asian.) And GLW’s non-telecom business continue to generate positive cash flow. Dew
OT GLW:
Let me address the balance sheet first. GLW has a high debt/capital ratio because the debt is being valued at par value. But GLW has been using its cash to buy back its own debt on the open market at less than 70 cents on the dollar!
http://biz.yahoo.com/bw/020723/232563_1.html
“Also in the second quarter, Corning recorded a gain of $68 million… due to the repurchase of $220 million in accreted value of its zero coupon convertible debentures due 2015 for $148 million in cash in a series of open market transactions.”
GLW’s debt stems mostly from the company’s misguided acquisition of Pirelli’s optical business (yes, that Pirelli) at the height of the tech/telecom bubble. But in spite of some stupid decisions during the bubble, GLW remains a 150-year-old, conservatively managed company that is the technology leader and low-cost producer in virtually every business segment they operate in.
Approximately 45% of GLW’s revenue derives form optical fiber and photonics. Because this percentage was much higher (about 75%) during the tech/telecom bubble, investors continue to paint GLW with the same brush as the hardest-hit pure telecom suppliers such as LU and NT.
This is silly because GLW has some profitable and highly promising non-telecom business. Examples are the glass substrates used in LCD monitors and TVs, specialty materials in the life sciences, and ceramic filters for diesel engines. The later should be a terrific growth segment in about 2-3 years as anti-pollution laws begin to require that utility plants, trucks, and busses be retrofitted with such filters.
In no way does GLW afford investors the safety of an INTC or a CSCO; it is a moderate-to-high risk play. But the upside is enormous if you believe (as I do) that capital spending in telecom will recover and the non-telecom segments continue to perform well.
No doubt someone on this MB will want to point out the huge amount of dark (unused) optical fiber in the ground. This is largely a non-issue, however, as the technology in optical fiber has advanced rapidly and much of the unused fiber in the ground will not be cost-effective for telecom carriers to light. Moreover, buildout of fiber networks will continue (particularly in the Third World) as long as worldwide bandwidth demand continues its upward trajectory.
Finally, in answer to your question: GLW is not a significant competitor of CSCO as it does not sell routers or switches. In fact, CSCO has been rumored to be a suitor for GLW, although I find that unlikely. Regards, Dew
Companies that refrain from aggressively cutting capacity during a downturn – because they misread the depth of the downturn or because they have sufficient financial resources to wait it out -- stand to benefit disproportionably to their industries when the recovery finally comes. INTC is an example of this in semiconductors, and GLW is an example in telecom components. (Disclosure: I am long GLW.)
OT Bonds:
lojjm: given Bonds’ stratospheric on-base %, wouldn’t the Giants be more productive with Bonds hitting third (or even second) in the order?
This will be my last post about baseball… at least until this evening.
If sales are indeed ramping nicely in mid 2003, TMTA should have little trouble raising capital on acceptable terms if management determines that additional capital is warranted.
It is only in the scenario where sales are not ramping that raising capital on favorable terms would be problematic. And if sales are not ramping by mid-2003, TMTA will be in serious trouble in any case.
Hence I submit that cash burn is not the biggest concern for TMTA longs. As I’ve said many times, TMTA has a good balance sheet for an emerging tech company. What TMTA needs now is to produce a better P&L (income) statement to go along with the good balance sheet. Dew
lojjm: The Red Sox had close calls in both the ’75 Series and the ’86 Series. The ’75 Series was the one where Carlton Fisk hit the home run off the foul pole in game 6, and the Reds went on to win game 7.
The game which last night reminded me of was game 6 of the ’86 Series, where the Red Sox were up 5-3 in the 10th inning and one strike away from winning the whole thing vs the Mets. Then the Sox surrendered three singles, a wild pitch, and the infamous Bill Buckner play to lose 6-5.
What struck me as similar to last night’s game was the game-6 setting, the identical final score, and the suddenness of the comeback.
OT Bonds:
Fred: Bonds has always been a great “pure” hitter, i.e. making solid contact and hitting for a high average. When Bonds came up with Pittsburgh, he was a skinny kid (relative to most home-run hitters) whose power derived from getting the “best wood” on the ball rather than from sheer heft.
Judging by appearance, Bonds must have added at least 40 pounds during the past decade, and that can make the difference between fly balls which reach the warning track and balls that go out.
The home-run numbers from the ballpark in Denver give an indication of this effect. The “thin air” in Denver is thought to boost the trajectory of a typical fly ball by about 40 feet relative to conditions at sea level. That incremental 40 feet produces a huge increase in home runs (and overall runs) relative to other ballparks.
