Dot Hill's stock price shot up today on a series of announcements about partners and future guidance, as well as holding its annual analyst day. The last 5 years have been rocky for HILL despite gradual acquisitions of new customers since in lost Sun. In 2012 Dot Hill was developing products that it said would attract new customers [See Dot Hill's 2013 Hopes]. Today was delivery day.
New guidance was given for Q1 2013, Q2 2013, full year-2013, and (tentatively) 2014.
A recap of Q4 2012 provides perspective: revenues were $44.1 million, down 6% from year earlier. Non-GAAP earnings per share (EPS) were negative $0.03, down from $0.00 year-earlier. Not a great quarter.
Prior guidance for Q1 2013 was revenue between $43 and $46 million, with a non-GAAP EPS loss between $0.02 and $0.04.
Today's guidance for Q1 (which should be pretty close, given that the quarter is over) is revenue of $44 to $45 million, narrowing but not increasing the range, with EPS as low as negative $0.02 and as high as $0.00.
$0.00 non-GAAP EPS may not seem like much to get excited about, but that includes research and development costs for new products as well as startup manufacturing costs in costs-of-goods sold. With higher revenue and flat or lower R & D costs going forward, we get to the prettier picture for the future:
Q2 2013 guidance is for revenues between $47 and $53 million, up about 12% sequentially. Non-GAAP EPS estimated range is negative $0.01 to $0.02 per share.
For the full year 2013 revenues are estimated between $205 and $227 million. Non-GAAP EPS should be positive $0.02 to $0.10. That would be great if it happens.
For the full year 2014 revenue estimates are between $231 and $301 million and non-GAAP EPS could be $0.11 to $0.40.
While such long-term predictions should be taken with a healthy spoonful of the salt of cynicism, consider the value of HILL stock if it hit the $0.40 per share top of guidance in 2014. That would likely more than restore investor confidence, so let's give a PE ratio of 15. That would bring the stock to $6 per share. As I write it is trading at $1.53. There are a lot of hoops to jump between $1.53 and $6.00, but there are some reasons to not entirely discount the top range of estimates.
The world of data storage has been evolving rapidly. HILL does not sell disk drives. It sells storage systems for small, medium, and increasingly enterprise businesses. It used to make storage systems for Sun Microsystems until Sun brought a competitor in house. It then picked up HP and NetApp as OEM clients, plus some smaller players and system integrators. Dot Hill dumped NetApp because the margins in the deal was bad, and that made its revenues slump. But all the while it used its substantial cash to develop better systems. Now we are seeing the payoff.
The big announcement today is that Quantum is selling systems, its new QX family, supplied by Dot Hill. A rep from Quantum, at today's Hill analyst conference, reviewed how Quantum has been addressing the rapidly evolving data storage market and how Hill's new products fit into the picture. The amount of data stored in the world is climbing rapidly, largely to accommodate video, full time data feeds, and the mining of big data. Verticals with particular needs to expand their disk drive farms rapidly include entertainment, government, life sciences, and resource extraction (geology). In entertainment many company are rapidly expanding their incoming video feeds, and need all that video instantly for editing and pushing out to consumers. Clients need cheap, reliable storage, and that is what Dot Hill has been developing and is now shipping.
HP, which has provided the bulk of HILL revenues these last few years, has committed to continue using Hill as a supplier of their lower-end, mass market products, the MSA line, the market share leader in its class. While no specifics were mentioned, HP indicated a product refresh is on the horizon. HP has noted Dot Hill systems value, reliability, and interoperability (ability to work with most hardware and software).
The new data storage workloads that are driving the adoption of Hills (patented) technologies are described as a randomized sequential workload. In other words, a lot of data has to be quickly available, and it is hard to predict which data will be needed. However, in a VMWare environment, the new Dot Hill systems were shown to be rock solid reliable and capable of learning about the data demands so as to increase spread over time. With SSD still expensive and tape still much cheaper (using less electricity) than disk drives, the ability to load balance between various media has become a necessity, and Dot Hill does that well.
Also notable is that Dot Hill has greatly increased its addressable market by moving to the higher-end of the data storage market. It is also bringing high-end capabilities to the midrange and even lower range business markets, which makes all of its offering attractive at their price points.
It is an exciting time to be an owner of Dot Hill, but the usual cautions apply: data storage is highly competitive, margins could be better, and the global economy is always an issue.
So keep diversified! And congratulations if you already own HILL stock.
Disclaimer: I own HILL stock. I won't trade HILL stock for at least 3 days from the first publication of this article.
See also:
My Dot Hill main page.
My Q4 2012 Dot Hill conference notes
and of course www.dothill.com
Showing posts with label video. Show all posts
Showing posts with label video. Show all posts
Monday, April 8, 2013
Tuesday, November 1, 2011
Akamai Grows with Internet
Akamai Technologies' (AKAM) stock price is $26.43 as I write. Before (Wednesday, October 26, 2011) Akamai's Q3 results announcement and analyst conference call the price ended at $23.77, and its peak the last few days was $28.28 on Friday. Clearly the results and outlooks pleased more traders than they displeased. What can we learn from the results and conference call?
Akamai is best known from the dot.com boom bust era, when it soared in price before it started showing profits. During the last decade its earnings have grown pretty steadily on a year to year basis. Its stock price and P/E ratio has been pretty well-aligned with reality. Today the trailing 12 month P/E is 26. Non-GAAP earnings for Q3 were up 10% y/y, and revenues were up 11%. The P/E is a bit high for this market, but the almost the entire market is undervalued due to fear still triumphing over greed.
Akamai's core business is content delivery, speeding up web page and file delivery from originators to consumers. Increasingly its income and profits are derived from "value-added" businesses, including security for cloud datacenters and DSA (dynamic site acceleration). It is also involved in accelerating the delivery of content to mobile devices.
As the amount of data delivered by the Internet, including cellular networks, grows, so does Akamai, presuming it maintains its large market share in the business. But prices also drop on a per unit basis as volume goes up. Akamai management believes that the delivery of video content is going to drive up volume, revenue and profits. While video data delivery is growing rapidly, it has not yet started to accelerate at rates that would compensate for Akamai's aggressive pricing to its clients.
There is always concern about competition, but mostly competitors have had to compete on price to win customers, making their profit margins thin or non-existent.
