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AMD Wakes the Sinking Giant
Sorry, AMD (AMD:NYSE - commentary - research - Cramer's Take) fans. Your favorite company has been getting a free ride lately, but the low-hanging fruit has been plucked.
Look for Intel (INTC:Nasdaq - commentary - research - Cramer's Take) to awaken from its slumber within the next couple of quarters, and then we'll see how tough AMD CEO Hector Ruiz and his company really are.
Now that you're ticked off, lets stipulate that Advanced Micro Devices has executed brilliantly and come up with world-class designs. And Intel hasn't. Simply put, AMD deserves its success and Intel deserves its bloody nose.
Nonetheless, the impressive gains in market share and prestige of the last year were made possible by mistakes Intel made a few years ago. Among the worst was a decision to cut capital spending, which in turn was probably brought about by underestimating the strength of the PC market.
The result: A serious shortage of capacity, particularly for chipsets, low-margin products that play the vital role of connecting microprocessors to the rest of memory and other parts of a PC's circuitry. Without them, PCs can't be built. In effect, Intel left business on the table that AMD was only too happy to snap up.
"It's easy for No. 2 to gain share when No. 1 can't deliver enough products. It will get more interesting in 2006 as Intel brings new capacity on line," says Dan Niles, CEO of Neuberger Berman Technology Management. Neuberger Berman currently has a position in AMD, but not in Intel.
Intel's capital expenditures went from $7.3 billion in 2001 to $3.6 billion in 2003 and $3.8 billion in 2004. Last year, spending jumped to $5.8 billion and will climb to $6.9 billion in 2006, the company announced during its disappointing earnings report this week.
Before going further, it's important to note that guiding a semiconductor company is a lot like steering an oil tanker. It takes a long time to change course. Building a fab (industry speak for chip factory) takes a year and several billion dollars and another year to ramp production to full steam.
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more at
http://www.thestreet.com/_yahoo/tech/semis/10263113.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
While Intel still has more than 80 per cent of the market for the dominant “x86” processors, AMD reported its share grew to 15.3 per cent in the fourth quarter from 11.9 per cent in the third and 9.6 per cent a year ago.
Keith is this server? It seems to be low to include total market share.
Keith did you see that Boxxtech starting shipping their 4-socket workstation? Several months late but they are finally shipping.
http://www.boxxtech.com/products/apexx4.asp
Reuters updated the tag line from "AMD quarterly profit falls short of expectations" to "AMD reverses loss as sales jump".
AMD quarterly profit falls short of expectations
SAN FRANCISCO (Reuters) - Advanced Micro Devices Inc. (NYSE:AMD - News) on Wednesday posted a quarterly net profit that fell short of expectations as the No. 2 maker of computer processors recorded costs associated with the spin-off of a memory chip joint venture.
AMD said net profit for the fourth quarter ended December 31 was $95.6 million, or 21 cents per share, compared with a loss of $30 million, or 13 cents a year earlier. Revenue was $1.84 billion, up 45 percent from the $1.26 billion a year earlier.
Analysts had expected the company to earn 27 cents a share on revenue of $1.65 billion, according to Reuters Estimates.
AMD has been steadily making headway against giant rival Intel Corp (NasdaqNM:INTC - News), which on Tuesday reported quarterly profit and revenue that disappointed investors and drove its stock down more than 10 percent. AMD's shares, meanwhile, rose more than 3 percent, and have more than doubled in the past year.
But AMD is richly valued, with the stock trading at more than 35 times expected 2006 profit, compared with less than 16 for Intel.
http://biz.yahoo.com/rb/060118/amd_earns.html?.v=1
Intel: What Went Wrong
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"You have Hewlett-Packard (HPQ:NYSE - commentary - research - Cramer's Take), which is a clear No. 2, which has been moving product designs to AMD. Lenovo and Acer have been moving some product designs [to AMD] . And Dell has stayed with Intel, but has been putting some pressure on them in pricing," says Gorman. As a result, he says, Intel's market share loss and decline in the average selling price of its microprocessors is not entirely surprising.
After years of effectively owning the PC microprocessor market, Intel appears to have been caught off guard by the suddenly fierce level of competition.