So it is with Bonds. The “supplements” have transferred him from a great pure hitter with good power into a great pure hitter with great power. JMHO. Dew
OT lojjm:
Commiserations for the Giants. That was a tough one. Reminds me of the 1986 Series.
Correction re HP Tablet pricing:
An explanation of the various pricing options courtesy of fatspidr:
http://messages.yahoo.com/bbs?.mm=FN&action=m&board=1602585284&tid=tmta&sid=16025852...
>> Whatever happened to the Banias manufacturing cost question? <<
wbmw: I addressed Banias’ costs from the financial angle in #2089 on the INTC MB. Further, as I posted in #2094, “manufacturing” cost includes a heck of a lot of things other than the wafer, which is why the true gross margins for chips made by INTC or anyone else are far more modest than the numbers you have suggested.
If you properly account for all of the relevant expenses, I believe that your “bottom up” approach to estimating costs would produce numbers that are not far off from the ones I get via a “top down” approach. Regards, Dew
HP Tablet: Nice to finally see all the specs including the price. I was a little worried it would debut at over $2,000 but, at $1,759 for the Windows Home version, price should not be too big a concern.
Don’t know why I thought So. Cal. Maybe because of your friend from IDPH.
Re Bonds: I’ve never before seen intentional walks given routinely when first base is not open. In almost all cases, I’m convinced that intentional walks are statistically wrong, but Bonds is clearly an exception.
Re the INTC MB: it’s apparent that some of those people have no clue about financial metrics such as COGS and gross margin. wbmw seems willing and able to assimilate the relevant concepts but some of the other posters over there have their heads stuck firmly in the sand. Regards, Dew
Thanks, lojjm. You are right, of course, about a little knowledge being dangerous.
If you live in So. Cal, I guess you must be rooting for the Angels. Whether they win it all or come in second, it’s nice to see them finally accomplishing something after all these years. They lucked out when they unloaded Mo Vaughn – his hitting was overrated on account of Fenway Park, and his fielding was among the worst I’ve seen.
Next year, the Red Sox may be the team to beat.
If you are a numbers guy or gal, the action this evening is on IHub’s INTC MB.
>> We welcome other points of view here but you're way off base on this one. By excluding R&D the cost of Banias will probably be well below $25, regardless of speed. It's easy to calculate based on wafer cost and die size. <<
EM: are you including the cost of owning and running the fabrication plant that is used to make the chip, including the salaries and benefits of the personnel at the plant, electricity and other utilities, depreciation of the equipment and real estate, etc.?
Didn’t think so.
It’s a common misconception that these costs are in the SG&A line on the income statement, but that is not the case. Facilities costs for the manufacturing facility used to fabricate the chip are included in the “cost of good sold” (COGS) line.
I’m glad you posted because now I can see why you and wbmw are way too low on your estimates for Banias’ COGS and consequently way too high on your estimates for gross margin. Regards, Dew
We are taking two different approaches to estimating the unit costs for Banias. You are doing it by trying to understand the manufacturing process, making guesses about die sizes, yields, etc.
My approach is to look at the financial statements of INTC, other semiconductor companies, and other companies who manufacture precision electronic components. I believe that my method is at least as accurate as yours – and perhaps even more accurate as my method involves fewer assumptions and hence fewer chances of introducing an error from a faulty assumption.
You can talk all you want about INTC’s leading-edge technology, but the fact remains that very few high-tech components sell at the kinds of gross margins implicit in the claims you make for Banias. Your contention that the $637 high-end Banias will have a COGS of only $60 – and hence a gross margin of 90.6% (577/637) -- strikes me as naïve. Regards, Dew
TMTA’s gross margin in 3Q02 was 38% (2449/6443) on a GAAP basis and 18% (1147/6443) on a pro-forma basis. (Note that TMTA’s financial release includes two separate income statements – one for GAAP and one for pro-forma, which was the one you referenced. The GAAP cost-of- goods figure is lower than the pro-forma figure because some of the inventory sold during the quarter was previously written down according to GAAP rules.)
The only reason I used a 22% gross margin in my earlier example was that you had mentioned 22% in your message. As I’ve already said, TMTA has given guidance for a 40% gross margin for 2H03. Whether they get there remains to be seen, of course, but 40% seems to me to be an achievable number. Regards, Dew
Further to spokshave’s message: a gross margin of 84% on any high-tech component, whether from INTC or anyone else, is rare. I’m not saying that the high-end Banias can’t possibly have such an 84% gross margin, but I am highly skeptical.