Akamai has $1.2 billion in cash and equivalents and generated $116 million in cash flow from operations in the quarter. They invested $47 million in capital expenditures. It is hard to compete with that, as I wrote in Akamai or Limelight? in January of this year.
At this price I am holding my Akamai stock, believing that downside risks are mainly market risks while upside potential is present from both increased video delivery and broader adoption of Akamai's cloud services solutions. Another bright spot is international revenue, which grew 15% y/y. Akamai started in the U.S. and is still expanding its reach to developing economies.
I first bought Akamai for $17.56 per share in September of 2008 when everyone else was panicking. I have both bought and sold shares since then, as P/E ratios have swung rather wildly (the 52 week high was $54.65, 52 weak low was $18.25).
For more detail see my Akamai (AKAM) Q3 2011 conference call summary.
Disclaimer: I am long AKAM, but occasionally trim or expand my position. I don't plan to trade AKAM in the next 3 days.
See also: www.akamai.com
Akamai is best known from the dot.com boom bust era, when it soared in price before it started showing profits. During the last decade its earnings have grown pretty steadily on a year to year basis. Its stock price and P/E ratio has been pretty well-aligned with reality. Today the trailing 12 month P/E is 26. Non-GAAP earnings for Q3 were up 10% y/y, and revenues were up 11%. The P/E is a bit high for this market, but the almost the entire market is undervalued due to fear still triumphing over greed.
Akamai's core business is content delivery, speeding up web page and file delivery from originators to consumers. Increasingly its income and profits are derived from "value-added" businesses, including security for cloud datacenters and DSA (dynamic site acceleration). It is also involved in accelerating the delivery of content to mobile devices.
As the amount of data delivered by the Internet, including cellular networks, grows, so does Akamai, presuming it maintains its large market share in the business. But prices also drop on a per unit basis as volume goes up. Akamai management believes that the delivery of video content is going to drive up volume, revenue and profits. While video data delivery is growing rapidly, it has not yet started to accelerate at rates that would compensate for Akamai's aggressive pricing to its clients.
There is always concern about competition, but mostly competitors have had to compete on price to win customers, making their profit margins thin or non-existent.
Akamai has $1.2 billion in cash and equivalents and generated $116 million in cash flow from operations in the quarter. They invested $47 million in capital expenditures. It is hard to compete with that, as I wrote in Akamai or Limelight? in January of this year.
At this price I am holding my Akamai stock, believing that downside risks are mainly market risks while upside potential is present from both increased video delivery and broader adoption of Akamai's cloud services solutions. Another bright spot is international revenue, which grew 15% y/y. Akamai started in the U.S. and is still expanding its reach to developing economies.
I first bought Akamai for $17.56 per share in September of 2008 when everyone else was panicking. I have both bought and sold shares since then, as P/E ratios have swung rather wildly (the 52 week high was $54.65, 52 weak low was $18.25).
For more detail see my Akamai (AKAM) Q3 2011 conference call summary.
Disclaimer: I am long AKAM, but occasionally trim or expand my position. I don't plan to trade AKAM in the next 3 days.
See also: www.akamai.com
Monday, April 4, 2011
AMD Llano APUs Shipping
In a analyst call today AMD mentioned that Llano APUs (Advanced Processing Units) are now "shipping for revenue," and should be appearing in computer systems later in this quarter (by June). This means that samples went out some time ago, sample systems were built, and the various computer makers are now moving to volume production.
Llano is interesting because it is outside the Bobcat and Bulldozer core paradigm most associated with AMD's Fusion program. Like the chips based on Bobcat and Bulldozer CPU cores, Llano also integrates a pretty high-end graphics processor (GPU) on the chip. However, Llano uses an updated Athlon (K-10) core. For most computer users that will make for a mean machine. Intel, AMD's bigger rival, is behind AMD in graphics technology. For most users graphics is now the bottleneck. Games and video need strong graphics processing, as does almost any content creation work. Llano-based computers should be very fast, very good with graphics, and very inexpensive.
For AMD investors the good news is that the profit margins on Llano chips are going to be better than those of older AMD chips. In effect, as older non-Fusion chips are phased out, everyone gets upgraded graphics computing ability. Gamers and other high-end users will still want to add a discrete high-end graphics card, but your everyday computer will have very good graphics capability without the expense of the separate card. In return the chip will be somewhat more expensive, and show a better profit margin. The impact on Q2 2011 will probably not be great. The computer industry is fairly seasonal. In Q3 there will be the usual seasonal ramp in production, getting ready for back-to-school and holiday shopping. OEMs will have Llano-based computer production in full tilt by then. Last-year's computers will be on fire sale.
Keep in mind that this puts what would have been, a decade earlier, a personal supercomputer on everyone's computer. These new PCs will have way, way more computing power than tablet computers based on ARM chips. Software makers are going to be able to do amazing things once they can count on APUs with parallel processing capabilities that can be used for many applications besides graphics. Many of these applications will make big computer screens even more desirable. Portability is great, but there is still a lot of future in big screens tied to truly capable computing machines.
Of course, rival Intel has a lot of marketing muscle. But the graphics capabilities of its new chips are seriously deficient, not even able to run the DX 11 graphics standard of Windows 7. That means for a good video or gaming experience anyone buying an Intel-based machine will also have to buy a graphics card based on AMD or NVIDIA graphics processors. Most consumers may not understand that, but the big OEMs do, and some of the sales people at Best Buy seem to understand that as well. Interestingly, Apple is currently building machines with Intel CPUs and AMD graphics chips, but I would not be surprised if Apple introduces Fusion based machines some time in 2012. Once the graphics leader, Apple can't afford to fall to far behind Windows in this race.
See also:
My main amd page
AMD Llano demostrated [October 19, 2010]
Wednesday, January 12, 2011
Nokia N8: CPU, GPU Roles Shift
Most days I check Anandtech because the staff there does an excellent job of reviewing new computers, smartphones, and peripherals. By excellent I mean they actually give details about the software and chips used in the devices, and also run benchmarks. Today the only chip stocks I own are AMD and Marvell (MRVL), but my customers own (far larger) positions in other technology companies, so I follow the industry as best I can. Today's review of the Nokia N8 smartphone should be of particular interest to technology investors since it illustrates a fundamental shift in computing technology.
