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Mas,
Intel's stock hasn't thrived since 2000.
The notion that Amd is a poor victim of Intel's Price war is BS. Didn't AMD cut prices to hang-on to their 'naive' 30% MSS goal and failing miserably (and also posts huge loses as a result). Didn't AMD introduce the $1000 pc to udercut ASPs few years ago.
Why does there have to be only one aggressor in Intel-Amd saga?
Maui.
Tenchu,
Yes, Commoditization did contribute. But should it have contributed so much?
Maybe the discussion could be:
What if Intel had jacked up the ASP by $20-$30 starting last year when economy was better and AMD was messing up with everything? Maybe AMD would have jacked up the price too and breakeven and maybe behind the scene have them back off from these lawsuits. What if Intel do it now? Would people in emerging market not buy computer? Would businesses use PDA and cell phones instead or delay their purchase? What choice do they really have (I am speaking for Investors, not consumers right now)?
Maybe Intel and Amd have though about it all and concluded that this is the only way to go. But then, sometime they (executives) are too obsessed with screwing each other. In early/mid 90's, Andy Grove and Sanders disliked each other so much, that someone (Barrett, if I remember right) else acted as a peace-maker with their lawsuit - whcih could only benefit both companies.
I gave an example of Oil companies earlier. The breaking point seems be around $5/gal in US, but they have still managed to jack it up from ~$1.80 to $4.60. Aren't they all finding ways to thrive at the cost of consumers?
Maui.
Re: 'Looking a 1997, you're in the middle of a market that somehow thought that Pets.com warranted a market capitalization in the many billions. Intel was caught up in (and smacked down by) the dot-com bust."
I am sorry, that is not true. You are confusing 1999 and 2000 with 1997. Notice that I did not intentionally pick a $60/$70 price to compare with todays price. Most of 1998 was quite a terrible year for Intel stock (by its standard then).
You forget that Intel's earning in 2007 (in Q3) was $2B on a $6B/quarter revenue, same as what it is today at $10B/quarter. Intel has simply now found a way to grow their profits and they market is paying accordingly.
Maui.
Mas,
I am sorry you missed the point. While Intel is doing a poor job of converting product leadership into stock price gain, doesn't mean AMD is not to be blamed here. They are more obsessed going after Intel than the other way around. The AMD stock boost 2 years ago was probably an anamoly. I can go on and on about AMDs screw-up (30% market share at any cost tops my list).
The point is, with only two players left in this 'growing' PC market, they should both be thriving - and neither are.
The only joy for the most investors on this and AMD's board is how the other one is in a big funk.
Maui.
I am fully invested in stocks too. Bulk of it in Intel (worked there for a long time). The best it did in the last up cycle is $28? This stock was at $26s in 1997. You can take a 2 year span and feel better (BTW, 1 year doesn't look that great either), but with all the competive egde, I expected lot more.
I am very dissappointed in the returns (dividend and cover calls helped) in a timespan when CPU sales have grown significantly. I think it either ignores competition in their core business (under Barrett) and then does just the opposite - too much focus on AMD.
Bye.
Re : "How do you propose that be done? Should we gather outside the headquarters with torches and pitchforks?"
Now we are going in circles. Started with wheather Core duo was underpriced.
Re: Based on Intel stock price relative to the market, Intel stock seems to be doing very well.
Good to know there are some happy intel investors.
Re: Semiconductors aren't oil...
Business is Business. As a stockholder, why dont you demand much higher returns from a dominant market player with much superior technology. Oh right, you are happy with your INTC returns!
Dont you feel Intel shareholder should be benefiting immensly from the technology lead and their dominant position in the market? Intel had a 2B quarter in 1997 and they are still at the same level, when the annual MPU sales have more than doubled. It's been a disaster for the shareholders over last several years and I have been wondering if it is a good strategy to keep fighting against a competitor (even a suicidal one like AMD) with nothing to show to the investor for so long.
Look at the oil companies, they are all together raking in gold (and screwing the consumers in the process). Why shouldn't the consumer take a backseat to benefit the shareholder for these two companies? In that context, aren't core2 priced too low?
