Sunday, April 30, 2006

Hello, community.

I think these AMD plans are very important, but I don't understand Japanese.

Help, please.

[update] It wasn't funny to receive a google translation link, but well, some people may think with all goodwill that perhaps one is not aware of that possibility.

Thus, just to be very clear, I need help with the slides.

Saturday, April 29, 2006

What was I thinking?

Reviewing my latest post, the summary of the predictions, there is something that I didn't publicly announce, but that I feel I need to disclose in Detail:

When at $42+ AMD started to go down on Conroe/price war fears, I took it as a buying opportunity. And since it kept going down with an impressive stream of good news and only the non-news, non-worrysome Intel developments, I started to invest increasingly aggressive bullish positions, and went as far as to buy some March calls, which went *worthless*, and substantial amounts, like 15% of my whole PF in July calls, that right now are down to less than 50%.

I was sure that AMD was going to beat the estimations, and couldn't find a reason for it to go down on good earnings. Thus, I had a specific moment, the Earnings Report, to speculate in the stock market. When one has precise timing, it is correct to go the route of options if there is a suitable combination of Expiry, Strike Price and Price.

I set up to find such adequate options to gamble. It is important to understand the mathematical theory of options. Time value decays exponentially with time, with the steepest decay the last days of vigency. Thus, you absolutely don't want to hold an option for more than 1/3 the time to expiration from the moment you bought, and in extreme circumstances, up to 1/2. So, if you are fixed on April 12 (AMD earnings) to make a bet on March 12, the proper thing to do is to buy at least June calls, but July would be much better: In case a catastrophe happens, you can sight and assume some losses waiting for another presumably positive jump due to earnings in July, much better than just being below the waterline in June.

Thus, I bought July calls merrily.

AMD reported, beat the expectations by an off-the-chart marging, provided (giving the circumstances) very bullish guidance, but AMD lost another 14%; thus, I screwed it big time with my gamble, because even though the options expire in July, it was for events that will take place this month that I bought them.

By the time the earnings report came, I was already prepared, for an adverse reaction, and fortunately abstained myself of loading more. Although very surprised by the market reaction, I knew that the general principles I described in my last posts still held, thus I followed an adaptation of the plans pointed out, and indeed wrote the covered april calls, with good profits (although I did a preemptive chicken buy-to-close instead of allowing them go worthless).

I was prepared because I understood what was my mistake: AMD became disruptive, thus risky, thus a less desirable investment. If Intel would be today very competitive against AMD, AMD would have flown, because what AMD would be doing is to little by little erode Intel's market. But Intel is in a pathetic situation, it is not that AMD "awoke the giant", it is that the market is already feeling the possibility of an Intel collapse without guarantees about AMD nor AMD intrinsic attractiveness (because it doesn't aspire to be a greedy monopoly but a teeming ecosystem leader).

I should have known better, that AMD could do slightly better than just punching Intel becoming disrruptive.

But "I should have known better" is the lament of all the smart players when they lose with options, anyway.

Still, there is people who doesn't get it, such as Sharikou and AMDACE, who think that AMD should go for the yugular right now just because it has the great chances of succeeding. That would be a catastrophe for all of us who have bullish positions on AMD.

Friday, April 21, 2006

Quarterly review of my forecasts - April

The idea behind this blog is to improve my analysis about what is going on in the technology world. I leverage that knowledge in many ways, including investments and gambling in the stock market. I am the first person interested in finding mistakes, and I find that, in the spirit of the Free and Open Source software traditions, to be fully open allows a multitude of observers to come up with interesting ideas.

I have thought that I should, from time to time, review what I have forecasted with the intention of learning from past mistakes and successes. I may leave something aside by mistake, but so far my forecasts have been:

From an article of Jan 27:
"On the mean time, every company that is in partnership with AMD is doing excellent both in the market and stocks: Rambus, Soitec, Chartered, Innovative Silicon have all jumped ahead as a direct result of a deal with AMD, and perhaps even Broadcom (confirmation in the works) are doing great. Whereas Apple is next to dissapointing, and I guess that Dell would too.

Does anyone want to buy Dell $30 puts for February?"

