Tuesday, July 18, 2006

Intel in turmoil and facing possible financial disaster

Tommorrow, Intel will post its 2Q06 financial results. As I analysed previously, GAAP loss is a substantial possibility. I also expect substantial decline in net cash and stockholder equity. The expected revenue was $8.3 billion, down from $8.9 billion in 1Q06. Some analysts projected a revenue of $7.8 billion.

INQ reported some stories from inside Intel. Some very competent but outspoken folks lost their jobs at Intel. I can imagine that place is full of fear and uncertainty, everyone is an enemy. If your co-worker loses job, your chance of staying increases. Especially for those folks who spent their youthful years there, their chances are slim. Craig Barret once said that "[t]he half-life of an engineer is only a few years." Those who lose their jobs will find it hard to find another one -- AMD is not hiring that many.

AMD already forecasted that its 2Q06 revenue will be $1.21 billion, down 9% from 1Q06. Looking forward a few months, 4x4, 65nm, K*L, Bulldozer. Intel won't be able to walk out 2007 in one piece.

25 Comments:

Anonymous Anonymous said...

you drug addict start barking again, shame on you Alabama sucker

9:58 AM, July 18, 2006  
Anonymous enumae said...

I do not mean to beat a dead horse, but I have to ask for you to show links, outside of your blog, that show K8L coming out in 2007. I have searched Google and their is nothing definitive, one day its yes and another its no, thaks.

Also, with all of these price cuts AMD is making how will that effect there 3Q06 revenue?

The one thing that I am not sure you factor in is that Intel has alot more going on than just chips, if the lower there price at least they have alternate income, maybe not enough to account for the losses but some is better than none.

10:12 AM, July 18, 2006  
Anonymous Anonymous said...

Do you know any AMD high rank personality who is reading this blog? If yes, Please ask him to comment on ANY subject he sees right.

10:42 AM, July 18, 2006  
Blogger mrmaloon said...

Sharikou,

Tomorrow, according to most estimates, Intel will announce earnings of approximately $820M for the quarter.

$820M....

$820M.....isn't that greater than the grand total of all AMD net earnings since the beginning of time....seriously....

2005-- AMD made $165M
2004-- 91M
2003-- (-274M)
2002-- (-1328M)
2001-- (-61M)
2000-- 983M

11:06 AM, July 18, 2006  
Blogger Sharikou, Ph. D said...

$820M.....isn't that greater than the grand total of all AMD net earnings since the beginning of time....seriously....

But that was the past. AMD alleged all the money Intel made was illegally obtained. Since AMD's filing of the lawsuit, you see INTEL earnings going downhill, further prove AMD's allegations.

11:18 AM, July 18, 2006  
Anonymous Anonymous said...

Well, we just have to wait a couple of months to know who's right and who's wrong.
One thing is for sure, the consumer will benefit much from upcoming processor war and the future technology improvements.

I personally think AMD has made the right choice for the future of computing (torrenza), by stimulating other companies to develop co-processors for specific purposes, but who knows what intel will come up with within a couple of years.

However, if I had to upgrade within a couple of months, I would consider C2D for sure, but unfortunately I was forced to upgrade in january and back then the X2 3800+ was the only (expensive) choice. My former rig consisted of a P3 800EB, which was back then performance/watt more attractive than the Athlons. I mainly use my pc for scientific calculations.

11:20 AM, July 18, 2006  
Anonymous Anonymous said...

GAAP stands for “General Accepted Accounting Principles”. Intel has no principles. Intel is well known for its underworld dishonest marketing, who’s to say there GAAP numbers can be trusted. They lie about there technology numbers (benchmarks), why not lie about there accounting numbers.

11:25 AM, July 18, 2006  
Anonymous Anonymous said...

don't worry the itanium 2 will save intel. long live the itanium 2. lol.

http://www.theinquirer.net/default.aspx?article=33113

11:43 AM, July 18, 2006  
Anonymous Anonymous said...

AMD is losing half its revenue for desktop chips starting July 24th if Dailytech is right.

AMD is losing half its revenue for notebook chips starting August 24th if Dailytech is right.

While AMD may be doubling its Opteron prices soon, AMD will still be in no great shape itself.

I do hope Intel survives because it is so clear with Conroe that if Intel does not keep AMD on its toes, AMD spends no money on chip development and just milks the market.

You need two evils (AMD and Intel) fighting against each other to give the consumer a chance.

12:58 PM, July 18, 2006  
Anonymous Anonymous said...

"don't worry the itanium 2 will save intel. long live the itanium 2. lol."

Itanium 2 will save Intel ?! you must kidding man. Itanium is a joke in the industry and Intel lost billions of dollars on itanic.

Check this one out

http://theinquirer.net/default.aspx?article=33115

1:19 PM, July 18, 2006  
Anonymous jackall said...

enumae said...

"I do not mean to beat a dead horse, but I have to ask for you to show links, outside of your blog, that show K8L coming out in 2007. I have searched Google and their is nothing definitive, one day its yes and another its no, thaks."