The N8 is "the first Nokia phone to have a discrete GPU." GPU is Graphics Processor Unit, as opposed to the more general purpose CPU, Computer Processing Unit. Smartphones are now expected to have excellent displays, which is hard to achieve without a GPU assist. But for years now AMD and NVIDIA (the rival makers of high-end GPUs for personal computers) have been talking about how computer work loads are starting to shift from being CPU-bound to GPU-bound. This is not just because of the need to have large, detailed, rapidly changing displays for gamers. It is because many ordinary computing tasks can be done faster if they are broken into parallel processes that accelerate results.
The Anandtech N8 article is the first time I have heard someone say the transition has already been made in an actual device (aside from professional video content creation machines). "You see, pretty muhc everything in the N8 runs around the BCM2727 media processor. I would hazard a calculated guess that appart from lightweight low-level OS functions and interfacing with the baseband and other radios, there isn't much else for the CPU to do on the N8."
I think that in effect the Broadcom (BRCM) GPU is acting as a DSP (digital signal processor) in addition to doing graphics processing, leaving the CPU little to do. Note that the 2727 (like AMD's new combo CPU/GPU chips) can output 720p HD video through an HDMI port.
NVIDIA has tried to place itself at the center of the GPU revolution, but it's anybody's game. There are two fronts right now: graphics for notebooks/PCs and graphics for cell phones/tablets. The graphics for smartphones can't display games on big screens at a high frame rate (which smooths the action) yet. But in 5 years, maybe sooner, they should be able to do that. The big differentiator is that anything that runs on batteries has to do its graphics work with minimal watts, but a machine plugged into the electric grid can do a lot more a lot faster, using a lot more watts (say, 200 watts versus 1 watt). NVIDIA's strategy is to keep rolling with its high end discrete graphics units while rolling out mobile combined CPU/GPU chips based on the ARM architecture. These would integrate its current offerings that work with ARM, but with the GPU on a separate chip.
AMD's strategy is called Fusion, which combines CPU and GPU on a chip based on the 8086 architecture.
Intel's strategy is to advertise, and hope that the reviewers dependent on its advertising revenue do a good job not mentioning that its current generation of combined CPU/GPU chips, code named Sandy Bridge, are instantly obsolete because they are a generation behind both NVIDIA and AMD in graphics capacity (ask for DX11 capable computers, and you have eliminated Intel, which had trouble implementing the now ancient DX10 standard) and in low-power consumption. Also, Intel is using its vast resources to get back into the ARM-based architecture. They sold their ARM mobile chip unit to Marvell Technologies a few years back. Marvell has since become one of the bigger players in ARM devices, most notably with its chips inside some Blackberry devices and the XBox 360 Kinect.
Then of course, in addition to Broadcom, we have Qualcomm, Apple, TI, Samsung, etc., scrambling to combine graphics and CPUs into single chips or small chip sets to power smartphones and tablet computers.
Software programming is changing too. Want a job? Show you can recode older non-parallel software for parallel processing on GPUs. Lots of shortages in that department.
For investors, you might want to buy a piece of every company in the race. I am certainly not certain who will emerge a winner. On the other hand, there are no pure plays here. A victory in smartphones would add very little to Intel's fortunes, or Samsung's, but it is essential to Qualcomm. Broadcom itself has a diverse set of chip products that cover Ethernet, set-top boxes, and Wi-Fi, among others.
See full Anantech Nokia N8 Review
The N8 is "the first Nokia phone to have a discrete GPU." GPU is Graphics Processor Unit, as opposed to the more general purpose CPU, Computer Processing Unit. Smartphones are now expected to have excellent displays, which is hard to achieve without a GPU assist. But for years now AMD and NVIDIA (the rival makers of high-end GPUs for personal computers) have been talking about how computer work loads are starting to shift from being CPU-bound to GPU-bound. This is not just because of the need to have large, detailed, rapidly changing displays for gamers. It is because many ordinary computing tasks can be done faster if they are broken into parallel processes that accelerate results.
The Anandtech N8 article is the first time I have heard someone say the transition has already been made in an actual device (aside from professional video content creation machines). "You see, pretty muhc everything in the N8 runs around the BCM2727 media processor. I would hazard a calculated guess that appart from lightweight low-level OS functions and interfacing with the baseband and other radios, there isn't much else for the CPU to do on the N8."
I think that in effect the Broadcom (BRCM) GPU is acting as a DSP (digital signal processor) in addition to doing graphics processing, leaving the CPU little to do. Note that the 2727 (like AMD's new combo CPU/GPU chips) can output 720p HD video through an HDMI port.
NVIDIA has tried to place itself at the center of the GPU revolution, but it's anybody's game. There are two fronts right now: graphics for notebooks/PCs and graphics for cell phones/tablets. The graphics for smartphones can't display games on big screens at a high frame rate (which smooths the action) yet. But in 5 years, maybe sooner, they should be able to do that. The big differentiator is that anything that runs on batteries has to do its graphics work with minimal watts, but a machine plugged into the electric grid can do a lot more a lot faster, using a lot more watts (say, 200 watts versus 1 watt). NVIDIA's strategy is to keep rolling with its high end discrete graphics units while rolling out mobile combined CPU/GPU chips based on the ARM architecture. These would integrate its current offerings that work with ARM, but with the GPU on a separate chip.
AMD's strategy is called Fusion, which combines CPU and GPU on a chip based on the 8086 architecture.
Intel's strategy is to advertise, and hope that the reviewers dependent on its advertising revenue do a good job not mentioning that its current generation of combined CPU/GPU chips, code named Sandy Bridge, are instantly obsolete because they are a generation behind both NVIDIA and AMD in graphics capacity (ask for DX11 capable computers, and you have eliminated Intel, which had trouble implementing the now ancient DX10 standard) and in low-power consumption. Also, Intel is using its vast resources to get back into the ARM-based architecture. They sold their ARM mobile chip unit to Marvell Technologies a few years back. Marvell has since become one of the bigger players in ARM devices, most notably with its chips inside some Blackberry devices and the XBox 360 Kinect.
Then of course, in addition to Broadcom, we have Qualcomm, Apple, TI, Samsung, etc., scrambling to combine graphics and CPUs into single chips or small chip sets to power smartphones and tablet computers.
Software programming is changing too. Want a job? Show you can recode older non-parallel software for parallel processing on GPUs. Lots of shortages in that department.
For investors, you might want to buy a piece of every company in the race. I am certainly not certain who will emerge a winner. On the other hand, there are no pure plays here. A victory in smartphones would add very little to Intel's fortunes, or Samsung's, but it is essential to Qualcomm. Broadcom itself has a diverse set of chip products that cover Ethernet, set-top boxes, and Wi-Fi, among others.