All of those companies are still doing fantastic. And Dell is worse. Those puts may have given money depending on the exact purchasing and selling moments, in my case, I barely made even because I think that there was some manipulation of the books, what Sharikou calls the "week X", and other details, that spared the real bleed before options expiry. This counts as a mistake, because the right recommendation should have been March. It is suicidal to be imprecise with options, all three parameters while transacting have to be totally accounted for: Price, Strike Price and Experiation.

From March 04, about the price war, I mentioned that there are factors that make us think that costumers will keep preferring AMD products despite price discounts from Intel. Intel discounted aggressively the prices to clear its channel. The measure was so inneffectual that Intel's inventories grew, and allowed Henri Richard to stellarly bash Intel saying that yes, AMD has seen price slashing on Intel on low end products nobody wants to buy. Even with those discounts, AMD's demand proved as strong as to allow Gross Margins to improve 1.2% from 57.3% to 58.5%, larger Gross Margins than Intel's (!!); while at the same time, experiencing a market share increase that according to my latest estimations, was 1.5% to 2%, to reach about 22.75% global market share, that confirms the resilience, that is, the improvement in Brand Equity.

From March 09:
"Learn the game: After a sell-off, stable growth for a while, until AMD becomes noticeable again,
and the roller coaster will begin again, until another sell-off". The sell-off continued with a bump about Dellienware to less than pre-Q4 05 earnings report levels, incredible, as if AMD would have gone backwards. That total irrationality will be substituted by growth during this quarter, although not as high as $40.

About investment, March 31
Comparing AMD and Intel to two farmers, the stern and hard working attitude of AMD is very different to that of boisterous Intel: "Right now, we are in the harvesting season, all of what AMD sawn has grown and is ready to be turned into profits [that's why it is working so hard]. The neighbor doesn't have anything but weeds. There is still a lot of people who has faith in the gigantic neighbor, he says that in the remote corner it has the greatest grain ever grown in these fields, but that just seems to be him once again bragging about what he doesn't have. If his harvest were good, he would be very busy, as we are."

Recently, in "Riding the Roller Coaster", and "Conversation with the Ticker", I pointed out the lack of support for AMD after positive results induces a sell-off on momentum seekers and technical analysts that make it deeper. That's what happened just after the conference call. But this plunge had the benefit of relieving pressure from this stock, because it seems that it is a piece of shit, and that the company is not capable of challenging Intel. Under those two assumptions, AMD grows, because it is carried forward by the long term investors, breaking the downward momentum.

That's why it wouldn't be advisable to write covered AMD short term calls, because there exists a breakout to $37+ waiting to happen, but not even think about writing naked puts, the timing isn't dependable. To go long on options is too expensive too, it would be best to allow the pessimism to be fully incorporated into the 2008 and 2007 call options b4 going long on them. But alternatively, depending on some parameters, it may be possible to go short on Intel and to hedge writing puts if you feel the downward pressure has exhausted to milk some extra change money from your short position.

My predictions about the Core µ-architecture regarding 64 bits (look for points 6 and 10) have been confirmed, indeed the recent Clovertown (dual Conroe) was seen running versions of 64 bits benchmarks as reported by Sharikou. If Intel added the REX prefix decoding to the simple decoders, then Conroe (Clovertown, Woodcrest, and Merom) would run 64 bits at top speed, but just as it was explained, the 64 bit architectural differences play well to Core's emphasis in reordering. If anything, I am surprised that we are talking of a mere 20% advancement in the higher credibility tests done after IDF, I am expecting around 30%, of course that Core has too many defficiencies. One of the things I don't buy is it being better power efficient, and that, without taking into account the bloated memory frequencies and FSB power consumption.

I wonder too who's Intel fooling with the "chinese story" of accumulating inventories on purpose in the case the extremely ambitious transition to 65nm on Conroe has a misshap, but taken at face value, confirms my thesis of the complexities of "Coredump".

On the other hand, Intel "beat the expectations" on the same sense that Dell had a fantastic Q4, they both went up to give back everything they went up and then some more. Nevertheless, AMD wasn't (so far) dragged down.

From "Intel down / AMD jeopardy"
Paradoxically, it seems that a positive result from Intel will ease the pressure against AMD, the market will just say:

"Oh, very well, so Intel is back on track, regaining market share from AMD. We are not going to downgrade AMD because giving back market share was already priced in, but perhaps we can analyze again forward earnings"

I thought the scenario of Intel pleasing Wall Street as moot to discuss, but it happened (very close to the 20 cents EPS and with a murky conference call, as predicted, by the way), thus no AMD tanking.

