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Compal is not the only company threatening a backlash against Centrino’s premium price – you can add Dell to the list.
--
Excerpts from 2/28/03 Merrill Lynch (Joe Osha) update on INTC:
>>
o We had a chance to visit with the management of Dell yesterday and came away with a few observations that we think are relevant to Intel. Nothing that we heard vis a vis Intel, or the semiconductor business in general, came as a surprise to us, although Dell's comments did confirm several trends that we've been highlighting recently.
o First, Dell does seem to be seeing slightly firmer pricing from Intel, no doubt as a result of the still-declining competitive pressure from AMD. That fits with our own observation last week that Intel seems to be concentrating on sweetening its P4 mix, while leaving the lower-priced Celeron brand relatively untouched in terms of pricing and speed grades. The implication is positive for Intel - we believe that the company is seeing an overall improvement in its desktop product mix, which is positive for gross margin.
o Dell was also a little more positive on Itanium than we had expected given the tone of previous comments. Itanium is not significant financially for Intel and will not be for a long time, but we note that Dell's comments regarding its support of the architecture were unequivocal.
o Centrino, Intel's attempt to bundle several pieces of silicon into a new mobile platform brand, drew the reaction from Dell that we had expected, and indeed the reaction that we think the PC industry is having in general. Dell indicated that it's perfectly willing to go with Centrino, but strongly emphasized that the price needs to be right. We think that a lot of PC OEMs are informing Intel that premium pricing for Centrino is not going to be tolerated.
o Our earnings estimates and neutral opinion for Intel stand, and we heard nothing from Dell that inclines us to change our mind. The positive impact on margin resulting from better process mix is worth noting, but probably not enough to move our numbers.
<<
CNET on Centrino marketing:
http://www.investorshub.com/boards/read_msg.asp?message_id=802285
From CNET: apropos to the Business Week article posted by Bird:
[Note the part about Dell not going along with Centrino hook, line, and sinker. By gosh, they really do have a mind of their own.]
>>
Intel in a mobile marketing muddle?
By John G. Spooner and Michael Kanellos
Staff Writer, CNET News.com
February 27, 2003
http://news.com.com/2100-1005-986320.html
Notebook buyers will have to wade through multiple marketing messages to find the wireless combination they want when portables containing Intel's next generation of mobile chips make their debut next month.
The first notebooks using the Pentium-M, a new energy-efficient processor formerly code-named Banias, will emerge March 12. Intel will launch the chip and the new Centrino brand name that day at an event in New York attended by Intel Chief Executive Craig Barrett and high-level executives from Dell Computer, Toshiba and others.
After the debut, however, potential customers will be forced to choose between two brand names representing the same basic hardware inside these new notebooks.
Some notebooks will be affixed with Intel's Centrino badge, a logo that looks like a flying dart. The Centrino badge signifies that the notebook uses Intel's entire family of new chips including the Pentium-M, a supporting 855 chipset and the Intel Pro Wireless network connection via a mini PCI 802.11b radio module.
Other notebooks will come only with a Pentium-M badge.
The difference between the machines will be the wireless networking modules they contain. In some cases, PC makers will use all three components--the Pentium-M, the chipset and the Intel Pro Wireless module. In other cases, manufacturers will integrate the Pentium-M chip and chipset but use a wireless module from another manufacturer.
The distinction--and thus the different labeling--comes from the guidelines set by Intel for manufacturers. Those that do not use all three chips forfeit their ability to brand their machine as a Centrino. Even if their machines use the Pentium-M and 855 chipset, Intel won't allow manufacturers to use the Centrino label unless they also use the Intel wireless module.
The guidelines create a marketing dilemma for manufacturers. Most manufacturers want to give customers a choice between Intel's module and an alternative, such as an 802.11a module. But some sources say that manufacturers that don't opt to use Centrino could also lose out on some of the co-marketing funds that Intel grants to partners. Intel will spend about $300 million to market Centrino.
But a company representative said that while Intel offers co-marketing funds to PC makers to help fund advertising, it allows those companies to choose where to use those funds and doesn't offer more money to a PC maker using Centrino than for one just using Pentium-M.
Customer choice
"We will have Centrino products, and we will have other notebooks that will not be Centrino" but include the Pentium-M, said Jim McDonnell, vice president of marketing in the personal systems group at Hewlett-Packard. HP's goal is to let customers decide what they want, he said.
Sources familiar with Dell's plans said the company intends to focus its marketing on the Pentium-M and its attributes, which include longer battery life than the Pentium III-M or Pentium 4-M chip.
Intel asserts that notebooks using the Pentium-M chip, which will debut at clock speeds between 900MHz and 1.6GHz, will run for up to six hours on a single charge of their internal batteries. The current norm is three hours to four hours.
Dell plans to give customers the choice of whether to use Intel's module or one of its own Dell TrueMobile 802.11b modules--thus forfeiting its ability to use Centrino as an overall brand.
Toshiba, which already has its own dual 802.11a and 802.11b module, will also give customers a choice of Intel's or other wireless modules, sources familiar with its plans said.
For its part, IBM plans to sell Centrino-branded notebooks, said sources close to the company. However, the company will offer an upgrade to include 802.11a. That upgrade cannot be labeled a Centrino.
Analysts say that the mixed messaging could confuse some potential customers at first.
"This is really a commercial product. I don't think it's that big of an issue to commercial IT buyers," said Alan Promisel, notebook analyst with IDC. "It's going to confuse consumers, however, because Intel isn't marketing Pentium-M as heavily as it is the Centrino brand. That is a risk for OEMs," or original equipment manufacturers.
But Promisel asserts that most consumers who buy notebooks are not nearly as concerned with mobility and features like wireless networking as are business users at the moment. Instead, many consumers are buying larger, heavier and less expensive "desknote" machines that incorporate desktop Pentium 4 chips and 15-inch or larger screens.
"If anything, all the marketing is going to raise awareness and get consumers to start thinking about wireless connectivity and real mobility, not just portability. That's the crux behind Centrino's value proposition," Promisel said.
PC makers are also partially responsible for accurately explaining the differences between Pentium-M and Centrino notebooks, he added. "I do expect wireless demand to increase in the consumer segment based on the publicity that the Centrino launch is going to drum up," he said.