See full Anantech Nokia N8 Review
Tuesday, November 23, 2010
AMD versus Intel: Show Me the DX 11
New computers in 2011 based on competing processors from Intel and AMD will initiate a new era in personal computing: the combination of a CPU and GPU (graphics processing unit) on a single chip. Intel's offering is refered to as Sandy Bridge; AMD's is Brazos (part of the Fusion program). In both cases a line of processors will be introduced that will be distinguished by part numbers. Systems are being built now and should be first available to consumers in January, with many more systems and variations on the processors available as 2011 progresses.
Over the last decade in particular graphics processing has increased in importance for the vast majority of computer users. People watch and even edit video on a regular basis. 3D virtual realities, including games, are a common part the computer experience. Even business applications are increasingly visual and three dimensiona. Starting with Windows Vista, computers needed improved graphic computation just to allow the operating system to present all of its graphic features.
If there is one thing consumers (including business buyers) need to know about computer graphics, it is that DX 11, introduced with Windows 7 in 2009, is the graphics standard for today's applications. DX 11 is short for DirectX 11, which Microsoft designed to handle multimedia, including video and 3D graphics. The prior generation, DirectX 10, was introduced in 2006. While a powerful advance in that era, it is now seriously out of date. While many applications still use DX 10, most new software introduced in 2011 will run best with DX 11. When DX 11 is not available, they will default to the lower graphics standards of DX 10 or earlier.
When a computer runs a DX 11 game or application by substituting DX 10, it loses graphic details that enhance the visual experience.
Sandy Bridge cannot run DX 11. If you buy a computer with an Intel Sandy Bridge processor, you will have two choices. Sub-optimal graphics, or buying an add-in graphics card from AMD or NVIDIA. AMD's Brazos chips (and all their Fusion chips to be introduced in 2011), on the other hand, do run DX 11. If you think about the computer replacement cycle, this is a remarkable difference. Intel computers bought in 2011 can be expected to remain in use for 2 to 4 years. By the end of that cycle they will be running a decade-old graphics standard.
Intel is going to spend a hefty amount of money trying to convince people that Sandy Bridge based computers have graphics on par with AMD Brazos based computers. I've seen some of how that will work already. One online technology reviewer in England used a factually correct article that first appeared at Anandtech to argue that Sandy Bridge is about as good, possibly better, than AMD offerings. He used the following graphic to support his argument [see also the full Sandy Bridge Preview at Anandtech]:
What you see hear is that a desktop Sandy Bridge Core i5 (the top bar) shows a good improvement on Intel's earlier integrated graphics attempts. It is also significantly better, for this particular game, than a AMD Radeon 5450 card. That is great, but it is not a valid comparison for people buying new computers in 2010. The Radeon 5450 card, as you can see from the chart, could do remarkable things for an older Intel CPU with integrated graphics. But it is a card you can now get, retail, for $33.99 [See HD 5450 at TigerDirect]. It supports DX 11. It is the very bottom of the AMD discrete graphics line.
Fair enough, though, Sandy Bridge has the graphics equivalance of the cheapest, slowest discrete video cards made with AMD graphics chips, except it can't do DX 11. Brazos has, as its graphics engine, the equivalent of either a Radeon HD 6250 or 6310, depending on the exact chip used, but those don't correspond to any discrete chips released by AMD. However, graphics capabilities of the Brazos APU are only slightly less than for the 5450.
The Brazos chips, draws just 9 watts of power in the C versions with 6250s, or 18 watts in the E versions with 6310s. The Intel Core i5 2400 draws 95 watts (according to Anandtech). In fact [See Sandy Bridge Preview] they list no Sandy Bridge CPU that draws less than 65 watts.
In other words, in order to make Intel integrated graphics look better than AMD APU graphics, you need to take an expensive, power-sucking chip designed for desktop computers and compare it to a relatively inexpensive, power-sipping chip designed for netbooks and notebooks. And the Intel based desktop computer won't do DX 11.
The way it works out, AMD is releasing its Fusion (combined CPU/GPU) notebook & netbook chips in January. Intel is releasing its desktop chips with integrated graphics January. So direct mobile to mobile and desktop to desktop comparisons are not available yet.
AMD will be releasing more powerful Bulldozer chips designed for desktops later in 2011. They will support DX 11. Intel uses Atom for its netbooks; expect no DX 11 support there.
DX 11 adoption is well underway. Games tend to adopt a new graphics standard most quickly, but only when new games are introduced. See a list of games with DX 11 support. Note that Windows 7 itself supports DX 11. Expect new versions of most major application programs coming out in 2011 and 2012 to support DX 11.
What consumers need to know is that Intel based computers are essentially defective as they come off the assembly lines unless (1) you just do simple tasks like e-mail that are not graphics intensive or (2) they include a discrete graphics card from AMD or NVIDIA.
Who will tell them that? Not Intel. And Intel's advertising budget is such that you can expect a lot of obfuscation in media outlets, including technology magazines and web sites dependent on Intel for much of their advertising revenue. Intel also pays many large retail chains to promote its products over AMD products (by paying for ads).
If anyone is going to get the truth out, it is the millions of ordinary tech people who help everyone else with their buying decisions year-in and year-out. If they can get the typical buyer to ask the typical seller, "Does it do DX 11?" then AMD is going to pick up a lot of market share in 2011. On the other hand, if they stick to the "Intel is the premium brand," line, AMD will continue to have a hard time getting its message heard.
Over the last decade in particular graphics processing has increased in importance for the vast majority of computer users. People watch and even edit video on a regular basis. 3D virtual realities, including games, are a common part the computer experience. Even business applications are increasingly visual and three dimensiona. Starting with Windows Vista, computers needed improved graphic computation just to allow the operating system to present all of its graphic features.
If there is one thing consumers (including business buyers) need to know about computer graphics, it is that DX 11, introduced with Windows 7 in 2009, is the graphics standard for today's applications. DX 11 is short for DirectX 11, which Microsoft designed to handle multimedia, including video and 3D graphics. The prior generation, DirectX 10, was introduced in 2006. While a powerful advance in that era, it is now seriously out of date. While many applications still use DX 10, most new software introduced in 2011 will run best with DX 11. When DX 11 is not available, they will default to the lower graphics standards of DX 10 or earlier.
