What did Fleck hate about INTC?
I bought a sizeable amount of jan 20's this am
Lauding a Live Fish: Yesterday I mentioned a rumor about some sort of IBM (IBM:NYSE) /Advanced Micro Devices (AMD:NYSE) linkup and said I'd elaborate further today. I have some assistance from the most recent issue of The High-Tech Strategist, but before quoting from it, a few words about its author, Fred Hickey. To reiterate my oft-stated praise, Fred is about the only live fish that I have found in technology.
Fred writes: "AMD's new 64-bit microprocessor chip continues to make progress. Yields are improving, and the desktop and mobile versions will be announced in September (shipments to customers will begin this month). IBM is rolling out its first Opteron servers now. H-P (HPQ:NYSE) has plans to adopt the desktop version of the chip (Athlon 64) in a line of PCs. Sun (SUNW:Nasdaq) will likely use Opterons in a line of servers. AMD's chip is superior to Intel's (INTC:Nasdaq) Itanium. Once the chip gets more traction, I believe that even Dell (DELL:Nasdaq) will jump Intel's ship and announce that it's using the chip. There are lots of rumors floating around to that effect."
Pooling Resources Along the Hudson: The bottom line: Fred is convinced that the Athlon and Opteron are going to be successful parts. The only real question has been whether AMD will be able to manufacture these things. It has been working on this project in collaboration with IBM, which, as folks who've been paying attention know, desperately needs a successful part to run in its Fishkill, N.Y., fab (note that AMD's research group has moved to Fishkill and is presently working on the next-generation .65 Athlon 64/Opteron). IBM could give AMD a double bonus, both by teaming up with it on the manufacturing process, and also by endorsing its part in the PC business. To me, it seems to make perfect sense for IBM and AMD to do something together, as AMD needs credibility, and AMD's balance sheet isn't the best on the planet.
Of course the real key is, as Fred muses, whether or not Dell jumps ship and opts for these AMD processors. I believe the answer is yes, since Dell will be able to get them cheaper, and they're better processors, with backward-compatible features. Further, I believe that Dell ought to feel like Dell's customers are Dell's, so why should the company pay such huge margins to Intel and Microsoft (MSFT:Nasdaq) if it can help it? Obviously, Microsoft is hard to get around. But to the extent that Dell can do something with AMD parts at a better price, that helps Dell's margins.
Toppling the Intel Pedestal: So, I believe some sort of combination/endorsement among these three players is in their collective best interest. I expect that it will occur, though I have no special knowledge that it is in process. All of this, naturally, helps to bolster my negative opinion of Intel. To repeat my comments from previous Raps, I believe that Intel's basic idea of selling ever-more expensive processors is flawed, given that PCs are a commodity, and saturation is upon us. I believe that if this little scenario which I've laid out comes to pass, folks will see that Intel has rested on its laurels for a long time, and it's not the innovative powerhouse that people think.
Intel has, in my opinion, pursued the wrong strategy since 1998. That is when it denied the existence of the sub-$1,000 PC, choosing to try to keep margins up and make its stock price go up, rather than seeking the best technological strategies that money could buy. I believe that Intel has turned itself into a marketing company, as opposed to a technology company, but obviously reasonable people could debate that subject.
Anyway, based on this thought process, I own a few AMD calls as a speculation, but I own far, far more Intel puts, because to me, that cake is completely baked. My belief is strengthened further by what Fred opines in his most recent issue -- that Intel will lower guidance on Sept. 4 at its midquarter update, since it will be unable to make the numbers it has set for itself. I would just say that Fred's opinion is good enough for me, and I support his view. |