Timing is everything
The root of Intel's Centrino dichotomy lies in the delay of its first wireless module. Initially, Intel planned to include a module that offered both 802.11a and 802.11b with its Centrino family. Bundling has often been a way for Intel to enter new markets, such as chipsets and PC graphics chips.
But in December, the company delayed the dual-band module until later in the first half of 2003. In its place, Intel will insert a module that uses an 802.11b chip from Philips in the first wave of Centrino notebooks.
Until Intel's module is released, manufacturers will have to go outside the Centrino family to add 802.11a or dual-band modules.
"Anything else does not qualify because it hasn't gone through Intel's testing process," said Shannon Johnson, an Intel representative. "Centrino represents the best in class from Intel because it has been designed to work together and tested. We want to ensure a great user experience. Anything else that's been kind of put together--we can't ensure it's been tested to the fullest." [LOL -- Dew]
PC makers that don't use the Intel module could also stand to see higher development costs than those that do. Intel has performed thousands of hours of testing on its module, so it can ensure that a Centrino-branded notebook will work properly, the company said.
The testing was meant to ensure compatibility among the module, the Pentium-M, the chipset and existing wireless services, said Mooly Eden, general manager of Intel's Israel design center, where the Pentium-M was designed.
"We have developed (test and verification) chips whose only aim in life was to torture the rest of the system," Eden said.
Meanwhile, the Pentium-M will become the predominant notebook chip for Intel by the end of the year, various Intel executives have said.
The company will still supply its mobile Pentium 4 chips for notebooks, but they are likely to appear only in the consumer market, and even then in the cheaper models.
<<
Bird: that article was published by businesswek.com more than two weeks ago (2/11). Yahoo Finance is now re-releasing the article as though it were a new piece. It may be a symptom of Yahoo’s attempts to boost its own metrics to help sell ads.
In any case, it’s a good read. Regards, Dew
Business Week interview with Corning CFO:
http://yahoo.businessweek.com:/print/technology/content/feb2003/tc20030211_1327_tc055.htm?tc
>>
[CFO]Flaws talked about Corning's progress and challenges with BusinessWeek Online reporter Olga Kharif on Feb. 7. What follows are edited excerpts of their conversation:
Q: A lot of analysts on Wall Street continue to say Corning won't turn profitable until 2004. What do you say?
A: Wall Street has, perhaps, underestimated our cost-cutting and growth. For starters, with the closing of three additional fiber factories at the end of last year, and with reductions in our selling and operating expenses, we are going to see a fairly dramatic improvement in our expenses starting in the first quarter. Many analysts didn't foresee how fast these cuts would show up on our financials.
Second, particularly in the LCD business, we've seen strong growth this past year, and we see it continuing in 2003. That's a highly profitable business. And we're the world's most efficient producer of that glass.
Q: You hope to turn profitable in 2003. How much will come from cutting costs and how much from sales growth?
A: Three-quarters comes from cost-cutting and one quarter from volume growth. We do expect to see growth in some of our businesses, such as LCDs. But we're not expecting a rebound in demand on fiber and cable this year. We expect volumes to be relatively flat and prices to remain under pressure.
Q: So nontelecom-related businesses will grow as a percentage of revenue this year?
A: You'll continue to see a shift of the company's revenues' between our two main segments: telecom and technologies [which includes glass for displays, among other products]. They will shift by maybe 6% at the most, with technologies going up and telecom going down.
Q: When will the restructuring be completed?
A: We're very far along. There's one strategic decision we still need to make, which is whether we continue to be in the photonic-components business, narrow our offerings, get out of the business, or partner with somebody. We've set a goal of making a decision by midyear. Plus, there will be some reductions of people that have been planned but not done yet. But 80% of the cost reductions are done.
Q: As part of the cost-cutting, you announced you would reduce research and development from between 14% and 15% of revenues to 10%. Where are the cuts occurring?
A: The major reduction came in photonics product development. We're continuing to spend on core research -- as Corning has always done, and we're increasing our spending against some businesses, such as new display and semiconductor technologies.
Q: It sounds like you don't expect the photonics business to recover any time soon. Why?
A: In the fourth quarter, our own photonics business actually didn't go down, it was a slight increase -- and it was the first time in two years that had happened. On the other hand, most of the photonics components have gone into long-distance networks and that build-out is complete. That leads us to believe there won't be much vibrancy to that market for a couple of years.
Q: In addition to photonics, your fiber sales were higher in the fourth quarter than expected. Why?
A: In the fourth quarter, we had expected the fiber volume to be down slightly sequentially, and it was actually up 6%. It was almost all driven by fiber demand in Japan, primarily because of that country's national policy to extend telecommunications networks to individual homes. We actually expect to see strong demand for fiber in Asia in the first part of this year. But this could be balanced by the U.S. market's continuing weakness.
Q: Let's talk about your debt. You've been reducing it for the past six months. How far along are you?
A: We paid off last year about $800 million of debt. In January, we've already spent $150 million in cash to [retire] more debt. And we're going to continue to reduce debt. We haven't announced any specific plans yet, as we'll be opportunistic, like last year, and try to [retire debt] at the right point in time.
Q: Does Corning have anything to worry about in terms of meeting obligations?
A: We ended 2002 with several billion dollars in cash. Our cash usage rate was very low last quarter, excluding restructuring charges. We feel we've made a lot of progress in reducing our cash-burn rate. This coming year, we'll actually switch to generating some cash. We have the cash, our $2 billion credit line -- and, most important, we're working to get back to profitability.
Q: Do you expect Corning to need additional funds in the next few years?
A: I won't speculate about future years, but we feel very good about our resources in this upcoming year.
Q: Your credit line stipulates that your debt-to-capital ratio can't rise too much. The ratio rose a little in the past quarter. Do you expect it to rise more in 2003?
A: The ratio rose between the third and the fourth quarter because of goodwill and restructuring charges. We're not expecting any more massive charges. Actually, I hope you'll see positive changes to the ratio as we reduce debt and return to profitability -- and add to our equity. The ratio should be relatively stable and should over the rest of the year actually go down.
Q: Corning is known as an optical-fiber company. Is that changing?
A: We've always thought of ourselves as a technology company. When telecom revenues climbed to well over half our total, we became known as a telecom company. But there have been times in our past when we've been known for other things. Back in the '60s, everybody thought we were just a glass television company. But as the LCD business grows dramatically -- which we believe it might the next four or five years -- we'll certainly become known as a more broad-based technology company. Whether we'll just be known for LCDs or not -- that's a bit hard to predict.