When a computer runs a DX 11 game or application by substituting DX 10, it loses graphic details that enhance the visual experience.
Sandy Bridge cannot run DX 11. If you buy a computer with an Intel Sandy Bridge processor, you will have two choices. Sub-optimal graphics, or buying an add-in graphics card from AMD or NVIDIA. AMD's Brazos chips (and all their Fusion chips to be introduced in 2011), on the other hand, do run DX 11. If you think about the computer replacement cycle, this is a remarkable difference. Intel computers bought in 2011 can be expected to remain in use for 2 to 4 years. By the end of that cycle they will be running a decade-old graphics standard.
Intel is going to spend a hefty amount of money trying to convince people that Sandy Bridge based computers have graphics on par with AMD Brazos based computers. I've seen some of how that will work already. One online technology reviewer in England used a factually correct article that first appeared at Anandtech to argue that Sandy Bridge is about as good, possibly better, than AMD offerings. He used the following graphic to support his argument [see also the full Sandy Bridge Preview at Anandtech]:
What you see hear is that a desktop Sandy Bridge Core i5 (the top bar) shows a good improvement on Intel's earlier integrated graphics attempts. It is also significantly better, for this particular game, than a AMD Radeon 5450 card. That is great, but it is not a valid comparison for people buying new computers in 2010. The Radeon 5450 card, as you can see from the chart, could do remarkable things for an older Intel CPU with integrated graphics. But it is a card you can now get, retail, for $33.99 [See HD 5450 at TigerDirect]. It supports DX 11. It is the very bottom of the AMD discrete graphics line.
Fair enough, though, Sandy Bridge has the graphics equivalance of the cheapest, slowest discrete video cards made with AMD graphics chips, except it can't do DX 11. Brazos has, as its graphics engine, the equivalent of either a Radeon HD 6250 or 6310, depending on the exact chip used, but those don't correspond to any discrete chips released by AMD. However, graphics capabilities of the Brazos APU are only slightly less than for the 5450.
The Brazos chips, draws just 9 watts of power in the C versions with 6250s, or 18 watts in the E versions with 6310s. The Intel Core i5 2400 draws 95 watts (according to Anandtech). In fact [See Sandy Bridge Preview] they list no Sandy Bridge CPU that draws less than 65 watts.
In other words, in order to make Intel integrated graphics look better than AMD APU graphics, you need to take an expensive, power-sucking chip designed for desktop computers and compare it to a relatively inexpensive, power-sipping chip designed for netbooks and notebooks. And the Intel based desktop computer won't do DX 11.
The way it works out, AMD is releasing its Fusion (combined CPU/GPU) notebook & netbook chips in January. Intel is releasing its desktop chips with integrated graphics January. So direct mobile to mobile and desktop to desktop comparisons are not available yet.
AMD will be releasing more powerful Bulldozer chips designed for desktops later in 2011. They will support DX 11. Intel uses Atom for its netbooks; expect no DX 11 support there.
DX 11 adoption is well underway. Games tend to adopt a new graphics standard most quickly, but only when new games are introduced. See a list of games with DX 11 support. Note that Windows 7 itself supports DX 11. Expect new versions of most major application programs coming out in 2011 and 2012 to support DX 11.
What consumers need to know is that Intel based computers are essentially defective as they come off the assembly lines unless (1) you just do simple tasks like e-mail that are not graphics intensive or (2) they include a discrete graphics card from AMD or NVIDIA.
Who will tell them that? Not Intel. And Intel's advertising budget is such that you can expect a lot of obfuscation in media outlets, including technology magazines and web sites dependent on Intel for much of their advertising revenue. Intel also pays many large retail chains to promote its products over AMD products (by paying for ads).
If anyone is going to get the truth out, it is the millions of ordinary tech people who help everyone else with their buying decisions year-in and year-out. If they can get the typical buyer to ask the typical seller, "Does it do DX 11?" then AMD is going to pick up a lot of market share in 2011. On the other hand, if they stick to the "Intel is the premium brand," line, AMD will continue to have a hard time getting its message heard.
Tuesday, November 9, 2010
AMD Ships First APUs on Analyst Day
Computer chip maker AMD announced it began shipping its new APUs (Advanced Processing Units) to computer makers this morning from its Singapore plant. At its analyst day presentation AMD executives described and demonstrated the APUs, which combine an advanced CPU (general purpose computer processing unit) with an advanced GPU (graphics processing unit) on a single chip.
Emphasizing what a groundbreaking point has been reached, CEO Dirk Meyer held up a typical sized CPU and then a mid-range GPU card, which was about the size of a small paperback book. Then he held up the APU that will have the equivalent CPU and GPU computing power. It was smaller than the CPU chip, about the size of a postage stamp. I know that the GPU card contains not only a GPU chip but memory, a fan, and connections for video output, so the comparison was a bit of an exageration. But it is a sort of computing grail achievement that goes beyond mere size comparisons.
Of course, knowing AMD has been working for years to achieve this feat, much larger rival Intel has announced that it will also have an integrated cpu/gpu product release for 2011. AMD executives mocked it, as well they might. We know it is an inferior product. It supports a graphics standard called DX10, which is now four years old. AMD supports DX11. It is true that most older software and games can't take advantage of DX11.
But many games already can, and most graphics software updates are moving to DX11. So Intel will be making an offering that can't cope with new games or software. When you buy a new computer, it is often because you want to take advantage of new software. Intel will be leaving consumers in the lurch.
Nevertheless, Intel is the Goliath, and AMD's previous attempts to take on the giant have had mixed results. Intel's profits are usually higher than AMD's revenues, and Intel spends way more on R&D than AMD. A few years ago Intel was so far behind in graphics, it is remarkable that they are maybe only 2 years behind now.
Intel will heavily outspend AMD in marketing, and will omit to tell consumers that its chips can't run DX11. So for AMD to take a lot of market share in 2011, it has to get its story out. In my experience retailers are more interested in Intel advertising subsidies than in making sure consumers make an informed choice between computers based on AMD and Intel. I would hope that tech "geniuses" would tell show off their stuff by telling the public to choose AMD if they want good graphics and video capabilities. But it seems that a lot of technology mavens are employed by Intel and Apple.
If the word does get out that Intel cpu/gpu combination chips are not good enough, AMD's ability to take market share could become capacity constrained. Intel has a huge production capability to match its market share; AMD's capacity can only be expanded so much in the short run.