Maui.
Why 2 years?
try 5 years or 10 years. It would be an eye-opener.
Only AMD looks worse. What difference does that make, unless you benefited from that?
Hi Sarmad, Alan, wbmw,
Thanks for you responses.
I did go ahead and buy AMD and sold 2010 jan 7.5 CC.
I am betting they will survive but not thrive over next 2 years and hover between 5 and 10 around.
Alan, I have not retired (I wish though!), so need to be reasonably aggressive in my investment.
Maui.
Elmer, wbmw, Sarmad, others
I would love to hear you poke holes in my theory!
I just quit Intel after working there for eternity. Currently I am loaded with INTC. I have money in my profit sharing that I plan to rollover to an IRA and invest in some stock.
I am beginning to find AMD attractive now.
I was looking at AMD jan 2010 7.5 covered calls. Writing CC would fetch me $3.40 at current price, which is over 40% in value and 66% (0.4/1-0.4) if I fully invest - about 28% annualized gain if the stock stays above 7.5 in Jan 2010. It has to end up below $4.50 for me a make a loss.
My logic being AMD can do a lot of things to not drop a whole lot more from current level - go back to where they came from (serve the mid to low end 15% market), do massive cost-cutting, provide value to specific customers, get their product line in shape (though this might take some time) or rely on Nehalam being a bust.
In the worst case, if AMD doesn't recover (and goes under), Intel would go up significantly from current level, which would more than offset my losses from AMD.
Do you see a scenerio where AMD goes down lot more from current level and Intel doesn't increase their EPS significantly from a weak AMD?
Thanks
Maui.
Techno_bull, Thanks!
Maui.
Wbmw, I could not find the link.
If this is about banning MAS, my vote is NO.
If not, would you provide more details on where the survey link is? Any chance, it is available to only specific subscribers.
Maui.
Tech's biggest trend: everywhere
Nothing is changing IT like the adoption of technology across the developing world. Expect more than two billion PCs worldwide by 2015
http://money.cnn.com/2007/06/15/technology/personaltech/fastforward_pcgrowth.fortune/index.htm?postv...
---------
As these efforts, especially Intel's, suggest, though we may exceed two billion PCs by 2015, what a PC will be then will in many cases look more like today's cell phones and PDAs, even though they will do all that today's PCs can do and more.
---------
My questions:
1. Are these numbers overly optimistic? Does one out of every 3 (or 4)human really need a PC?
2. Why would some form-factor PC succeed over a cell phone that has processing power of a PC? If internet access is the driver, why would one prefer a small PC over a cellphone/PDA?
3. What's in it for Intel at this lower ASP in terms of:
a. Fundamental change to its business model. How does it R&D, chip design cycle time and manufacturing change to acomodate this.
b. Bottom-line and top-line growth.
Would appreciate any thoughts anyone has.
Thanks.
Maui.
wbmw, Re "EPS = $1.05 (give or take $0.10)
For 2008, no clue, but I would hope to see it at least 15% greater than 2007.
"
so, at $22 stock price, the forward looking PE is about 17 - not really low for a company, that may not sustain more than 10-15% growth rate long-term (next 5 years)
So, what is the source of optimism about Intel stock ?
BTW, I am a playing devils advocate here (I own tons of INTC).
Maui.
wbmw, Re : "It may be smooth sailing from here. I also expect a boost in Q3 when people realize that Intel's margins in the second half are actually going to hit their targets"
What do you expect the 07 and 08 eps to be ? How high do you expect Intel's PE/stock price to be this year and next?
Also, do you think Intel will get lot higher PEs if AMD continues to suffer financially ?
Appreciate your thoughts.
Maui.
Re : "I believe they are now claiming 51% for the full year, which means they expect 52% for the second half"
Not to nitpick, but shouldn't it be 53% for 2nd half?
50% in Q1, 48% in Q2 gives and avg of 49% in 1st half.
My guess would be 51% in Q3 and 55% in Q4.
Maui.