<<
That article repeats the canard that HP’s Tablet PC has poor “performance,” which I find amusing because the HP Tablet has by far the largest market share of any tablet PC.
Anyone interested in the performance of the HP Tablet (e.g. someone considering buying a tablet PC) might want to examine the posts by “119” on the TMTA MB.
(OT) lojjm: I sent you IM this morning when I saw that the byline with your recent Yahoo post had the “online” logo next to it. Did you get it?
John Dvorak on Centrino:
[From the 3/11/03 issue of PC Magazine]:
>>
I see Intel is once again coming up with strange names for its products. The latest is Centrino… To me, the name sounds too Italian and not futuristic at all, but more like a fancy salami you’ll find in Genoa. “I’ll have a quarter pound of sliced centrino – mild, not hot!” Centrino also brings to mind some sort of weird fish you might find on the Greek Islands. “I’ll have a centrino sandwich on rye – no mayo!” I think they missed the mark with this one. Either that, or I’m hungry and I need to travel.
<<
--
P.S. In the same issue of PC Mag. (page 30), it states that the initial Centrino CPU will run at 1.4GHz. Expectations in the trade press have been in the range of 1.3-1.6.
Ciena:
Just wondering if anyone here follows CIEN. I listened to their recent CC and was somewhat impressed with their durability and the additions to their customer base. (Don’t own any because it still isn’t cheap enough, IMO.)
>> I'd be interested to know why you think the FCC decision will have little influence on GLW's results. I'm inclined to think it is a significant positive for GLW. Sooner or later, the RBOCs are going to have to invest in high speed networks - fiber to the home or a faster fiber/DSL hybrid. The FCC's actions improves the RBOC's incentive to do so. <<
Rapoole: The degree of financial (dis)incentive for telecom carriers to build last-mile fiber connections varies widely from country to country. The market dynamics in other countries is unlikely to be greatly influenced by regulatory decisions in the U.S.
Even in the U.S., I do not see the FCC’s decision having a large immediate impact on FTTH. That’s because the economics of FTTH still depends on having moderately-priced high-bandwidth content which necessitates a fiber connection.
U.S. FTTH will be a big deal -- eventually. And the FCC decision helps somewhat by eliminating one of the roadblocks to FTTH’s adoption. But in the overall scheme of things, I do not see U.S. FTTH being one of the most important growth drivers for GLW. Regards, Dew
P.S. Wendella: thank you for your note.
Where is everyone?
Lots of GLW-related news these days but, sadly, there’s no one on iHUB to discuss it with.
FWIW: I think this week’s FCC decision is only a minor matter for GLW.
Overview on process technologies:
[Mostly old hat, but worth a read. Thx to worachj on the IBIS MB.]
http://www.electronicsweekly.co.uk/default.asp?=http://www.electronicsweekly.co.uk/issue/techview.as...
>>
The chip stream
The semiconductor industry has always been a hotbed of innovation and despite the recession there has been no slowdown, with IBM leading the way. Necessity is proving to be the mother of invention, says David Manners
The last few years have seen an explosion of innovation in chip technology: copper, SOI, SiGe, strained silicon, 300mm wafers, 3D structures and advances in GaAs, GaN and InP. In almost every sector IBM has been a leading, if not the leading, technology pioneer.
Some blame the routine publishing of the ITRS (International Technology Roadmap for Semiconductors) for the phenomenon because it pushes companies to keep up with, or try to beat, the ITRS targets for process technology development.
Others hold the recession responsible, as it brings with it a requirement to provide more bangs for the buck.
Others argue that the decrease in the rate of chip-size growth, for cost and productivity reasons, encouraged companies to concentrate on accelerating feature size reduction in order to pack more transistors into the same chip-area.
As the recent The McLean Report 2003 from ICInsights points out, whereas, for the industry's first three decades, the average chip size grew by 14-15 per cent a year, since the mid-90s it has been growing at under four per cent a year.
Feature size has decreased, for the past 40 years, by an average of 12-13 per cent per year - representing an order of magnitude reduction every 15 years. This, coupled with the 12-13 per cent increase in chip size, has allowed Moore's Law to operate at an average rate of doubling complexity every two years.
But with chip sizes now remaining static, while fast-shrinking transistors are packed ever tighter, the area for surface wiring consequently reduces, and so the number of interconnect levels has to grow - doubling every decade in complex logic ICs - and expected to reach ten layers this year.
Another problem caused by these shrunken, tightly packed transistors is power dissipation, a function of the square of the voltage. With lowered threshold voltages, oxides have to become so thin - in order to maintain drive current - that they leak. Design techniques such as body biasing, and using variable supply voltages, have been employed to help reduce the problem.
Although aluminium and silicon dioxide have reached their performance limits as conductor and insulator - to be replaced by copper and low-k dielectric material, this is only for the high performance end of the market. Some 17 companies are now using copper in their fabs, and the choice of low-k dielectric material is still causing them severe headaches.
IBM's CMOS 7S copper chip.
Progress down the micron trail has been helter-skelter with several companies last year claiming to be first into volume 90nm production. At one time TSMC appeared to lead - only to find customers for the process proving elusive.
It is expected that it will be 2004 before volume 90nm processes get under way at the twelve companies which currently have 90nm technological capability.
The big step into EUV processing could start at the next process node - 65nm - for critical chip features - like gate length - with conventional 157nm scanners doing the rest of the chip.
However a technology known as 'immersion lithography' being pursued at MIT and Lincoln Labs could extend 157nm scanner lithography to the 32nm process node, says ICInsights.
SOI has become important at the high performance end with IBM making its PowerPC and its high-end Asics on silicon-on-insulator (SOI) wafers for some years. Now others are moving their processors to SOI - Motorola, AMD, HP and even, perhaps, Intel.
Intel has always been sceptical about SOI but announced, late last year, a 'TeraHertz' transistor which, says ICInsights, is "simply a fully depleted SOI transistor". Whether or not Intel intends to use TeraHertz is unknown. Some 12 companies are expected to be running SOI wafers by the end of this year.