In any case, my original contention was that INTC could not sell Banias profitably for less than $100, and I believe that I’ve shown how I have come to that conclusion. Regards, Dew
wbmw: you are evidently using a non-standard definition of “gross margin.”
Gross margin is conventionally defined as (revenue - cost of goods)/revenue. Clearly, gross margin can never be greater than 100%. Moreover, there is no need to account separately for variable manufacturing costs as they are already included in “cost of goods.” Regards, Dew
wbmw: First, a correction to your arithmetic. If Astro were to have a 22% gross margin, TMTA would need to sell 1.42M units (not 1.73M) per quarter at an ASP of $64 to cover the $20M quarterly overhead: 1.42Mx64x0.22=20M.
However, the $64 ASP is not the ASP TMTA expects to obtain on Astro; rather $64 is the current ASP from the TM5800 and TM5500 (a smaller-cache version of the same chip) during 3Q02. Although the ASP for Astro is not known at this point, it is reasonable to assume that it will be considerably higher than the $64 aggregate ASP realized in 3Q02. Moreover, TMTA has stated that the company expects to realize a 40% aggregate gross margin in 2H03. Astro is expected to have a gross margin at least as high as the TM5800 (probably higher). So if you do the math, you will see that the unit volume needed for TMTA to break even is considerably lower than your analysis suggests.
--
Now let’s switch gears and talk about INTC and, more specifically, Banias pricing.
Analysts’ consensus estimates for INTC’s gross margin in the current quarter is 49%. As a new product in INTC’s most profitable segment (microprocessors), Banias should be able to command a gross margin above the company average. (Moreover, INTC’s aggregate ASP may improve a little between now and 1H03.) Here are the gross margins I expect for the 1.3-1.6MHz versions of Banias, respectively:
1.3MHz 50%
1.4MHz 56%
1.5MHz 62%
1.6MHz 68%
State-of-the-art high-tech products occasionally have a gross margin as high as 70%, but levels that high or higher are rare and such products generally have little or no bona fide competition. I expect Banias to be a fine product, but not one without competitive pressures.
Using the gross margins shown above together with the prices given in the Inquirer article for the 1.3-1.6MHz versions of Banias ($209, $294, $423, and $637, respectively) we can derive an implied cost of goods for each version of Banias. Please note that these figures do not even include any allocation for R&D costs – just the actual cost of goods shown on the P&L statement.
The arithmetic yields a cost-of-goods range from $105 for the low-end version of Banias to $204 for the high-end version. Hence my original comment that INTC cannot sell Banias at a profit for less than $100. Regards, Dew
wbmw: I just saw your messages to my mailbox from Wed. I didn’t realize until just now that I had an IHub private mailbox to check! Regards, Dew
Thanks, Greg. The confusion comes from the fact that some sources refer to Dothan and others to “second generation” Banias. Still looking to clarify the discrepancies in the press concerning the Dothan launch date.
>> The processor appears to be taking the form of a group of chipsets which could mean extra expenditures in terms of power. <<
You lost me there, Bird. Assuming that TMTA’s solution will want to offer the same functionality as the auxiliary chips in the Banias solution, how is the fact that INTC will be offering the whole chipset helpful to TMTA?
Question on terminology:
Is Dothan the code name for the 90nm version of Banias, or is it something else altogether? Further, when is Dothan expected? I have read conflicting sources: some say late 2003 and others say 2004. t.i.a. Dew
Banias pricing discussion on INTC MB:
See #2051-2054.
>> Maybe "amortized" was the wrong word, but the point was that the added R&D for a Banias processor (compared to a Pentium proliferation) won't increase the costs all that much, since Intel intends to sell a lot of them.<<
“Amortized” was the right word. Accounting rules on financial statements and internal analysis which determines product pricing are two different things. Although R&D is expensed on the financial statements, it is very much part of any internal analysis done by INTC (or any other company) in determining product pricing. Although the R&D costs have already been spent, they must eventually be recovered for a product to be financially successful. Agree with wbmw’s statement that the R&D costs per projected unit may be smaller than some other INTC processors.
On the possibility that Banias, in any flavor, can be sold for less than $100 at a profit, we’ll have to agree to disagree. Even after reading your analysis of Banias’ architecture on the TMTA MB, I simply can’t come up with a set of plausible assumptions that leads to a profitable price below $100.
It looks to me (and other TMTA longs) as though INTC is leaving a lot of room for Crusoe/Astro to take root at the low end and mid range of the mobile-device market. Dew
No problem. Please post your response on the INTC MB; you can include my question as part of your post. Regards, Dew
Banias pricing: still no response from wbmw:
I have posted and re-posted my comments suggesting that wbmw’s estimates of INTC’s production costs for Banias may be too high.