Biggest advances in chips in 40 years
INTEL, IBM UNVEIL BREAKTHROUGH
By Therese Poletti
Mercury News
Intel and IBM each separately announced competing developments Friday described as the biggest advances in semiconductor chip making in over 40 years.
Using new materials and a new manufacturing process, the two companies announced advances that would increase the speed and power of chips for another decade.
But Intel of Santa Clara is apparently much farther along, saying it will launch new chips for computers, laptops and servers before the end of the year based on the advances.
One of the most important features is that the faster chips will also consumer much less power, an epidemic problem for some companies in the industry.
``It's a real breakthrough ... for both of them,'' said Rick Doherty, research director of The Envisioneering Group in Seaford, N.Y. ``I wouldn't be surprised if members of these teams were up for the Nobel prize.''
The news from both tech giants is a proof point that after almost seven years of industry research, transistors can be built using so-called high-k metal gates. Transistors are the simple on-off switches that process the ones and zeroes of electrical data on a chip.
Intel said that the development will ensure that Moore's Law will thrive well into the next decade. Moore's Law is the name given to a prediction by Intel co-founder Gordon Moore, who said in the 1960s that the number of transistors on a chip would double every two years. That prediction has proved to be an industry benchmark that has paved the way for faster, cheaper and more reliable computers, cell phones and other consumer electronics.
Moore, 78, came out of retirement, where he spends some of his time in Hawaii, to issue a statement Friday about the Intel team's innovation. He said Intel's use of high-k and metal materials ``marks the biggest change in transistor technology'' since Intel's pioneering use of polysilicon in 1969.
Polysilicon, a mixture of small silicon crystals, acts as the gate of the transistor, which determines whether the transistor is on or off. Intel and IBM are both heralding a new gate made from a combination of metal and a higher insulating material called high-k, an engineering term for the ability of a material to hold a charge. By replacing one element with metal, efficiency goes up, because metal can hold an electrical charge better than the less efficient silicon.
Yoshio Nishi, a professor of electrical engineering at Stanford University, said that many companies, research labs and universities, including Stanford, have been conducting research on using high-k metal gates in the transistor, with some difficulties.
``Despite many serious efforts worldwide, there are a lot of challenging and difficult problems to be solved before commercialization,'' Nishi said. He said that Intel's news that it has working chips using these technologies proves to the industry that this is a possible path to continue the march to doubling transistors on a chip.
Even if Intel does not make public yet all the details of how it achieved its advances, Nishi said, this will inspire others in the industry. If someone can run 100 meters and breaks a record, ``No one knows how he or she did it,'' Nishi said. ``But the fact that they did it, then everyone will try to break that record. In this technical world, a similar mechanism also works.''
Intel said its new family of chips, code-named Penryn, will have 410 million transistors, using the new materials combined with the 45-nanometer technology manufacturing process. This compares with about 280 million in current chips. Intel also said electrical leakage will be reduced by a factor of about 30 percent.
Nishi described IBM's advance as still in the research phase. IBM made its announcement as part of its research partnership with Intel's rival, Advanced Micro Devices of Sunnyvale, along with Sony and Toshiba.
The two companies have different approaches to their use of high-k metal gates.
Doherty, the Envisioneering analyst, said IBM integrates their high-k metal inside the silicon, where Intel's development is on top of the silicon.
``Imagine a farm where the irrigation is on the surface, moving across the land,'' Doherty said. ``The Intel technique is making sure there is good metal irrigation on the surface and IBM has gone straight into the ground with sprinklers.'' He said IBM's approach could enable it to stack more layers together in the silicon, and thus enable even more transistors.
The two companies were clearly angling to be first with the news. Intel had previously planned to announce its development last week, but its new partnership with Sun Microsystems took precedence. But the Armonk, N.Y. computer giant is believed to be presenting a technical paper on its advances with high-k metal gates at a technical conference in about six months and word of its paper has leaked through the semiconductor industry, analysts said.
``We will put it out the door in a product in roughly in the '08 time frame,'' said Bernie Meyerson, chief technologist for IBM Systems and Technology Group and an IBM Fellow. ``It's almost meaningless to say I'm going to ship a chip first. Yes, you can do that. It doesn't mean that you are actually going to put it into a server, there is a ton of work to get to that.''