Until now, Intel's performance has mostly been measured by how fast the market is growing, says Sunil Reddy, senior portfolio manager at Fifth Third Asset Management. Now the company is dealing with the novel factor of market share, says Reddy, whose firm owns Intel shares.
If Intel didn't take the AMD threat seriously enough before, however, the company left no doubt about its intentions going forward, proclaiming that it will boost capital spending and R&D 19% and 27% respectively in 2006, even at the cost of lower gross margins.
"Now it becomes interesting," says Fifth Third's Reddy. "Intel has upped the ante by increasing their capital expense plans. More so than in any other area, in the microprocessor area having leading edge manufacturing is key."
The goal is to accelerate development of advanced chips with 45 nanometer circuits, a generation ahead of the 65-nanometer chips that Intel is currently transitioning to. By contrast, AMD is not expected to move to 65 nanometer processors until the second half of 2006.
"No semiconductor company with the exception of Samsung can match this pace of leading-edge fabrication expansion," wrote Moors & Cabot analyst Hans Mosesmann in a note. "We believe AMD is now roughly 1 year behind Intel in processing technology, in 2007 they will be 1.5-2.0 year behind Intel."
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http://www.thestreet.com/_yahoo/tech/hardware/10262223.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=...
IBM Could Post Upside Q4 On Strength Of Chip Unit
Caris & Company analyst Mark Stahlman reiterated a "buy" rating on IBM ahead of the company's earnings fourth-quarter earnings announcement.
The analyst projected earnings at $2.02 per share, 8 cents above the consensus forecast, "based largely on our expectations of an outsized quarter in IBM (nyse: IBM - news - people )'s Microelectronics unit." The analyst expects the division to contribute quarterly earnings of 10 to 15 cents per share.
"We believe that IBM's server business is likely to turn in a strong quarter, in part because this will be the first full quarter for shipments of the new Z9 mainframe and because the previous model Z990 was beginning to flag last year after more that six quarters of record sales," Stahlman said.
"Our indications are that IBM's software unit also did well -- as is typical in a quarter when hardware sales are strong."
However, there is some concern regarding IBM's services signings, which make up about half of the company's sales, the analyst said, noting that "$12 to $13 billion will be interpreted as 'decent' with $10 to $11 billion being viewed as potentially 'weak.'"
Still, "while there has been a shift from longer-term towards shorter-term contracts at IBM and elsewhere, we believe that IBM is likely to report good long-term signings with somewhat more modest short-term additions," he said.
The analyst noted that in 2006, IBM, along with Dell (nasdaq: DELL - news - people ), is likely to begin to take advantage of the x86 processor line made by Advanced Micro Devices (nyse: AMD - news - people ).
IBM is scheduled to report fourth-quarter results after today's close of trading.
http://www.forbes.com/2006/01/17/ibm-earnings-0117markets06.html?partner=yahootix
From aleph0@SI
COVERAGE REITERATED: Advanced Micro (AMD) reiterated by Am Tech/JSA Research. Reiterated rating Buy.
From Briefing.com.
The Core Duo chip "is the closet thing in my life I've seen to defying the law of gravity," says Mooly Eden, VP and general manager of Intel's mobile platforms group. It will provide a 78% performance boost with a simultaneous 28% power reduction, he says.
Keith that is a great quote.
Keith, then it is worst than I orginally thought. This is CIOs job, to know about such issues.
He said: "CIOs don't care. I was recently at an event with 50 or 60 CIOs and this subject came up and one of them asked, 'Should I be embarrassed that I don't give a shit about this?'."
This is kinda scary. If the CIOs don't care about peformance, and peformanc/watt then AMD may NEVER penetrate into these guys.
...and shortly VoodooPC will be launching the world's fastest notebook - no question, uncontested, no one will touch it. Guess what processor it's running?
Any idea what he is talking about here? Dual core Turion?
But shouldn´t AMD have updated their guidance if it was really as good as the market seems to expect? Those are the questions I´m asking myself.