Strained silicon is another technology driven by IBM, though invented by the MIT spin-off AmberWave and licensed to AMD and UMC. The technology utilises the different lattice sizes of germanium and silicon to stretch the lattice of the silicon structure - so producing the effects of higher electron and hole mobility, and therefore increasing transistor speed and decreasing power consumption. The technology is not expected to be seen in volume production use until 2004 or 2005.
Compound semiconductors have been getting a lot of interest - InP because it could extend IC performance beyond that of any other material, SiGe because it is cheaper and easier to process than GaAs while delivering comparable performance.
Again, IBM has taken the lead in driving SiGe, but the German SiGe foundry Communicant, backed by Intel, has set itself up as a technology rival. Last year, IBM announced a SiGe ring oscillator with a gate delay of 4.3ps only to be beaten seven months later by Communicant's 4.2ps gate delay ring oscillator.
3D structures are another new departure for the industry. Ziptronix and IBM Microelectronics have been pioneering 3D techniques that allow functional circuits to be transferred from wafer to wafer and then connected to form a 3D device.
These techniques have been able to create both multi-functional and multi-technology devices. The three year-old start-up Xanoptix has raised over $70m to pursue a technology which fuses wafers made using different technologies, such as Si, SiGe, InP and GaAs, and allowing a very high interconnect capability - up to eight million connections per cm2.
As for larger wafers, the 300mm generation is, belatedly, starting to deliver benefits. Just before Christmas, technology leader Infineon announced it had reached break-even between devices made on 200mm wafers and those made on 300mm. From now on, the extra head-room of 300mm should deliver increasing cost benefits. By the end of this year, says ICInsights, some 29 fabs owned by 18 companies plan to be in production on 300mm.
So, while the chip industry's revenues may not have grown for a few years, its technological capability has been growing apace - with necessity, once again, proving to be the mother of invention.
<<
INTC must have converted to REIT status while I wasn’t paying attention…
>> I wonder what they will do with all their 200mm facilities once things transfer over [to 300mm] <<
Contract work?
>> Dew, as soon as TMTA can get to the performance level of a low end Celeron, then they may have a market as "baddest cool-running chip". <<
wbmw: I was referring to TMTA’s Astro, due out in Q3, which will blow away a Celeron in raw performance.
If you don’t believe that, perhaps we could make a small wager. I don’t think lifetime iHUB memberships are still being sold, but I’m sure we could find something else to bet on…
I’m amused by the overheated discussion of the possible overheating of the P4 under various typical and atypical circumstances. If you guys can get this heated over overheating, that can’t be bad for the baddest cool-running chips from TMTA…
RCN set to unveil `video on demand'
[The following article from today’s Boston Globe does not explicitly mention Corning, but it does show that, even in this “nuclear winter” for the telecommunications industry, companies are moving ahead with investments which will increase the demand for bandwidth. –Dew]
http://www.boston.com/dailyglobe2/048/business/RCN_set_to_unveil_video_on_demand_-.shtml
By Peter J. Howe, Globe Staff, 2/17/2003
WESTWOOD [MA] -- RCN Corp., the upstart cable television-Internet competitor to giant AT&T Broadband in Boston and 14 suburbs, is set to announce plans today to roll out ''video-on-demand'' television service locally this spring.
With new AT&T owner Comcast Corp., a cable industry leader in on-demand video offerings, expected to make its own push locally in coming months, RCN is hoping to stay fully competitive with Comcast -- if not beat it to the punch in providing Greater Boston cable customers with their first ''anytime access'' to hundreds of hours of entertainment.
The RCN move also reflects a growing cable industry interest in using high-capacity cable networks, in which the industry has invested more than $50 billion since 1995, to provide customers with profitable rentals of movies as an alternative to visiting video-rental shops. Only about 8 million of the 70 million US homes with cable now have access to video-on-demand services, according to Forrester Research of Cambridge.
Robert Sheehan, RCN's vice president and general manager for the Boston market, said the local service will be modeled on an RCN video-on-demand service that became available in the Philadelphia area last fall.
It will include about 250 titles at a time, including $4 new releases, $3 for a library of older films, sports, children's programs, and other entertainment, and $10 for pornographic movies.
Only RCN's digital cable customers, about 65 percent of its Boston area customer base, could receive video on demand. The rest would have to upgrade to digital cable, which costs $10 a month more than conventional cable.
Digital cable customers would be able to use their remote controls to choose from a list of titles on the TV screen. As long as they were current on their bills, their choices would begin to appear on the screen seconds later.
They would be able to watch them as often as they want in a 24-hour period, with the rental added to their monthly bill, and could pause, fast-forward, and rewind movies and programs they have ordered. Subscribers will have features to block children from getting access to adult content and restrict their access to paid content.
The service works off existing digital cable TV boxes and does not require new equipment, Sheehan said.
RCN is using Maynard-based SeaChange International, a top national maker of video-on-demand and other broadcasting gear, as its equipment vendor for the back-office ''video servers.''
Sheehan said RCN, which is based in Princeton, N.J., and operates the local franchise as a joint venture with utility giant NStar, plans to launch what it is calling RCN Video Impulse on Demand in Framingham, Natick, and Needham in April, then roll it out through the rest of its metropolitan Boston market by June.
RCN currently has about 65,000 cable TV customers in a total potential local market of about 272,000 homes and apartment units. In some communities, it has been able to gain more than a third of the market in direct competition with AT&T. Last fall, RCN also launched a 3-megabit-per-second broadband Internet access service that is double AT&T Broadband's maximum claimed speed for its own cable modems.
Boston is widely considered RCN's most successful market in a national footprint that also includes the New York-Philadelphia-Washington corridor and areas of Chicago, Los Angeles, and San Francisco.
But Wall Street discomfort with the company's large debt load and the fierce competition in telecom has sent RCN shares plunging below $1 for most of the last six months. They closed Friday at 80 cents.
Josh Bernoff, a Forrester cable analyst, said launching video on demand is a good strategy for any cable provider facing competition from satellite TV, which can not offer true on-demand services, but especially for an RCN that is chronically fighting to differentiate itself from AT&T Broadband.
In every community it serves, RCN competes with AT&T Broadband, which owns franchises in more than 210 Bay State cities and towns.
''When you're in a fight for consumers, video on demand is a pretty important element to offer,'' Bernoff said. ''Consumers love it, and this is the time to do it.''