No response from wbmw to either my original post (#2331) or the re-post (#2659).
Does anyone here believe that INTC is planning to sell any flavor of Banias at a gross margin that is way, WAY above the gross margin of any other chip in the microprocessor industry?
I do not, and that’s why I consider wbmw’s assertions that INTC can sell Banias profitably for less than $100 to be highly suspect. FWIW. Dew
I would prefer that even objectionable posts not be pulled until a reasonable amount of time (perhaps 24 hours) has elapsed, enabling regular readers to see the material before it turns to vapor. It is disturbing to see a response to a message that no longer exists. That’s like having a debate in which one side has their microphone turned off. FWIW. Dew
>> “You tend to design the chips differently to live inside different devices." <<
Thanks, lojjm. That’s a good soundbite for us TMTA longs to keep in mind.
OT IBIS:
Thanks, hseitz. Your post corroborates much of what I was thinking on the SOI market. I’m up 35% on IBIS in less than a month and I plan to take some money off the table in case the guidance for Q4 or 2003 is less than stellar.
Re the IBIS MB: not sure which disseminators of misinformation you are referring to. (I pay attention only to corrchess, ryan, and maybe one or two others.)
>> hope this helps, and you don't own a 2 story home <<
My wife and I rent a condo. Where we live (outside of Boston), house prices are in almost as big a bubble as tech/telecom stocks were in 2000. The median house in our town is $1M. As with any bubble, the best action is to sell or go short, which is sort of what we’ve done by renting. If the local housing bubble bursts, our rent should drop accordingly.
(BTW: the cover story in the latest issue of Fortune has some amusing photos of overpriced houses.) Regards, Dew
OT Hseitz:
Any comment on Soitec’s 45% drop today? Do you still own them?
IBIS announces 3Q results (and 4Q guidance) tomorrow. I am somewhat apprehensive in view of today’s Soitec thrashing. T.i.a. Dew
Are Banias costs as low as wbmw suggests?
wbmw: about two weeks ago I posted that I had doubts about your estimates of INTC’s costs of producing Banias:
http://www.investorshub.com/boards/read_msg.asp?message_id=531778
As you did not respond to the above post, perhaps you would like to respond now. Regards, Dew
Taiwan's TSMC Posts Sharply Lower 3rd Quarter Net, Outlook Grim
Tuesday October 22, 6:57 am ET
By Dan Nystedt, OF DOW JONES NEWSWIRES
TAIPEI -(Dow Jones)- Taiwan Semiconductor Manufacturing Co. , the world's largest contract chipmaker, posted sharply lower than expected net profit in the third quarter and gave a grimmer outlook for the fourth, confirming that a technology sector recovery isn't around the corner as many had hoped.
"(TSMC's) recovery will come next year in the second quarter of 2003," said Morris Chang, the chairman of the world's largest foundry that is considered a barometer for the global electronics industry due to the wide variety of products its chips are used in, including personal computers, mobile phones and digital video disc players.
The poor outlook follows a string of warnings by global peers including Intel Corp. and Microsoft Corp. in recent days during their own quarterly results.
TSMC said Tuesday net profit in the third quarter hit NT$3.16 billion (US$1= NT$34.926), more than double from a year ago - when the chip industry was in a severe downturn - but sharply lower than analysts' expectations of NT$6.1 billion.
The third quarter result was also much lower compared with the second quarter when net profit hit NT$9.3 billion.
TSMC predicted worsening business conditions for the fourth quarter, which traditionally is one of the strongest periods of the year. [Hseitz should be well on his way to retirement.]
In the final three months of this year, TSMC's shipments will slow by a percentage in the low teens as sales of chips for use in DVD drives and players, graphics chips used in products like game machines and personal computers, and those for hard disc drives will all decline, the company said.
Slower sales will likely drive average selling prices down between 2%-4% in the fourth quarter as TSMC idles nearly half of its production lines. [A small silver lining for customers such as TMTA.]
The company also further cut spending on new plants and equipment to US$1.65 billion for this year, down from an original estimate of US$2.5 billion and said capital expenditures next year would be even lower.
Chang added that the company expects to make profits during this "bottoming out period" on an after tax basis. "This is another disappointment for the market," said George Wu, analyst at Primasia Securities in Taipei.
>> “When they start gaining market share again, I'll write the comeback.” <<
I think Kanellos’ comment pretty well sums up the view of most members the technology press. For whatever reason, these people tend to think in “binary”. A company is either up or it’s down – no middle ground. Right now, TMTA is down and it is treated accordingly by the press. Dew