MB - re:"I can't answer any questions about Osha's models, but I can take stabs at the rest. 1. How much of Dell's business is US vs. international? About two thirds. 2. [50%/non-US] what's the trend here? I'm not sure, but this report sure makes US and worldwide PC unit growth seem congruent: biz.yahoo.com 3. What's the trend for consumer markets? Unclear from Dell's report alone. Add in Compaq, IBM, Gateway, resellers; despite HP's optimism ("home PCs and laptops particularly strong") you have a mixed bag. 4. [PC-bottom-up vs Intel overall] Bottom-up forecasts, by their nature, tend to be skewed towards optimism. After the fact, they necessarily balance. 5. unit volume of demand and supply that Intel will cease to be capacity constrained? <g> Give me Intel's internal production forecasts and let me set prices and I'll tell you. My best guess for IABG microprocessor demand, in dollars, is for low-to-no-growth, say 0-5% revenue increases YOY. My guess is that Intel is ramping for substantial unit growth, probably not less than 15-20% YOY, perhaps more. Natch, whether this constrains capacity is dependent on pricing; I expect the same old softness, so even flat dollar growth might strain the ramp. And last, in re a couple of companies, Dell and Compaq are more than that to IABG, and you know it. So, enough detail for you to provide thoughts instead of just questions? -mb"
I spent a few moments going over publicly available data to try to test some of your points and check to see if there is a wide error margin in the conclusions. What I determined:
1. Your right about Dell's international distribution of sales: 68%Americas; 26%Europe; 6%Asia. Didn't get a consumer vs. commercial split. Intel's business, on the other hand is distributed: 42%Americas; 27%Europe; 31%Asia+Japan. You can conclude that Dell's comments are going to be skewed towards the US markets (unless they specify otherwise). That can still be good input, but it is skewed.
2. Your assumption that US and worldwide PC growth trends are congruent is too general for use in this case. If you look at Intel's quarterly growth rates broken out by geographic region (available on www.intc.com) you'll see a pretty erratic pattern of geography growth. In fact, for th last few years the Americas have been weak in Q1 vs Q4.
the first column is Q4'99 growth over Q3'99 and it moves back in time by quarter to the right(sorry about lack of formatting)
Americas 5% 9% 2% -9% 3% 21% 1% -12% -1% 13% 2%
Europe 16% 13% -15% -13% 31% 5% -5% -11% 32% 3% -24%
Asia-Pacific 17% 14% -5% -2% 19% 14% -1% 8% -5% 3% -12%
Japan 31% -19% -5% 24% -3% -1% -1% -8% -6% -29% 9%
Intel Overall Growth 12% 9% -5% -7% 13% 14% -1% -8% 6% 3% -8%
I think you'll find that news about one geography's growth doesn't tell you much about another's and Q1 tends to be weaker for US/Europe and stronger for Japan/Asia.
3. Trends for consumer markets. It would help you to have some data here. You also want to know what's going on in servers. Compaq, for instance, generates 69% of its quarterly revenues from Enterprise solutions and servers combined with consumer product lines (also where they make their profits).
4. "after-the fact they necessarily balance" - not true. Intel's numbers and those of the common market research firms don't match, there's enough delta in there to add some incremental error margin.
5. Now you've made some big assumptions, and this appears to drive most of your conclusions. Those "best guess" assumptions you've made about ASPs, unit growth are ones that really can impact the results - my only hint to you is that the fundamentals are not as volatile - when all is rolled into single average - as you seem to be presuming.
Lastly, with respect to Dell and Compaq, Intel has filled in its 10-Q that the top five customers account for 44% of Intel's net revenue as of Sept 25th. So, yes, Dell and CPQ are big, valuable customers, but your conclusions presume that the marginal ups and downs of these few customers cannot be balanced by the rest. Maybe you're right, maybe not.
I think you're asking a lot of interesting questions now. That's good. Have you noticed how far away we've moved from the original premise of the analyst that: "Although it's hard to tell what's happening, we think that Intel may have assumed that resolving its Coppermine problems was all that needed to happen in order to continue ramping revenues - actual demand softness did not enter into the calculation.".
regards,
jh |