Still, even a 10% increase in revenues for AMD in 2011, with maybe a 1% increase in market share, would be a boon for AMD.
Watch this space closely. The actual computers will start being available to the public in January, traditionally a slow period for computer sales. Public acceptance of the new AMD products, or resistance to Intel advertising, should be knowable by March or so, and act as a predictor for the remainder of the year.
For investors a key element will be margins. AMD believes that with the new processors (and server chips introduced in 2010) it can improve its non-GAAP gross margin from about 40% for 2010 to about 44% to 48% in 2011. If that turns out to be true (if Intel does not start a price war), then earnings will rise nicely and AMD will be in an even better position to compete with Intel in 2012.
Dirk Meyer showed an HP thin light notebook running gaming level graphics using the new APU chips. He claimed it could run 8 to 10 hours on one battery charge, and would cost less than $600. I want one, and it would work a lot better for me than a smaller form factor tablet computer. This ability to reduce power consumption is being introduced across the range of new AMD products in 2011: for netbooks, notebooks, desktops, and servers. That is good news.
Emphasizing what a groundbreaking point has been reached, CEO Dirk Meyer held up a typical sized CPU and then a mid-range GPU card, which was about the size of a small paperback book. Then he held up the APU that will have the equivalent CPU and GPU computing power. It was smaller than the CPU chip, about the size of a postage stamp. I know that the GPU card contains not only a GPU chip but memory, a fan, and connections for video output, so the comparison was a bit of an exageration. But it is a sort of computing grail achievement that goes beyond mere size comparisons.
Of course, knowing AMD has been working for years to achieve this feat, much larger rival Intel has announced that it will also have an integrated cpu/gpu product release for 2011. AMD executives mocked it, as well they might. We know it is an inferior product. It supports a graphics standard called DX10, which is now four years old. AMD supports DX11. It is true that most older software and games can't take advantage of DX11.
But many games already can, and most graphics software updates are moving to DX11. So Intel will be making an offering that can't cope with new games or software. When you buy a new computer, it is often because you want to take advantage of new software. Intel will be leaving consumers in the lurch.
Nevertheless, Intel is the Goliath, and AMD's previous attempts to take on the giant have had mixed results. Intel's profits are usually higher than AMD's revenues, and Intel spends way more on R&D than AMD. A few years ago Intel was so far behind in graphics, it is remarkable that they are maybe only 2 years behind now.
Intel will heavily outspend AMD in marketing, and will omit to tell consumers that its chips can't run DX11. So for AMD to take a lot of market share in 2011, it has to get its story out. In my experience retailers are more interested in Intel advertising subsidies than in making sure consumers make an informed choice between computers based on AMD and Intel. I would hope that tech "geniuses" would tell show off their stuff by telling the public to choose AMD if they want good graphics and video capabilities. But it seems that a lot of technology mavens are employed by Intel and Apple.
If the word does get out that Intel cpu/gpu combination chips are not good enough, AMD's ability to take market share could become capacity constrained. Intel has a huge production capability to match its market share; AMD's capacity can only be expanded so much in the short run.
Still, even a 10% increase in revenues for AMD in 2011, with maybe a 1% increase in market share, would be a boon for AMD.
Watch this space closely. The actual computers will start being available to the public in January, traditionally a slow period for computer sales. Public acceptance of the new AMD products, or resistance to Intel advertising, should be knowable by March or so, and act as a predictor for the remainder of the year.
For investors a key element will be margins. AMD believes that with the new processors (and server chips introduced in 2010) it can improve its non-GAAP gross margin from about 40% for 2010 to about 44% to 48% in 2011. If that turns out to be true (if Intel does not start a price war), then earnings will rise nicely and AMD will be in an even better position to compete with Intel in 2012.
Dirk Meyer showed an HP thin light notebook running gaming level graphics using the new APU chips. He claimed it could run 8 to 10 hours on one battery charge, and would cost less than $600. I want one, and it would work a lot better for me than a smaller form factor tablet computer. This ability to reduce power consumption is being introduced across the range of new AMD products in 2011: for netbooks, notebooks, desktops, and servers. That is good news.
Sunday, August 8, 2010
Akamai Q2 2010 and Future Trends
On July 28 Akamai Technologies held its analyst conference call and reported second quarter 2010 results. You can read my detailed notes on the call at Akamai Q2 2010 Analyst Conference Call.
Before the call there was a lot of buzz about spectacular results fueled by people watching the World Cup over the Internet, which means on Akamai-accelerated services. As management has said in the past, no one event, not even the World Cup, is going to have a significant impact on revenue in a quarter. In Q4s the holiday-driven advertisement traffic does push up Akamai's numbers, but again this is a macro effect, not due to any one customer.
Akamai had a high P/E ratio comparted to most other growing technology companies both before and after the non-event driven spike, but it is not high by historic standards. Rather, the other tech stocks are low. Still, selling a high P/E stock and buying an all-other-thing-equal but a low P/E stock is a good way to reduce risk. So the sell off after Q2 results were reported is not a big surprise. The results were good, but some short-term investors were deluding themselves as to how good. The stock was in the 40s in most of June and July, only to fall below 38 after the conference call.
Aside from P/Es returning to normal, which will help all stocks, Akamai has a lot to recommend it. The internet continues to grow and commercial customers need reliable, fast delivery. Whether it is ads, online stores, or video feeds, the Internet works much better over Akamai's system. In the future revenues should grow more quickly than either Akamai's capital expenditures (mainly on servers) or operating expenses. The increased use of high-bandwidth mobile devices will also grow Akamai revenues.
On the negative side AKAM's real tax rate is going up, mostly in 2011, as it uses up its NOLs (losses from startup years).
But keep in mind this growth will be relatively steady, with extra acceleration every fourth quarter. One time events won't matter too much.
And keep diversified!
See also http://www.akamai.com/
Before the call there was a lot of buzz about spectacular results fueled by people watching the World Cup over the Internet, which means on Akamai-accelerated services. As management has said in the past, no one event, not even the World Cup, is going to have a significant impact on revenue in a quarter. In Q4s the holiday-driven advertisement traffic does push up Akamai's numbers, but again this is a macro effect, not due to any one customer.