Sheehan said RCN also hopes this spring or summer to begin offering access over cable to high-definition television broadcasts from Boston TV network affiliates, which would probably require subscribers who own or buy a costly HDTV set to get an extra converter box.
RCN also wants to offer what is known as subscription video on demand, or paid, monthly unlimited access to a set of titles such as episodes of ''The Sopranos'' on HBO or documentaries from history and entertainment-focused cable channels.
RCN last year took a first step toward another version of on-demand video known as ''time-shifted broadcast,'' or the ability to watch a show that is broadcast at a specific time any time several hours or days later.
Peter J. Howe can be reached at howe@globe.com.
HeavyDuty: thanks for your comments. As D-C emerges from bankruptcy, it will be helpful to have someone with your experience to put these matters into perspective for GLW shareholders. Regards, Dew
Asbestos:
Possum: nice job summarizing the relevant issues. Since you covered all of the bases, I’ll just add a little color.
The crux of the matter is that GLW will argue that it was merely a passive investor in P-C, and hence GLW should be shielded from P-C’s liabilities. This is a strong legal argument because, in general, courts require a high threshold to pierce the liability shield of a corporate structure. (This is, after all, the main reason businesses incorporate and spawn subsidiary corporations and joint ventures.)
Regarding GLW’s disclosure that a settlement of its share of P-C’s asbestos liabilities would cost $100-150M, it’s important to note that the disclosure of necessity does not mention the amount of such a potential settlement which would be covered by insurance. It seems likely that most, or even all, of such a settlement amount would be reimbursable.
Regarding GLW’s non-P-C asbestos liabilities, I second Possum’s conjecture that these cases may be “nuisance” suits without any merit. The fact that GLW has not set aside a reserve for these cases or even quantified the potential liability leads me to believe that management considers the downside from these cases to be minuscule.
Regarding the potential upside of GLW’s litigating the P-C liability cases, winning the suits, and retaining an equity interest in a post-bankruptcy P-C, I think that might be too much to ask. But the mere threat of doing that may be sufficient to allow GLW to close the books on the P-C liability without significant harm to GLW’s finances.
Thanks again, Possum, for a fine research effort and summary. Regards, Dew
A rare positive note on option grants:
An article on page 1 of today’s NY Times Business section discusses a study of option grants by two professors at Rutgers University. INTC was the “fairest” distributor of options among all of the companies studied. From 1999-2001, INTC was the only company where less than 1% of the option grants went to the top five executives.
119: Thanks for the update. I posted a link on Yahoo. Dew
Re TC1000 review by Mr. Breeden II:
I believe 119 has a plausible explanation for the performance “problem” encountered by Mr. Breeden. Please see this post on Yahoo:
http://messages.yahoo.com/bbs?.mm=FN&action=m&board=1602585284&tid=tmta&sid=16025852...
Thanks. That must be what I was thinking of.
From reading the financial and trade press, I formed an opinion that BRCM’s Henry Nicholas was the kind of character who was capable of filing a bogus lawsuit if he thought it would help the company’s stock price. I have no knowledge of the actual merit of any of these cases. Regards, Dew
I clearly recall mutual lawsuits between INTC and BRCM on these matters, but maybe BRCM’s suit never went anywhere…
TI Says It's Ready for Intel Wireless Onslaught
http://story.news.yahoo.com/news?tmpl=story2&cid=581&u=/nm/20030214/tc_nm/tech_intel_ti_dc&a...
SAN FRANCISCO (Reuters) - Texas Instruments Inc, .the top maker of semiconductors for cell phones, on Thursday said it was well-positioned for the pending battle over the wireless Internet phone market with Intel Corp.
Earlier on Thursday, Intel unveiled a chip for new generation phones that combines a processing, flash memory and communications on a single piece of silicon. The chip will allow users to do videoconferencing and play online games, among other applications.
Samples of Intel's PXA800F, code-named "Manitoba," will appear in phones later this year, with large-scale production likely in the first half of next year, Intel said.
Texas Instruments, however, said there are smartphones and personal digital assistants on the market now that contain its integrated wireless OMAP chips.
Those chips have integrated digital signal communications processors, SDRAM (synchronous dynamic random access memory) and microprocessors, said Alain Mutricy, general manager of TI's OMAP wireless processor group.
Texas Instruments plans to add radio frequency and analog components to the integrated chip that will be available in samples to cell phone customers next year, he said.
"We are far ahead of Intel," Mutricy said, a claim that Intel disputed.
Both companies claim their approaches are better, with either lower power consumption or faster speed and tighter integration or cheaper memory.
"It's going to be quite a horse race and the odds are that both companies are, to some degree, going to rescue the cell phone industry" by delivering advanced functionality, said Richard Doherty, research director at The Envisioneering Group, a market research and technology assessment company in Seaford, New York. "Intel has raised the bar."
Dallas-based Texas Instruments has an advantage being the top maker of semiconductors for cell phones, while Intel is a leader in selling flash memory to handset makers and Pocket PC-based PDAs, both companies said.
Intel hasn't announced any contracts, but said it is in talks with the world's top handset companies.
Texas Instruments OMAP customers include NEC Corp. (6701.T), Matsushita Electric Industrial Co. Ltd. (6752.T) and Fujitsu Ltd. (6702.T), which all supply phones to NTT DoCoMo (9437.T); Nokia (NOK1V.HE), the No. 1 maker of cell phones; and Palm Inc., the No. 1 maker of PDAs.
Shareholder settlement:
The only reason one would opt out of the class-action settlement would be to pursue private litigation against the company to seek a better judgment or settlement than the one proposed in the class suit. Clearly not a reasonable option for anyone other than a very large shareholder.
Regarding the settlement amount per se: you get a sizable per-share amount only on shares bought during one of two periods: 1) The IPO and the period immediately following it; or 2) The period from 6/14/01-6/20/01 (inclusive). Shares bought at other times receive much smaller settlement amounts or nothing at all. Consult the detailed schedule in the legal documents you received to determine the exact amount you can expect to receive.
What ever happened to BRCM’s suit that INTC was ripping off BRCM’s employees and trade secrets? Was it dropped or settled? T.i.a.
Speaking of hot spots:
http://www.wired.com/news/print/0,1294,57641,00.html
Here's Broadband in Your Pocket
By Elisa Batista
Feb. 12, 2003
Australian researchers unveiled a chip that lets cell-phone users receive high-quality face-to-face video and other streaming media at rates faster than a home broadband connection.