The gains over the last two days comes from that analyst that says Dell blah blah blah... I know that I would be feeling much better if the analyst would off not said anything. I would like to play it like this, sell now hopefully at around 36, wait for AMD to tank after Dell says "no way" and after the earnings then buy back in at around 30. I do think that AMD will continue to do well. I do agree that Intel will catch up to AMD and may even surpass them in 2H of this year for < 2S servers, all clients and all mobile. But I do not know how long lived Intels advantage will be. I also think that even with Intels performance/watt advantage AMD will continue to take share (due to another reason, lawsuit).
There´s taxes and broker fees to consider as well for me.
I think this applies to all of us.
Keith if I may ask what is your strategy going forward. I'm starting to get a little nervous. This seems to good to be true, the stock price being so high that is.
Keith, I think this board is a great idea. I will be spending the majority of my time here. My only concern is that I may lose some visibility to some important developments that may get posted on the other board and not posted here.
When I look at that link it says "Sold Out". I hope AMD can keep up with the demand.
Yes, 35W parts are much "easier" to produce for AMD in volume than the 25W parts. OEMs like HP and Acer need stable supply and large volumes, and for now that means ML. Fujitsu-Siemens for example uses in their notebooks MT, ML and even A64 parts, for maximum flexibility, to be able to use whatever is best available at a given point in time. Some of the smaller vendors like Averatec use the MT parts to differentiate their models further from the likes of HP. Maybe as AMD improves the process, ramps up the volumes and/or moves to 65nm, we´ll see more MT parts, but the trend for both INTEL and AMD is to move to 35W TDPs in mobile.
Keith when do you suppose Fab 36 could help alleviate this problem?
Keith it seems like none of the OEMS are using the MT line of Turion. Is my observation correct and if so do you have any reason why this is the case?
VMS is better than ever and now runs on an Intel based platform as scalable and robust as Alpha ever was but without the nagging concerns about sustainability and longevity.
Paul outside of youself and Intel some would say that there are concerns with IPFs sustainability and longevity. Only time will tell.
Mike, you're wasting your breath. wbmw's not too keen on 64-bit laptops because Intel doesn't have it. If Intel did have it, his argument would have changed completely to support it. Logic doesn't quite have a place in that kind of mentality.
Dell shows off speedy game PC
LAS VEGAS--Michael Dell joined the overclockers' club on Thursday.
Speaking to a crowd at the Consumer Electronics Show here, the Dell Computer founder showed off a new gaming PC that includes several high-end components, including a "factory overclocked" 4.26GHz Intel Pentium Extreme Edition.
Dell's Limited Edition XPS 600 Renegade, which is expected to be available this quarter, also includes four Nvidia graphics processors in an airbrushed fiery red case designed by Michael Lavallee.
Dell also showed off a concept laptop design that folds out and resembles a desktop computer with a detachable keyboard. The computer included a 20-inch widescreen display and the company has at least 10 patents. A release date has not been determined.
The company also introduced a new 30-inch flat panel display that will sell for $2199 and a dual-core 17-inch widescreen entertainment notebook, the Inspiron E1705, priced at $2,299.
Although the consumer market makes up only 15 percent of the company's business, Dell noted that it has grown more than fivefold since 2000, while the rest of the PC industry has seen total consumer sales decline.
Overall, Dell said that his company sold 10 million PCs in the fourth quarter, a milestone he said had never been achieved by a computer maker. He noted that one of every three U.S. computers comes from the company he founded.
"It's because of this that we feel an obligation to take computing to the next level," Dell said.
Dell, who was joined on stage by Nvidia CEO Jen-Hsun Huang, made the case that PCs are better for gaming than consoles, which are considered fast when they come out, but remain static over their roughly five-year lifespan.
"The PC still ranks supreme as the high-volume device of choice," Dell said.
He also addressing the persistent speculation that Dell might adopt chips from AMD. "It's a distinct possibility," Dell told reporters following his speech. Pressed on the point, he said he "wouldn't want to speculate" on what role AMD might play. Historically, Dell has used only Intel's processors.
Addressing the gains AMD has made in creating speedy chips, Dell maintained that a fast processor is not the only way to improve PC performance. "What you see in these systems is that the real imrpovement in performance is not coming so much from the CPU as from the (graphics processor)."
http://news.com.com/Dell+shows+off+speedy+game+PC/2100-1042_3-6020407.html?tag=nefd.top
Keith do you happen to know if Intel makes the best in breed
wireless parts and chipsets with respect to performance and power usage?