Akamai had a high P/E ratio comparted to most other growing technology companies both before and after the non-event driven spike, but it is not high by historic standards. Rather, the other tech stocks are low. Still, selling a high P/E stock and buying an all-other-thing-equal but a low P/E stock is a good way to reduce risk. So the sell off after Q2 results were reported is not a big surprise. The results were good, but some short-term investors were deluding themselves as to how good. The stock was in the 40s in most of June and July, only to fall below 38 after the conference call.
Aside from P/Es returning to normal, which will help all stocks, Akamai has a lot to recommend it. The internet continues to grow and commercial customers need reliable, fast delivery. Whether it is ads, online stores, or video feeds, the Internet works much better over Akamai's system. In the future revenues should grow more quickly than either Akamai's capital expenditures (mainly on servers) or operating expenses. The increased use of high-bandwidth mobile devices will also grow Akamai revenues.
On the negative side AKAM's real tax rate is going up, mostly in 2011, as it uses up its NOLs (losses from startup years).
But keep in mind this growth will be relatively steady, with extra acceleration every fourth quarter. One time events won't matter too much.
And keep diversified!
See also http://www.akamai.com/
Thursday, May 21, 2009
Akamai Future Trends
Does Akamai have what it takes to make long term investors happy even after this recession ends and stock prices go to normal levels relative to fundamentals?
I am not sure. Akamai accelerates the Internet. They are good at it. They have a technological edge over all rivals. I would not be surprised if the size of Akamai, measured in terms of revenues or net income, is ten times today's ten years from now. On the other hand, we are going into uncharted terrain where you can't just draw a line on a graph and assume it will rise linearly or exponentially forever.
It does seem likely that Internet usage, measured in bits delivered, will continue to grow for the foreseeable future. But it might not. Much of the growth in the past ten years has been driven by the shift to bandwidth intensive applications. Sending a text email over the net involves shifting a few bits. Sending a small image as an attachment with the email can increase the number of bits by an order or more of magnitude. Audio and high quality still pictures require another order of magnitude or more of data transfer. The short videos made for tiny windows of a few years ago upped the stakes yet again.
The number of people using the Internet, however, no longer climbs at the dizzying rate of the 1990s. Most of the growth in new customers now comes in developing countries. In some nations, like the U.S., the failure to provide a comprehensive broadband infrastructure has also put a damper on Internet data transfer growth. You can't do much with video when you access the net with a dial-up modem connection. But to the extent people start expecting DVD quality or HD quality video over the Internet, we still have a long way to go in increased bandwidth.
Your guess is as good as the experts. My guess is that it will be at least five to ten years before Internet growth rates really flatten out.
So if Akamai maintains market share, we can look forward to a good decade. What are the chances Akamai will gain or lose market share?
It is easy to see Akamai gaining market share. They simply accelerate Internet delivery faster than any other company can. Right now. You don't want to run a major merchant web site right now without Akamai's help.
Akamai is also starting to have better penetration outside the U.S. That alone could be a major growth driver.
On the other hand, plenty of would-be competitors exist. Most are losing money, but some may reach the inflection point where they have enough customers to make money. The really big companies that are well-situated to compete with Akamai are Cisco and Oracle. Cisco, in particular, probably possesses the skills to do well in the Web acceleration business. But Cisco has a lot of other fires burning right now. Akamai is thriving on specialization.
So I would judge competition to be a threat, but not enough of a threat to bet against Akamai staying on top for at least the next few years.
How did Akamai do in the latest quarter?
Revenue was $210.4 million, down 1% sequentially from $212.6 million and up 12% from $187.0 million year-earlier.
Net income was $37.1 million, down 9% sequentially from $40.5 million, but up slightly from $36.9 million year-earlier.
EPS (earnings per share) were $0.20, down 9% sequentially from $0.22, and flat from $0.20 year-earlier.
Cash from operations was $90.5 million, up 3% y/y. The company held $848.5 million in cash and equivalents at the end of the quarter. There are $200 million in convertible notes outstanding. Capital expenditures were $25.0 million.
See my Akamai Analyst Conference Summary of April 29, 2009 for a higher level of detail.
Akamai Investor Relations page
My Akamai main page
I am not sure. Akamai accelerates the Internet. They are good at it. They have a technological edge over all rivals. I would not be surprised if the size of Akamai, measured in terms of revenues or net income, is ten times today's ten years from now. On the other hand, we are going into uncharted terrain where you can't just draw a line on a graph and assume it will rise linearly or exponentially forever.
It does seem likely that Internet usage, measured in bits delivered, will continue to grow for the foreseeable future. But it might not. Much of the growth in the past ten years has been driven by the shift to bandwidth intensive applications. Sending a text email over the net involves shifting a few bits. Sending a small image as an attachment with the email can increase the number of bits by an order or more of magnitude. Audio and high quality still pictures require another order of magnitude or more of data transfer. The short videos made for tiny windows of a few years ago upped the stakes yet again.
The number of people using the Internet, however, no longer climbs at the dizzying rate of the 1990s. Most of the growth in new customers now comes in developing countries. In some nations, like the U.S., the failure to provide a comprehensive broadband infrastructure has also put a damper on Internet data transfer growth. You can't do much with video when you access the net with a dial-up modem connection. But to the extent people start expecting DVD quality or HD quality video over the Internet, we still have a long way to go in increased bandwidth.
Your guess is as good as the experts. My guess is that it will be at least five to ten years before Internet growth rates really flatten out.
So if Akamai maintains market share, we can look forward to a good decade. What are the chances Akamai will gain or lose market share?
It is easy to see Akamai gaining market share. They simply accelerate Internet delivery faster than any other company can. Right now. You don't want to run a major merchant web site right now without Akamai's help.
Akamai is also starting to have better penetration outside the U.S. That alone could be a major growth driver.
On the other hand, plenty of would-be competitors exist. Most are losing money, but some may reach the inflection point where they have enough customers to make money. The really big companies that are well-situated to compete with Akamai are Cisco and Oracle. Cisco, in particular, probably possesses the skills to do well in the Web acceleration business. But Cisco has a lot of other fires burning right now. Akamai is thriving on specialization.
So I would judge competition to be a threat, but not enough of a threat to bet against Akamai staying on top for at least the next few years.
How did Akamai do in the latest quarter?
Revenue was $210.4 million, down 1% sequentially from $212.6 million and up 12% from $187.0 million year-earlier.
Net income was $37.1 million, down 9% sequentially from $40.5 million, but up slightly from $36.9 million year-earlier.