Developed at Bell Labs in Australia, the chip works on a next-generation cell-phone network like the one powering the Sprint PCS Vision service and can run programs at up to 24 megabits per second -- almost 20 times faster than a traditional T1 line.
The "turbo decoder chip," which is available for a licensing fee, lets users of any wireless device on a 3G network conduct video teleconferences, tap into corporate data behind a company firewall, and send and receive multimedia applications like MP3 tunes, video clips and PowerPoint presentations.
"We're talking about data rates competitive with the most advanced broadband wired modems," said Chris Nicol, lead researcher for the team that developed the chip.
Industry analysts said the chip could compete head-to-head with Wi-Fi wireless Internet networks, which have been hugely popular in coffee shops, homes, libraries and offices, but can deliver data to a PC at up to only 11 megabits per second.
"That's pretty impressive performance," said Stan Bruederle, an analyst for market research firm Gartner Dataquest.
The introduction of such a chip may breathe life into 3G networks. Many analysts and consumers have favored Wi-Fi over 3G because it's more readily available, cheaper and easier to use.
The big question, however, is whether Bell Labs' turbo chip can compete with Wi-Fi on price, Bruederle said.
Most Wi-Fi customers don't pay more than $40 a month for service. But Bruederle pointed out that using a cell phone as a modem for Internet access or running Internet applications on a wireless device powered by a cell-phone network could prove to be expensive -- many carriers charge by the minute.
Also, Wi-Fi technology operates on a slice of airwaves that is largely unregulated by the government and can be used without a charge. Cell-phone carriers, on the other hand, paid millions, if not billions, of dollars for their wireless spectrum. As a result, they're looking for ways to recoup those costs -- most likely at the expense of their customers, Bruederle said.
"It's a question of economics," he said.
Other analysts questioned whether Bell Labs' development may have come a little too late.
Nicol said the chip has been in development for three years, but that Bell Labs scientists grappled with technical issues such as how to use the spectrum most efficiently so that the wireless device could deliver the content at high speeds without draining the battery.
"Turbo decoding is one of the most computationally intensive functions performed on a mobile 3G network," Nicol said.
Unfortunately for Bell Labs, the market doesn't seem to have waited for those engineers to solve all the equations. Most cell-phone carriers have already decided to operate their 3G networks as they are or offer Wi-Fi service, said Joe Laszlo, an analyst with Jupiter Research.
"Carriers are already spending billions of dollars in technology," Laszlo said. "It's hard to get them to shift those billion-dollar bets onto another technology."
Forbes on AMD::
http://www.forbes.com/2003/02/12/cz_qh_0212amd_print.html
AMD Learns To Share
Quentin Hardy, 02.12.03, 8:50 AM ET
Searching for ways to slash its fixed costs, struggling chipmaker Advanced Micro Devices is speeding up the hunt for a partner to share costs on a 300-millimeter wafer fabrication plant, said Chief Executive Hector Ruiz.
"The next three or four months, we have to decide on a partner," he said. Ruiz's urgency stems from his stated goal of moving AMD's variable costs to 30% of operating expenses, from a current 20%. "That might not sound significant, but it's dramatic in our industry," Ruiz said.
In a similar cost-cutting move, in January AMD announced that it would jointly develop semiconductor manufacturing technologies for 65-nanometer and 45-nanometer chips with IBM. AMD moved a number of its technologists to New York as a result of the deal, which will last until at least 2006.
"We need to find future R&D spending cuts," said Ruiz. "The goal is to get expenses into the midteens (as a percentage of revenue.) Right now it's 20%." For the 2002 calendar year, R&D was 30% of revenue. [Fractions look bloated when the denominator is small –Dew]
AMD, long the embattled smaller competitor to chip giant Intel, finished 2002 with a net loss of $854 million on sales of $686 million. Excluding restructuring and other charges, the company lost $235 million, reflecting a worldwide drop in demand for most semiconductors.
Ruiz, speaking at a Bank of America technology conference yesterday, said that in recent months he has focused on tightening the company's supply chain, boosting its capitalization and reducing break-even levels, in part by lowering fixed costs. With inventories at four weeks' supply compared with eight weeks previously, 2,000 employees gone and capital expenditures cut to $705 million from $800 million, Ruiz said AMD now has a cost structure to break even on $800 million in revenue.
Now it is up to customer demand to deliver those top-line numbers--in particular, demand for flash memory chips in advanced cell phones as well as strong sales of AMD's 64-bit Opteron processor for computer servers, due to launch on April 22. Sales of chips into standard cellular phones and personal computers, he said, would likely reflect the "flattish" global demand for those products.
In the past year, Ruiz said, AMD's share of flash memory chips in high-performance cell phones has doubled to 20%, a trend he expected would continue. In addition, AMD has signed seven of China's ten indigenous cell phone makers to AMD chips.
Still, the executive gave little reason to expect a robust turnaround soon. While demand for the high-density flash chips was "healthy," he said, "we haven't raised prices." Instead, Ruiz was just grateful for relief from recent rounds of price cutting. "I see things to indicate pricing will be far more stable than last year," he said.
>> I expect [Centrino] to quickly proliferate to many different markets, probably quicker than Compal realizes. <<
That Compal guy is not offering an opinion about Centrino, he is saying that his company is not going to buy Centrino for consumer laptops because they won’t be able to make money doing it.
It doesn’t matter what you or I think – but it does matter a lot what people like Ray Chen think.
Compal: Centrino unlikely to penetrate consumer market this year
http://www.digitimes.com/NewsShow/Article_print.asp?datePublish=2003/02/12&pages=PR&seq=206
Wednesday 12 February 2003
Compiled from outside sources; Sarah Chang, DigiTimes.com
Ray Chen, president of Compal Electronics and Compal Communications, predicts that Intel’s Centrino mobile technology is unlikely to penetrate the consumer market this year unless its unit price can cut to US$100, the Chinese-language Commercial Times reported.
Intel has informed Taiwanese notebook makers that it will quote Centrino mobile technology, its new brand name for a Pentium M processor, 855 family chipset and wireless network connection, at around US$200, Chen revealed.