Keith do you think the reason Lenovo has not responded is because if they offered a Turion based solution it would drive up there cost too much. Basically the same issue that Dell has?
But whether AMD can land in ThinkPads, sold primarily to corporate accounts, will depend on a host of factors, he added.
So Keith what I want to better understand is what those *factors* are Lenovo is talking about. Any insight from you would be appreciated.
Corporate IT managers have been asking Lenovo, "If it is good for my servers, why isn't it good for my laptop?" he said.
Keith is this the way it really works? Those IT managers don't know whats good for them so the ask the salesman?
A next generation Horus wouldn't be able to do it without taking a radically different approach, possibly something directory-based or a NUMA approach like Sun does with Starfire.
I don't think the approach would be "radically" different then what Horus is currently doing. Its almost there already with its current *partial* directory based CC scheme.
I recall reading something along those lines also. It was about the possibility of one in the future though. What current chipset could support such a thing right now? I can see it possible in the distant future with Opteron being glueless to 32-way and then throwing in the next generation Horus. But in the works or imminent?
Thats alot of thinking.....:)
SP, no coincidence, but plans aren´t finalized yet as he says.
If they are not finalized yet I think they must be very close. I suspect that Cray will use such a platform for there Phase 3 submission of the DARPA HPCS program which is due mid year.
Thats the program in which the IPF based SGI system failed to make it out of Phase 1 :).
Do you think it is just coincidence that he mentions Cray when he talks about lincensing out C-HT?
Another point that analysts point to is that Intel has an advantage in bringing 65-nanometer process technology to the semiconductor market faster.
Hester: There are two pieces to that statement. The first part focuses on when Intel will ship its first 65-nanometer technology. The second piece of that statement questions when Intel's promise really yields in shipments and volume. AMD's philosophy is fundamentally different than Intel's. AMD tends to not buy the newest technology at the earliest possible date it's available. We tend to buy the technology a little bit later. The processes they put in place are focused around what they call automated precision manufacturing. What it allows them to do is tune the manufacturing process much tighter than when a general layer of silicon line is run.
Is that a screwed up statement or what. APM is AMDs baby.
UpNDown what is the significance of market cap?
What if your paper wings burn up?
Keith, knowing that AMD is flying on wings made of paper you should sell ASAP. I'm looking for my exit in the next several months.
Who is it that has a price target of $10?
Date:7/21/2005
AMD 20.37
INTEL 27.03
Date:12/30/2005
AMD 30.58
INTEL 24.93
Snippets from Prudential report:
HIGHLIGHTS
• We are establishing a 2007 pro-forma EPS estimate of $2.10. We are raising our price target to $40.
• Our new model takes into account the deconsolidation of the Spansion flash memory business, and that the Spansion memory unit contributes $4m and $32m to net income in '06 and '07, respectively.
• Our estimates assume AMD MPU unit share increases from 18% in 2005, to 21% in '06 and 24% in '07.
• We are also assuming that AMD's MPU ASPs increase from $85 in 2005, to $92 in 2006 and $99 in 2007, based on continued share gains in the high-end server and notebook MPU markets.
• We assume that AMD's MPU capacity ramps from 42 million units in '05, to 57 million units in '06 and 70 million units in '07.
• We are assuming gross margins of 56% in '06 and 57% in '07.
• Our checks indicate continued share gains by AMD this quarter. We believe that by mid-06, investors will start basing valuations on '07 forecasts.
• Fundamental risks include INTC on the competitive front, and the company's ability to successfully ramp capacity to our forecasts.
• Valuation risks include potential multiple contraction due to semi cycle rolling over and increased investor scrutiny on options expensing.
• We are Unfavorable on the sector, but recommend owning AMD as one of our top picks based on its product cycle.
Expect Continued Momentum
Our checks indicate that AMD continued to gain share this quarter, and based on our assessment of the product line, we expect the company to maintain its momentum through 2006 and into 2007.