Quoted from Digi Times' interview with Henri Richard, EVP AMD

----> "Well, as Dirk Meyer commented at our analysts meeting, we're not standing still. We've talked about the refresh of the current K8 architecture that will come in '07, with significant improvements in many different areas of the processor, including integer performance, floating point performance, memory bandwidth, interconnections and so on. You know that platform still has a lot of legs under it, but of course we're not standing still, and there's a next-generation core that's being worked on. I can't give you more details right now, but I think that what's important is that we're establishing clearly that this is a two-horse race. And as you would expect in a race, sometimes, when one horse is a little bit in front of the other, it reverses the situation. But what's important is that it is a race."

For more confirmation and information check out-

http://www.amd.com/us-en/assets/content_type/DownloadableAssets/PhilHesterAMDAnalystDayV2.pdf

2:32 PM, July 18, 2006  
Anonymous Anonymous said...

"Itanium 2 will save Intel ?! you must kidding man. Itanium is a joke in the industry and Intel lost billions of dollars on itanic.

Check this one out

http://theinquirer.net/default.aspx?article=33115"

I think he was being sarcastic... They don't nickname the Itanium(and Itanium 2 for that matter) the Itanic for nothing. ;^)




To all the Intel zealots here I CHALLENGE YOU to refute Sharikou's claims of Intel's finacial folly. He's spilled out the information on Intel's finacials with publically avaliable information and backed up his claims, not with rocket science and hyperbole, but instead, it's called consumer math and common business sense.

When your expenses outstrip your net income worth, the value of your assets and your credit line, you are going to hit red. Now compound that with selling your mountains of outdated inventory at a huge loss and even then selling your new products (with only 30% product of the new product achieveing market saturation by year's end) at a steep cut in a brazen effort to stop market loss to your competitor, your income is going to quickly dry up if not almost immediately evaporate with a company of Intel's size.

Simply put as Sharikou has said, it will not take long for Intel to start having to give somewhere and start "shedding pounds" quickly... If not, they will end up bankrupt, that's just how it goes in the business world if they don't have someone to bail them out. So far this has already started with the Marvel sale and then the layoff of 1,000 employees with more to be let go before the end of the 90-day review period.

This isn't just a case of being a fanboy people, this is what happens to a company when it's senior chairmen makes bad decisions with little reguard of thier business practices, ethics or competition and it comes back to blow up in thier colletive faces.

At best, if Intel is lucky, they won't end up in a situation like what happened with Enron and come out much smaller size, albiet a mere shadow of it's former self. If they aren't so lucky, here comes bankruptcy, lawsuits from investors and a federal investigation with some serious legal poo for alot of Intel execs.

2:54 PM, July 18, 2006  
Anonymous enumae said...

Jackall, thank you for the link, although I have already read that as well, I guess I'm looking for launch dates.

Thanks anyways.

3:20 PM, July 18, 2006  
Anonymous Anonymous said...

I agree with Dr. S; Intel’s business model relied heavily on fantastic volume on its chip monopoly (divide cash revenues by number of employees = $ per employee produced). Its volume and monopoly (market share) are fading fast, while profit margins shrink (price war). Intel’s cash burn rate is still extremely high (debt and overhead). Intel’s depreciated assets may only bring salvage value to cash out (actual worth). However, I believe Intel could restructure with the help of the courts to avoid total bankruptcy. It’s not inevitably certain, but it’s looking very ugly.

The only other saving scenario is; the stars align just right and net-burst becomes valuable or AMD does something extraordinarily stupid.

6:12 PM, July 18, 2006  
Anonymous Anonymous said...

Projected to be revenue of $8.3Bill doen from 8.9Bill.

Wow that's terrible thats a decline of just under 7% in revenue, MUCH, MUCH worse than AMD's projection of 9% revenue decline.

Oh wait 9% is worse than 7%, nevermind these pesky numbers.

6:31 PM, July 18, 2006  
Anonymous Jeach! said...

"One thing is for sure, the consumer will benefit much from upcoming processor war and the future technology improvements."

You couldn't be more wrong!

As Shakirou has pointed out in a few posts... Intel should have cut production and raised prices!

I would be even ready to bet any amount of money that if you were to survey the Fortune 500's CEO's on wether 'they' would have:

a) Cut production, increase prises, or
b) Do what Intel is doing now

The majority would answer 'a'. Its purely logical.

Now back to my point... this will just drain both companies financially. Dr. Ruiz has mentioned before that there is enough room in the playground for TWO companies. Intel does NOT want to share and play like this, so it's going to hurt the entire industry, including conusmers in the long run.

If the price war is to your advantage right now, it won't last long!

10:13 PM, July 18, 2006  
Anonymous Anonymous said...

"Oh wait 9% is worse than 7%, nevermind these pesky numbers."

AMD is down 9% from 1Q06, but up 52% over Q2 05, dummy.

10:34 PM, July 18, 2006  
Blogger Sharikou, Ph. D said...

Intel does NOT want to share and play like this, so it's going to hurt the entire industry, including conusmers in the long run.

Yes. Intel wants to kill AMD, then it can make all the money it wants. One company will walk out 2007 alive.