Chen believes that such a price would limit Centrino to only corporate users, with Centrino-based notebooks having to be sold at US$1,500-1,900 to be profitable. To penetrate the consumer market, notebooks must be priced below US$1,500, with a corresponding price for Centrino of around US$100, said Chen.
With the consumer market accounting for around half of the total notebook market, Intel should lower Centrino’s price to stimulate notebook demand, Chen stated.
Compal’s Centrino-based notebooks, all aimed at corporate users, will ship in the second or third quarter, said Chen.
[Thanks to mmattheych on Yahoo]
>> Dew, why don't press releases like this help TMTA stock? <<
Patience, my friend! Instead of focusing unduly on day-to-day price movements, think of your TMTA holding the way a VC would. At the current price, you own shares for close to their net cash value. Even real VC’s rarely get a deal that good. Regards, Dew
P.S. TMTA just announced a list of global sales reps and distributors:
http://biz.yahoo.com/bw/030212/120101_1.html
>> You think it makes sense to compare today's GMs with the height of the boom? That's comic relief. <<
EP: This comedy business is rough – maybe both of us should keep our day jobs…
Philips to cut costs in chip unit:
http://www.marketwatch.com/news/print_story.asp?print=1&guid={14DB1BC0-0448-4B87-A65A-C9CFB47871...
>>
Royal Philips, Europe's largest electronics maker, on Tuesday said it's cutting costs as well as research and development spending to push down the break-even point for its struggling semiconductor business… The company said it continues to target cost-savings of 1 billion euros and said it's aiming at profitability in its semiconductor business in the latter half of the year "under normal market circumstances"…
<<
>> I like to think the rally last Nov. was the bounce off the bottom and we are now re-testing it, but only time will tell. <<
Bearing in mind that the designation of a “bear market” is merely an abstraction, I believe that the brutal bear market of the past few years ended on 10/9/02. FWIW. Dew
>> For comparison, I looked up Corning's [gross-margin] numbers. <<
Why Corning? Did someone say that Corning has had strong gross margins lately?
Corning barely managed to stay out of bankruptcy and now, by dint of some astute balance-sheet maneuvers, they have become the turnaround story of the year.
Corning and INTC are both renowned for their proprietary technology, including an emphasis on leading-edge production techniques. But that’s where the similarity ends.
>> 49% gross margins look outstanding compared to the 31% in 1986 [emphasis added], the last major semi bottom. Try puting things in perspective. <<
EP: you use 1986 as a base for gauging INTC’s financial metrics? I assume you meant that to be for comic relief. 1986 was 17 years ago -- the year Microsoft went public.
I’d rather not belabor the point because it’s not my intention to bash INTC’s recent financial performance (which is quite respectable under the circumstances). I simply couldn’t allow the cited comment implying healthy gross margins to go unchallenged.
>> It would seem that Tim's assessment on gross margin is reasonable. <<
Are we looking at the same numbers? What I see is that 2001 and 2002 had the lowest gross margins since 1989. Moreover, the average of the 2001 and 2002 margins – 49.5% -- was 1,080 basis points below the 60.3% level attained as recently as 1997.
>> Intel hasn't done badly during the tech wreck. Look at sales and profits, and gross margins. Still very high, all of them. <<
I was going to elaborate on the misstatement there with respect to gross margins – but then I decided to let Usuck have the first crack at it.
Business Week on Centrino:
[No new info here -- just some color, most of which is probably old hat to readers of this message board. Note: bold-faced emphasis added by Dew]
http://www.businessweek.com:/print/technology/content/feb2003/tc20030211_8644_tc119.htm?tc
Whoa! Intel's New – Slower -- Chip?
By Olga Kharif in Portland, Ore.
FEBRUARY 11, 2003
The giant says its latest laptop processor will slip in clock speed, yet achieve better performance. You can bet AMD and others are listening
Intel wants to take your mind off chip speeds -- especially if you're going to be in the market for a new laptop. That might sound crazy to anyone who has watched Intel constantly crank out newer, faster chips -- and constantly try to convince consumers and corporations that the speediest semiconductor is the answer to all their computing prayers. But in a reversal of emphasis, Intel is about to start pressing the public to buy laptops with new brains that aren't faster than existing ones. Instead of simply running more rapidly, says Intel, its new laptop chip will result in better overall performance in real-world applications.
However, by taking this new, rather un-Intel-like approach to chipmaking and -- perhaps more important -- to marketing, the world's biggest semiconductor producer is attempting to dominate what promises to be a rare, high-growth tech market. Or possibly laying itself open to a big counterattack.
Intel says it achieves this performance increase without a speed increase because of the way it's bundling the new processor with other components into an integrated offering, a first for Intel. Called Centrino and set to be launched on Mar. 12, the package includes a main low-power-consuming processor specifically designed for wireless notebooks, a choice of one of two chips controlling graphics, and a wireless chip allowing the laptop to connect to wireless local-area networks.
GOTTA HAVE IT
This last piece is critical, considering the explosion of interest in Wi-Fi high-speed wireless Net access. Today, most users who want to connect to, say, a Wi-Fi network at the local Starbucks have to buy special wireless cards to put into their computers. But a wireless chip like one that's part of Centrino functions as an embedded wireless card -- essentially making any notebook wireless-ready.
And that's what makes these products so alluring. For 30 years, the bulk of computer processors Intel made went into desktop PCs that either sat by themselves or were connected to a network, or later to the Internet, by wires. But as corporate buyers and consumers start replacing their PCs in late 2003 or early 2004, they're expected to go ga-ga for laptops, especially those that can make batteries last longer and offer built-in wireless Web connectivity.
While only 5.7% of all notebooks in existence in 2002 were wireless-ready, that percentage will rise to 35% in 2003 and 90% by 2005, according to market researcher Cahners In-Stat. In two years, 50% of corporate users will be tapping on laptops, up from 20% today, estimates Charlie Glavin, an analyst with investment bank ThinkEquity Partners. And consumers won't be far behind.
FULL-COURT PRESS
.So Intel, which already controls most of the market for laptop processors, "basically has to reinvent itself," says Glavin. And that's pretty much what the marketing blitz behind Centrino, Intel's first mass-market brand since the original Pentium was introduced in 1993, will set out to do. In fact, Intel says it will pour more into marketing Centrino this year than the $300 million it spent on Pentium 4 in its launch year, according to Pam Pollace, vice-president and director of corporate marketing at Intel. Centrino, whose pricing hasn't been set yet, is expected to replace Celeron, Pentium 3, and Pentium 4 Mobiles as Intel's main notebook chip by the end of 2004.