For example we spoke with one senior I/T manager who told us that, while 6 months ago his company made the decision to switch all its HP blade server purchases to AMD Opteron, the products were so compelling that they decided to purchase all their HP servers based on the AMD Opteron. The issue was not just power consumption but performance. Because AMD has an integrated memory controller, there was more room on the blade for DRAM, which was an inexpensive way to increase performance. We don’t expect Intel to have a server MPU with an integrated memory controller until mid-07 at the earliest. We also think that it is worth highlighting that on its mid-quarter update conference call, Intel noted that in the server market “orders are tough to win” and that it was “hand-to-hand combat there.”
Paul, cool, I'll keep an eye on it. If I think its going to go for a good run I will pick up several thousand shares, it is cheap at $.38.
You starting get an itchy trigger finger WRT your holdings?
I know I am. Are you getting a itchy trigger finger WRT your SGI holdings?
Intel cuts back options for stock
By Michael Kanellos
http://news.com.com/Intel+cuts+back+options+for+stock/2100-1006_3-5998834.html
Story last modified Fri Dec 16 13:15:00 PST 2005
Intel, one of the longtime Silicon Valley proponents for stock options, is phasing them out in favor of restricted stock grants.
Starting in 2006, Intel employees will receive much more of their equity compensation in restricted stock units (RSUs) rather than options. An RSU is a full share of Intel stock that can't be sold or exchanged until it is vested. Vesting takes place over a four-year period. When vested, the shares get converted to regular shares of Intel stock.
The chief advantage for employees is they do not have to worry as much about stock price fluctuation. They receive a set number of Intel shares over the course of four years. With stock options, they would receive the right to buy shares at a set price. Then if the stock price declines, the options lose value and could even become worthless.
On the downside, employees will get about a third fewer RSUs than they would have received in options, said Gabi Thompson, worldwide director of compensation and benefits. Offering fewer RSUs will lessen the negative impact on Intel's bottom line now that the company will be expensing them annually.
All Intel employees get options now. In 2006, about half of the employees with get only RSUs. The other half will get a combination of RSUs and options. The higher an executive's rank, and the more that executive's performance can affect the company's stock price, the more options he or she will get, Thompson said.
Decades ago at Fairchild Semiconductor, Intel founders Robert Noyce and Gordon Moore became surprise millionaires through options, a form of compensation that was less familiar at the time. When starting Intel, they made stock options a key part of compensation packages.
The founders have asserted that stock options have been a crucial element in compensating employees. But Intel has had to fight politicians and its own shareholders over that assertion.
In other news:
In May 2004, Intel stockholders voted on a resolution asking the company to expense stock options. Historically, companies have not counted stock option grants as an expense in the year they were granted, effectively making options an expense-free method for companies to compensate employees. Critics have said that this accounting nuance has simultaneously inflated executive compensation and diluted shareholder value.
Other companies, such as Microsoft, have already reduced options in place of restricted stock grants.
Thompson, however, said Intel's shift from options to RSUs had nothing to do with the company's fight over options. Instead, it came from a review of compensation policies.
Intel will also increase the cash compensation for certain employees. In the past, the company paid the market average. Starting in 2006, Intel will try to pay above the market average. Some positions are already at the market average, those that aren't, Thompson said, will get a salary bump above and beyond any increase related to job performance.
Analysis: Intel Vs. AMD Becomes An Epic
The two have long been bitter rivals, but the competition reached a new high--or low--this year.
By Mark LaPedus, EE Times
Dec. 16, 2005
URL: http://www.informationweek.com/story/showArticle.jhtml?articleID=175004211
SAN JOSE, Calif. — For years, Intel Corp. and Advanced Micro Devices Inc. have battled each other in the x86-based microprocessor business.
But in 2005, Intel verses AMD reached epic proportions: Call it a new and memorable chapter in the ongoing battle between the semiconductor industry’s version of David and Goliath.
In 2005, AMD smacked mighty Intel with a stone from its proverbial slingshot, sending the microprocessor giant back on its heels — at least temporarily. Microprocessor supplier AMD scored a minor victory in its long uphill fight to wrestle the processor market from Intel, as the company overtook its archrival in the U.S. retail PC sector in October, according to market research firm Current Analysis.
Intel took AMD’s best shots in 2005, including a lawsuit, a slew of antitrust complaints and the ongoing introductions of arguably a better microprocessor design for servers. Yet Intel regained its balance and is still standing, vowing to fire back with a vengeance with products at the 65-nm node in 2006.