Intel said that the team of engineers at its research center in Hillsborough, Oregon, took new chips out of their research factory, using a new 45-nanometer process, and put them in a system and booted up several operating systems on the chips, including Microsoft's new Vista. They toasted the moment with sparkling apple cider instead of champagne.
http://www.mercurynews.com/mld/mercurynews/
wanna_b,
"I think there is some significant upside to Intel's earnings, above what the analysts have estimated"
Does that translate into significant upside to Intel stock price? At EPS of $1.00 in 2006, the stock is overvalued currently. So, IMO, the stock already reflects the upside over and above analyst estimates.
My high end estimate of annual EPS in 2-3 years is about $1.60, unless Intel finds a way to reduce cost significantly from the current level to offset falling ASP of MPUs/PCs. A long-term sustained growth of 10-15% in EPS might push the stock to low to mid twenties (my best case) in a couple of years. Not bad, but not spectacular either. For me, the dividend and writing covered calls makes it more attractive.
What do you predict Intels EPS to be over the next 3 years?
Maui.
glad to know you had a great new years eve party!
"Intel will have to work hard to avoid a very visible profit drop next year."
Maybe, though unlikely, unless the global and semi economy slows dramatically.
If you were in charge of Intel, how would you run the show instead? Not platformize and change focus away from mainly CPUs manufacturing? and Not alter the marketing strategy?
Maui.
More Intel Articles/Interview and Graphics at:
At Intel, "M" Means Modification
http://www.businessweek.com/magazine/content/06_02/b3966010.htm
Of Apples and BlackBerrys
http://www.businessweek.com/magazine/content/06_02/b3966009.htm
http://www.businessweek.com/magazine/content/06_02/b3966002.htm
http://www.businessweek.com/magazine/content/06_02/b3966004.htm
http://www.businessweek.com/magazine/content/06_02/b3966006.htm
http://www.businessweek.com/magazine/content/06_02/b3966008.htm
Maui.
Saw this on the Web.
http://yahoo.businessweek.com/magazine/content/06_02/b3966001.htm
Central to the effort will be the first new corporate logo in more than three decades and a $2.5 billion advertising and marketing blitz, BusinessWeek has learned.
chipguy,
The growth rate is impressive. Do you know what intel makes from itanium ? I believe 619m is the total server revenue, not the revenue Intel generates selling itanium, right?
Thanks.
Maui.
"Intel is facing a civil suite, and they're going to lose. The initial jury award will be for $30 to $40 Billion and it will be reduced on appeal to between $4 Billion and $8 Billion. You heard it here first, bookmark this post and recommend it to your friends. Come back to it later, it will still be here and time will prove it correct."
Didn't you accuse Intel of being involved with Anthrax once ? Didn't you also predict that AMD will have 50% mobile maket share around 2001 or so ? and overall 30% market share ? And that there will be a market cap crossover by 2003 or so ?
Why do you want us to have no friends ?
Maui.
What are the odds that AMDs Q2 results are in trouble and that the lawsuit is just a diversion ?
At least during jerry's time, the pattern was when Jerry is really bad outhing Intel, the worse AMDs results were.
Alan,
Re : "He does need a bit of a geography lesson, as Chef Chu is in Mountain View, and is my favorite bay area chinese restaurant as well"
Maybe you both do (-;
Chef Chu is in Los Altos.
Chef Chu's
(650) 948-2696 1067 N San Antonio Rd
Los Altos, CA 94022
Maui.
Article : Is "IBMtel" the Next Winning Combo?
http://businessweek.com:/print/technology/content/sep2004/tc2004092_8825_tc119.htm?tc
Maui.
Re : "I'd prefer if AMD is "on track," because that would signify that Intel's problems are solvable."
I doubt that will happen. AMD (Hector) pretty much said that are not well so far this quarter. Until (and if ever) AMD has a much larger market share than the 17% they have, I dont see AMD doing well, when Intel doesn't in the same product space.
Maui.