As Intel, which already holds an 80% share of the PC processor market, embarks on this new marketing drive, it's adopting a strategy more like the one archrival AMD (as well as Apple) has been using for years. And therein lies the danger. AMD's top chips have often run at slower absolute speeds than Intel's fastest models, but AMD has always claimed superior real-world performance because of more efficient internal architecture. Ditto for Apple and its PowerPC chips (made by IBM).
Centrino, too, will claim better overall throughput despite its slower clock speed, 1.6 gigahertz, compared to Intel's current mobile Pentium 4's 2.4 GHz. And taking a page from Transmeta's Crusoe laptop chip, Intel will also emphasize Centrino's ability to extend battery life. Despite Centrino's slower speed vs. the Pentium 4 Mobile, "it will absolutely be the fastest processor on the planet for the mobile environment," claims Anand Chandrasekher, Intel's vice-president and general manager for mobile platforms group.
HIGH HURDLES
.In making such claims, though, Intel might itself be bolstering the arguments its rivals have long been making that chip speed is hardly everything when it comes to gauging processor performance. Tim Bajarin, president of tech marketing consultancy Creative Strategies in Campbell, Calif., believes that ultimately Intel's strategy will pay off, but not before a long hard slog.
Among the hurdles Intel will face: The new benchmarks won't be as easy to explain to end users and could easily result in heightened competition from rival chipmakers eager to go up against Intel on the terms they've been stressing all along. Also, many of Intel's PC-making customers fear that packaged offerings might rob them of the ability to choose different vendors for different components. And they may not want to become even more dependent on Intel, especially since many specialty companies offer more advanced individual products compared to Intel's Centrino bundle.
Although the CPU itself -- called Pentium M -- that's part of the Centrino brand will also be sold separately, most analysts believe that Intel will offer PC makers major discounts -- and advertising dollars -- to make the bundle irresistible. Intel is expected to offer generous reimbursements to PC makers that mention Centrino in their ads.
"NO LONGER IMPORTANT."
Intel's carrot is a new logo that laptop makers can slap on their Centrino machines, part of the long-running "Intel Inside" logo campaign. To be able to put the Centrino logo -- looking like a heart on its side -- on their laptops, manufacturers will have to buy the three-chip bundle.
Intel's strategy, however, is already proving contagious: In March, Taiwan's VIA Technologies -- mostly known for its motherboards but also a chipmaker with a sizable following of white-box manufacturers -- will start offering a similar three-chip bundle to its customers, says Richard Brown, associate vice-president for marketing at VIA. Referring to its new 1-GHz laptop chip, Brown says: "Megahertz are no longer important. Now, we can [sell chips] just as well as Intel can."
That may be an overstatement. But Intel will clearly have to overcome resistance from PC manufacturers. "Centrino definitely has a role in our portfolio, but so do other products," says Matthew Wagner, manager of product marketing for Hewlett-Packard's personal systems group. "It's all about flexibility."
PLAYING CATCH-UP
So HP plans to use Centrino as well as separate chips from other suppliers. And on Jan. 29, HP, IBM, NEC, and Toshiba announced that they would purchase wireless chips -- more advanced than those initially available with Centrino -- from startup Atheros Communications in Sunnyvale, Calif. Why Atheros? "We are specialists. We live, breathe, and die that one thing," says President and CEO Rich Redelfs.
Indeed, the wireless chips included in Centrino are behind the competition in functionality. Intel's initial chip will support just the so-called 802.11b standard, commonly used for wireless LANs, even though other makers already offer chips that support that standard and the newer, faster 802.11a. Intel can't match that until the second quarter.
By that time, companies such as Agere Systems, whose chips are used by Dell, among others, and is the No. 2 wireless-chipmaker behind Intersil, will already offer chips based on three standards, says Tony Grewe, Agere's director of strategic marketing. PC makers and end users could be leery of Intel's early efforts here. Says Allan Nogee, an analyst with In-Stat: "When you pay $2,000 for a laptop, you don't want to be caught with just one [wireless] technology."
SLOW START
Considering that most PC companies also don't like to depend on one supplier for their key chips, Mark Grossman, an analyst with SG Cowen Securities, doesn't expect Intel to gain much more market share in notebook processors from rivals like AMD and Transmeta. Indeed, the latter says it's seeing rising orders, according to Mike DeNeffe, Transmeta's marketing director.
For the same reason, many analysts estimate that Intel will take perhaps only a few percentage point of share away from entrenched graphics-chip makers like Nvidia and ATI Technologies. "We think of ourselves, first and foremost, as a partner of Intel," says Philip Eisler, vice-president and general manager for mobile and integrated business unit at ATI. And he points out that his company also makes chips that can be used to enhance Centrino's relatively limited graphics abilities. So, ATI could actually benefit from Centrino's success. It remains to be seen, however, whether that gain would more than offset sales lost to Intel's new bundle. Nvidia declined to comment.
At first, most notebook makers would likely install Centrino only in a few models, says Creative Strategies' Bajarin. Intel confirms that the package will cost more than a comparable stand-alone processor, and anything that drives up laptop makers' costs would be more than unwelcome, considering how thin their margins are already. However, any laptop maker that wants to build wireless-ready machines will have to spring for some extra cost, either for the additional separate wireless chip or for a Centrino bundle.
SPREADING THE GOSPEL
Still, Intel's Chandrasekher claims initial orders for Centrino already exceed by three or four times what Pentium 4 Mobile got when it came out in March, 2002. This March, PC maker Gateway will begin outfitting some of its most popular laptops with Centrino. And by yearend, more than half of its notebooks will have Centrino inside, says Mike Stinson, Gateway's general manager for mobile products. So far, most manufacturers seem pleased with the quality of Intel's chips, says Dean McCarron, founder of PC components consultancy Mercury Research in Cave Creek, Ariz.
The adoption of the Centrino brand could take a while, as Intel spreads its new, speed-isn't-everything gospel to computer makers and consumers -- a message that rivals might actually welcome and help spread. With $10.8 billion in cash as of yearend 2002, though, Intel has all the time in the world. And it's betting that the wait will be worth it.