11:00 PM, July 18, 2006  
Anonymous Anonymous said...

"Intel wants to kill AMD, then it can make all the money it wants."

I think it is more likely cripple not kill; if AMD was killed the US government would get involved from regulatory perspective.

11:08 PM, July 18, 2006  
Anonymous Anonymous said...

So Sharikou, what is your estimated date for Intel's demise?

I'd just like to have it on record because you are so certain of their demise, then if you are proven correct you become Nostradamus the 2nd, however, if you are proven wrong, you'll be no better than the doomsdayers who say the world will end... and doesn't.

Personally, I find it highly unlikely Intel will go under. While they are trying to get rid of Netburst they will undoutably get lower ASPs, thus hurting their margins, but they are still making a PROFIT.

How does a company go down making a profit?

11:23 PM, July 18, 2006  
Anonymous Anonymous said...

"Yes. Intel wants to kill AMD, then it can make all the money it wants. One company will walk out 2007 alive."

Given that AMD will release no new processors in 2006 and only the DDR2 version of Opteron (with some slight tweaks) in 2007, it doesn't look like AMD will be the survivor.

All it took was one punch, one heavy blow from Conroe/Woodcrest/Merom, and AMD is down for the count. Bleeding on the mat.

With AMD having to double their Opteron prices to make up for halving their desktop/notebook prices, Intel is going to eat AMD alive in the server space (except for high-end cost-is-no-object servers like Sun x4600).

By the end of 2006, it will be clear that AMD is going nowhere. They have priced Opteron out of the market and their desktop chips are inferior, forcing the customer to buy two chips to match one Intel chip.

It looks like by the end of 2007, there will be another building from a processor manufacturer in Texas that never gets finished.

Too bad AMD is so greedy and dumb. They should have spent money in the past 5 years improving their chips. But they didn't.

12:07 AM, July 19, 2006  
Anonymous BigBadWolf said...

"It looks like by the end of 2007, there will be another building from a processor manufacturer in Texas that never gets finished.

Too bad AMD is so greedy and dumb. They should have spent money in the past 5 years improving their chips. But they didn't."


Too bad Intel fanboys are too dumb to see the light or think straight.
For those predecting AMD's demise , it will happen only in your wet dreams.
Without AMD in sight Intel is gonna make you bendover and shove those legacy networst chips up your's without lube ,1000 bucks a shot. Then you will cry like a 6 year old.
As we all know AMD has seen much worse times than this due to Intel's monopolistic designs and malpractices,yet managed to emerge victorious.
Yes It wants to kill the competition so as to have its way with end users.
AMD is no longer a one track pony for your info.

AMD is neither greedy nor dumb.
HAving said that the above description fits like a jewel in Intels portfolio.
What has AMD has done nothing to improve their chips during the past 5 years you ask.

OMG i can't believe someone actually made the retarded statement.
Are you really an idiot or on crack?
Do i have to start counting the innovations and initiatives carried out by AMD during the past 5 years or would you move your sorry ass and google for it.

Intel fanboys your idiocy makes no points here.You are so dumb it makes me feel sad.

3:33 AM, July 19, 2006  
Blogger Entrophos said...

Too bad AMD is so greedy and dumb. They should have spent money in the past 5 years improving their chips. But they didn't.

The amount of stupidity that is required to make a statement like this is mind-blowing.

AMD has spent a ton of the money it has made on R&D and has spent a lot of time fostering partnerships with other companies to help them forge platforms that are mutually beneficial.

Intel has spent a great deal of its money on cranking out craptastic Netbust chips, paying for subversive marketing, propping up Itanic and wasting billions of investor dollars on failed business ventures.

Maybe you should get your head out of your ass and take a look at AMD's roadmap before saying that they've done nothing, fanboi.

Intel has the lead again in the desktop/1P+2P servers space when their next generation chips actually ramp up (which will take a while), but they are about to be leapfrogged in performance again very, very soon.
They might have a 6-8 month window before Conroe/Woodcrest/Merom are in the same boat P4 is in now. Enjoy it while it lasts.

9:20 AM, July 19, 2006  
Anonymous Anonymous said...

"As we all know AMD has seen much worse times than this due to Intel's monopolistic designs and malpractices,yet managed to emerge victorious."

Please define victorius w.r.t your statement above.

10:02 PM, July 19, 2006  
Anonymous Anonymous said...

"Please define victorius w.r.t your statement above."

The K8 whiping the floor with the P4 in desktop performance while staying more energy efficent and cooler running for the past few years comes to mind... Opteron stealing Xeon and Itanium's marketshare and landing big contracts with OEM's like HP, Sun, IBM and now Dell... AMD making a nice profit for the past few years instead of being in the red... AMD building new FABs in Germany and soon in New York including a contract with Chartered's FAB 7 catching any manufacturing slack...

Need I continue? Anyone oblivious to these facts is nothing more than a Intel zealot, period. AMD has made some serious inroads, this past year especially, to becoming more competitive and on equal footing with Intel. Now if they will just do something about thier marketing...

8:50 AM, July 20, 2006  

Post a Comment

Links to this post:

Create a Link

<< Home