Needless to say, it was a memorable year for the two companies. In June, for example, Intel was hit by a suit from rival AMD, which made various claims against its rival.
AMD alleged that its archrival has been operating an unlawful monopoly in the x86 microprocessor market and has coerced computer makers, distributors, small system builders and retailers in their dealings with AMD. The complaint identifies 38 companies that AMD alleges have been victims of coercion by Intel. It also claims seven illegal tactics across three continents.
AMD said Intel had about 80 percent of worldwide x86 microprocessor sales by unit volume and 90 percent by revenue, giving it entrenched monopoly ownership and excessive market power. Intel denied the accusations, with chief executive Paul Otellini saying the company will not alter its practices.
Also, European authorities are probing Intel business practices on their continent. They are receiving help from Japanese officials, who in March managed to get Intel to stop unfair trade practices by its Intel K.K. subsidiary.
And antitrust authorities in Korea in August started looking into shaky rebate and marketing deals Intel has made with personal computer manufacturers there, according to a regulatory filing.
On the marketing front, Intel and AMD are preparing to square off again with next-generation products, which are expected in 2006. In addition, AMD recently opened up its first 300-mm fab.
Not to be outdone, Intel outlined its strategy to fend off competitive pressures from its rivals, especially at the 65-nm node. At an event, Intel re-announced its roadmap of dual-core mobile, desktop and server processors at the 65-nm node. The company also claimed that it will have no less than four wafer fabs in its arsenal that will manufacturer chips based on the 65-nm process.
Overall, Intel has invested more than $4 billion in new fabs and upgrades this year alone. These investments will add over 2,000 jobs for the company, according to Intel.
But amid the noise, hype and confusion, there are some lingering questions: Can AMD gain significant share from Intel in 2006 and beyond? And do consumers really care about so-called multi-core processors?
AMD could gain share if one or a combination of events takes place: 1) Intel badly stumbles with its roadmap in 2006; 2) the corporate market embraces AMD in a big way; 3) Intel-based backer Dell finally adopts AMD’s Opteron chips for its servers.
On the first point, Intel has stumbled in the past. For example, in 2005, the company rushed out a dual-core design, which turned out to be two processors slapped together in a single package.
Here’s the real key: Can Intel get its new “micro-architecture” processor designs out the door by the second half of 2006, as it has previously stated? The 65-nm, dual-core products will replace the company’s old and tired Pentium-based NetBurst architecture lines. Processor products based on the new technology include codenamed Tulsa and Woodcrest for servers, Conroe for desktops and Merom for notebooks.
Intel will likely ship the products in time, but they had better show a real performance benefit. AMD’s Opteron chip, which integrates the memory controller on the same circuit, proved to be a better design than Intel’s Xeon 32/64-bit processors.
Still to be seen, however, is if or when Intel will develop its own processor with an integrated memory controller. It, however, could be a moot point: the company with the best product sometimes never wins.
And at least for the foreseeable future, Intel will continue to dominate the corporate or business world — much to the chagrin of AMD. AMD has a tiny share of the business market and the old adage rings true with IT managers: “You can’t get fired by buying Intel-based PCs.”
This could change if — and only if — Dell switches camps and adopts AMD’s Opteron processor for a server design. Analysts have urged Intel-based backer Dell to jump on the Opteron, but don’t hold you’re breath unless Intel badly stumbles and fails to deliver.
Intel also hopes to regain lost share in the consumer space, thanks to Apple Computer Inc. Apple is reportedly readying its first product based on an Intel part. Apple is said to be using Intel’s Napa mobile platform in an upcoming laptop.
More importantly, the question is whether or not consumers really care about the newfangled processor designs in PCs. Not long ago, consumers became somewhat savvy when it came to PC technology, including the make and model processor. Those were the days when speed grades and megahertz mattered to run new and complex applications and games.
Now, as the world shifts towards complex dual-core, low-power processor designs, consumers are bound to become more confused and less interested in the make, model, speed and identity of the processor.
Just like the megahertz race, the “Intel Inside” moniker could become a thing of the past.
CEO of Spansion on CNBC right now <EOM>