Article : Meet the new boss, same as the old boss?
http://news.com.com/Meet+the+new+boss%2C+same+as+the+old+boss%3F/2008-1006_3-5305899.html?tag=cd.led....
Another One : Intel colonizes with chipsets
http://news.com.com/Intel+colonizes+with+chipsets/2100-1006_3-5304277.html?tag=cd.top
Maui.
Tecate, Morrowinder, Alan, Andyk,
Thanks for your responses.
Frequency of failure tell a story about the quality of execution or inability to hide poorly executed projects. My post is not as much about Grantsdale, as it is about last few years. Andyk has tried to make a point in his post that the frequency is no different from early 90s and Morrowinder pointed out that there is just more scrunity now than before. While I disagree that there were as many execution problems as in the early 90s than now, coming under more scrutiny when you are #1 is inevitable. Being #1, you are under an added burden of proving your execution and quality more than others. There is little chance you are going to be able to change that dynamics, even though it may sound unfair. Intel has to address the issue about the perception of execution (either execute better, or hide poorly executed projects better).
I think it makes perfect sense to measure against better execution (in the case early 90s). Back in early 90s, was I asking for more ? Of course. I was wondering why Intel isn't doing as well as CISCO or DELL. Why sell yourself short by measuring against competitor like AMD, when there is even better example of execution? Investors demand more (Tecate calls it whine) and poke holes where there is room for improvement. This is not a fan club, it’s an investment forum. Greed and continuous improvement is the name of the game. You don’t justify and find excuses when you have your hard-earned money invested in the company. Its not sufficient to be #1 with 15% semi market share (especially when you haven’t improved your position much in the last few years). It’s all about growth and more growth, if you are an investor.
Alan,
While I understand there more experience with failure help succeed second time around, it sounds to me like a 2nd order gain from a 1st order loss. Projects are of course not ‘easy’ for the team doing it, but I am questioning your acceptance of failure so easily and am questioning the lack of ‘paranoia’ culture with that additional edge Intel had (I mean specifically in the core-competency groups). Regarding FDIV bug that created wonders of Intels reputation, it was a case of pure luck and co-incidence. I bet that no project manager is told to fail to create recalls in their product or create FDIV bug to gain popularity. 9 out of 10 times you will come out ahead with good execution in the first place. Agreed that Intel Brand value continuous to grow, but the question here is if they are #4 now, could they have been even better off, had there been better execution ?
What good does demand for perfection do in a business world ? For one, it creates a culture of no-excuse deliverables. It’s puts people on a healthy edge to perform, where failures is not an acceptable option. Its sets a psychological bar higher than in a culture where mistakes are ‘understandable’ and as a result, you are more likely to deliver closer to perfection.
So, why am I invested up to my next in Intel ? Among many other things, Intel Execs ability to be brutally honest with their own execution in the past (No, I am not reading much into what the Intel PR says to the outside world – That’s just about external damage control). After execution problem in 1999/2000, Barrett came out saying that they simply “dropped the ball” and Andy Bryant recently said they “blew it” last year with Flash price increase. Then they went about addressing it. There seems to be a lot more emotional investment by many posters on this thread to be truly ‘honest’ with Intel execution and Intels ability to perform even better. I truly believe that they can do much better than they have been.
JMO, of course!
Maui.
Alan,
you bring up some interesting points. Though I disagree on many.
IMO,
1. Failure is not 'necessary', but inevitable when a company takes risks (like Intel does). You make it sound like one must fail (rather than one would) somewhat to succeed. Even more relevant is the frequency of failures in last 5 years over 5 years in early 1990s. You can say Intel is taking more risks, hence more failures. But I am talking about screw-ups in their core businesses, not in Intel Cap, or ICG. The frequency of failure in the area of core-competency is a result of inferior execution, more than additional risk-taking.
2. Public perception is huge, especially when your next growth is going to come from consumers. A recall hurts the image, when your marketing is trying to tout the quality of the product and severely hurts the brand name. I am willing to bet that Intel management will take Grantsdale recall and Tejas fiasco very seriously and find ways to fix it.