EPS (earnings per share) were $0.20, down 9% sequentially from $0.22, and flat from $0.20 year-earlier.
Cash from operations was $90.5 million, up 3% y/y. The company held $848.5 million in cash and equivalents at the end of the quarter. There are $200 million in convertible notes outstanding. Capital expenditures were $25.0 million.
See my Akamai Analyst Conference Summary of April 29, 2009 for a higher level of detail.
Akamai Investor Relations page
My Akamai main page
Wednesday, August 8, 2007
As Cisco Goes ...
We had quite a stock market rally today, especially in the technology stocks. Some people who had gone short on worries about credit tightening had to cover their bets, judging from the upward spike.
The rally is being widely attributed to the Federal Reserve statement issued yesterday and Cisco's (CSCO) report on its Q2 results. I listened to the Cisco Q2 analyst conference (See my summary) and got an idea of why Wall Street would read so much into a report that only saw the company beat sell-side analyst average expectations by one penny.
Cisco's revenues are booming. Cisco is probably the most important provider of hardware to operate the Internet. Its main products are routers and switches. It is a global business and has huge market share. With no disrespect meant for the engineers at Extreme Networks, Jupiter, Sycamore Systems, or any of its competitors, it is difficult to beat Cisco when it comes to technological innovation and breadth of products available to solve the problems that confront telecommunications companies, Internet-based businesses, and global enterprises and consumers.
So aside from growing its own revenues 18% in one year, what about Cisco's report would spark a technology stock rally? Other bellwethers have been mixed, with Motorola struggling and many chip makers below or barely above last-years revenue numbers.
Cisco reported that global sales were strong and broad (by product type). Businesses are spending money when they think it can save them money or improve efficiency. There were some notable exceptions, but they were drowned out by the all-around strength of the global economy.
One exception was Japan. In line with what other companies are saying, decisions about technology equipment buying have been in delay mode in Japan for about a year now, particularly when it comes to the big telecommunications companies.
In the United States there were three vertical markets that were weak. One was financial services; no surprise there. Another was automotive; again no surprise. Retail sales was also below expectations. Without a doubt big retailer are cautiously hoping that the housing bust won't hurt retail spending too much.
What is driving the need for more Internet equipment? Against a background of the continued shift to Internet, including using it for phone service, is an explosion of demand for video over Internet. Video requires huge numbers of bytes of information transmitted rapidly in order to work. All the text web pages at, say Google, pale in comparison to the amount of bandwidth it takes to move a few video pages across the Internet.
Cisco is meeting that demand. But many other companies, not just router and switch makers are benefiting as well. Video requires servers and storage. Processor makers like AMD, Intel, Sun and IBM; server systems makers like Dell, HP, and Rackable; and the various semiconductor manufacturers that make chips that glue all this together are all going to see larger that previously expected demand. Fabs that take these companies outsourcing, optical component makers, and the people who make the machines that make the semiconductors like Applied Materials should all benefit.
So what we may be talking about here is sector rotation. The technology sector has been neglected by many investors since the year 2000 meltdown. Prices are not at all frothy. If Cisco is right about future demand, and if that demand goes out more broadly
Then again, nothing is certain in the world of stock speculation. Maybe Cisco is the exception to the rule; maybe demand in narrow and temporary, rather than broad based and about to roar in like a tsunami.
Video. Telepresence. Think about it. A billion people broadcasting and receiving video around the world, all the time. The Bandwidth. The Bandwidth.
More data:
Cisco Investor Relations page
Telepresence
I do not own Cisco stock, but I wish I did.
The rally is being widely attributed to the Federal Reserve statement issued yesterday and Cisco's (CSCO) report on its Q2 results. I listened to the Cisco Q2 analyst conference (See my summary) and got an idea of why Wall Street would read so much into a report that only saw the company beat sell-side analyst average expectations by one penny.
Cisco's revenues are booming. Cisco is probably the most important provider of hardware to operate the Internet. Its main products are routers and switches. It is a global business and has huge market share. With no disrespect meant for the engineers at Extreme Networks, Jupiter, Sycamore Systems, or any of its competitors, it is difficult to beat Cisco when it comes to technological innovation and breadth of products available to solve the problems that confront telecommunications companies, Internet-based businesses, and global enterprises and consumers.
So aside from growing its own revenues 18% in one year, what about Cisco's report would spark a technology stock rally? Other bellwethers have been mixed, with Motorola struggling and many chip makers below or barely above last-years revenue numbers.
Cisco reported that global sales were strong and broad (by product type). Businesses are spending money when they think it can save them money or improve efficiency. There were some notable exceptions, but they were drowned out by the all-around strength of the global economy.
One exception was Japan. In line with what other companies are saying, decisions about technology equipment buying have been in delay mode in Japan for about a year now, particularly when it comes to the big telecommunications companies.
In the United States there were three vertical markets that were weak. One was financial services; no surprise there. Another was automotive; again no surprise. Retail sales was also below expectations. Without a doubt big retailer are cautiously hoping that the housing bust won't hurt retail spending too much.
What is driving the need for more Internet equipment? Against a background of the continued shift to Internet, including using it for phone service, is an explosion of demand for video over Internet. Video requires huge numbers of bytes of information transmitted rapidly in order to work. All the text web pages at, say Google, pale in comparison to the amount of bandwidth it takes to move a few video pages across the Internet.
Cisco is meeting that demand. But many other companies, not just router and switch makers are benefiting as well. Video requires servers and storage. Processor makers like AMD, Intel, Sun and IBM; server systems makers like Dell, HP, and Rackable; and the various semiconductor manufacturers that make chips that glue all this together are all going to see larger that previously expected demand. Fabs that take these companies outsourcing, optical component makers, and the people who make the machines that make the semiconductors like Applied Materials should all benefit.
So what we may be talking about here is sector rotation. The technology sector has been neglected by many investors since the year 2000 meltdown. Prices are not at all frothy. If Cisco is right about future demand, and if that demand goes out more broadly
Then again, nothing is certain in the world of stock speculation. Maybe Cisco is the exception to the rule; maybe demand in narrow and temporary, rather than broad based and about to roar in like a tsunami.
Video. Telepresence. Think about it. A billion people broadcasting and receiving video around the world, all the time. The Bandwidth. The Bandwidth.
More data:
Cisco Investor Relations page
Telepresence
I do not own Cisco stock, but I wish I did.
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