3. AMD : I didn't bring up AMD. Tecate did and now you did. I doubt if AMD is even discussed more than 20% of the time by Intel Execs. AMD has not gone anywhere for 2 decades, and not likely to do so on a sustained basis in future. It makes little sense to be discussing AMD so much on this thread (beside the entertainment value!). My criticism of Intels execution is not an acknowledgement of AMDs good execution. I would rather have Intel measure itself against what it has done in the past (early 90s) and what it is capable of doing with the resource it has.
Maui.
Re : "Yes, I guess I do think it's fair of me to ask you to figure out what I meant."
We obviously disagree here.
Re : "I do communicate honestly and directly, if you don't get it - you don't, but don't be obtuse."
I admit I generalised my overall feeling about this theard and painted it in my response to your post. I cannot help but feel that there are way too many posters on this thread, who tend to view Intel with rose-tinted glasses. In spite of all the evidence that there have been so many screw-up in the last 5 years (Timna cancelation, 1.13GHz Pentium recall, Rambus, Tejas fiasco, now Grantsdale, etc etc) and yet there seems to be little discussion and acknowledgement of these. While Intel has done very well identifying and enabling macro trends (centrino, comminication-computing convergence, going after very high end server market, etc), it is a different company in terms of execution than the one in early 90s (other than FDIV problem, I cant think of any major ones) and it shows a little, in the stock price. There is constant justification for these screw-ups on this thread. You response typifies it. And many on this thread tend to have blinders on them when it comes to objectively looking at Intels mess-up (there are very few exceptions in wbmw, saturn, john fowler, etc).
As a shareholder I would rather have poster discuss intels (and its competitor) achievements and screw-ups more objectively and honestly. I am certain Intel Management wants to do the same.
I do not mean to imply you are dishonest and indirect. But, your response to me does smack of bias for Intel to an extreme.
Maui.
Re : "Sorry if you didn't get it. Keep trying though :)"
Do you think its fair for me to try to guess what you mean ?
I hope you chose to communicate directly and honestly what you meant. If you dont want to clarify, thats your choice too. But, try not to play games.
Thanks.
Maui.
sorry, wasn't trying to rub it in. I am just catching up with the rest of the posts.
Maui.
Re : "Manufacturing Process Engineers are responsible for Manufacturing Process Improvement tasks, similar to defect reduction, etc that I outlined in my message to Tecate, but I guess I souldn't automatically expect people to know that"
I dont think you should. It's probably too granular for most stakeholders and Shareholders to be involved with. Most people will categorize Intel into design, manufacturing and marketing. Take a look at the articles around, almost all of them refer to this as "manufacturing" problem and thats the perception they will carry forward.
Maui.
Re : "Hey, how's that AMD designed and manufactured chipset doing? ??"
I missed your point. What does that AMDs chipset (or lack of) have anything to do with the flaw found in Intel chipset ?
Maui.
re: "Manufacturing Process Engineers, who will no doubt do their normal outstanding, superb, overachieving, fabulous job of driving down defects..... as well as accomplishing the tousands of other small tasks they execute flawlessly every day."
Intel Recalls PC Chips from Manufacturers.
http://biz.yahoo.com/rb/040625/tech_intel_recall_5.html
The flaw was caused by a failure to etch away part of a thin film deposited on the chip during the manufacturing process, Calder said. He said the company has corrected its manufacturing process
Maui.
Intel program to certify server components
http://news.com.com/Intel+program+to+certify+server+components/2100-1010_3-5233521.html?tag=cd.top
Intel program to certify server components
Last modified: June 14, 2004, 5:44 PM PDT
By Stephen Shankland
Staff Writer, CNET News.com
.................
.................
.................
"From a technical standpoint, the ServerWorks people stumbled a little bit. Intel has really good chipsets for up to four-way (four-processor) servers," Glaskowsky said. "They've done a good job of taking a lot of the business back that ServerWorks had taken."
Intel eyeing storage white boxes?
http://news.com.com/Intel+eyeing+storage+white+boxes%3F/2100-1015_3-5227114.html?tag=cd.lede
Maui.