Another thing is that the market seems that indeed is down, perhaps Intel went too far in Europe, non-processor Intel businesses are also down, Sandisk reported down, the market for silicion manufacturing supplies is also down.

If you are curious to know, I over leveraged before IDF, so I have been painfully squeezing some gains with complex trades, mostly hedging to prevent a margin call in case of a catastrophe, and certainly, the latest reactions to the earnings reports haven't help.

Wednesday, April 19, 2006

Alpha and Beta's bloody fight for supremacy

For the record:

Intel will report down, and will bring AMD with it.

Why? The money in Intel looks for a greedy monopoly, not a technology leader. AMD is a technology leader, looking to establish an ecosystem.

It doesn't matter whether it is a pack of wild dogs or entire nations, or companies: Whenever Beta is gaining strength and Alpha is weakening, it always happens that the supremacy has to be decided, and a bloody battle ensues.

One of the battlegrounds for companies are prices, thus the price wars. Another is the legal system. The market perception, etc.

This battle promises to be fought on all terrains: Servers, Mobiles, Desktops, Finances, Media; because the challenger is strengthening in all terrains.

Fortunately, AMD's management has been avoiding the conflict and at the same time preparing for it. I always felt fine about their appallingly modest goals, but at the same time they demonstrate not being afraid of the conflic, if necessary.

There are two more things:

How is it possible that Intel is down in a strong market (weak market is bullshit according to my appreciations): Because they had to resort to aggressive pricing to clear their channel, and the problem is far from over because according to my calculations, AMD took 1.5% market share in Q1.

Intel will do their book manipulations and media spins to make it appear that they are close to $0.20 EPS, so expect a murky conference call meeting.

Won't Intel going down infuse enthusiasm for AMD? After all every Intel problem is due to AMD's successes: No, because observers will want to wait until the battle is nearly over, not now, when it is just about to begin.

But still, the market capitalization relationship is very wide, if Intel goes down 1% and all that money goes to AMD, AMD should jump 8%, there would be substantial migration of that sort that will mitigate the previously described dynamics.

And a possible strong bottom is the 200 days EMA ($28+) because at that level the T.A.s will start to cover/load, the long term investors will keep asking: But this company can still sell processors no matter what Intel does, some earnings will come here, it can win the war, etc., etc., providing hard support.

Tuesday, April 18, 2006

Are you worried... -- READ AGAIN, MAJOR CHANGES


We have been discussing the Core µ-arch. here.

Let us focus on the complexity aspect and try to put it on perspective.

What has happened with Intel's attempts at complex products?

Let's set up the time frame starting with March 8th 2000, when Intel launched the Pentium III 1GHz (two days after AMD launched the Athlon 1GHz)

2000: Tried the 1.13 GHz Pentium III that wouldn't even compile the Linux kernel, great... embarrasment which was recalled

2000: Let me introduce you to the illustrious lineage of the Netburst µ-architecture, Pentium 4s designed from the ground up to eventually run at 10GHz (Never went over the 4GHz, and that pushing the envelop too much):

Willamette: tied to the showstopper Rambus memory (RDRAM), meaningless gigahertz, hot.

P4 Northwood: Introduced the infamous Hyperthreading, severely criticized by everyone + dog: Insecure, was actually a performance hindrance, quoting Ibbotsons' quotation in that article: "Intel had sold hyperthreading as something that gave performance gains to heavily threaded software. SQL Server is very thread-intensive, but it suffers. In fact, I've never seen performance improvement on server software with hyperthreading enabled. We recommend customers [to] disable it". Intel decided to ditch the feature for good. If you are curious to know why it never worked: because it trashes the caches.

From Wikipedia:
"Overclocking early stepping Northwood cores yielded a startling phenomenon. When VCore was increased past 1.7 V, the processor would slowly become more unstable over time, before dying and becoming totally unusable. This is believed to have been caused by the physical phenomenon known as Electromigration, where the internal pathways of the CPU become degraded over time due to excessive electron energy. This was also known as Sudden Northwood Death Syndrome."

Gallatin (Extreme Edition): Marketing answer to Athlon64's launch better known as "Emergency Edition"

Prescott: "Upon release, the Prescott turned out to generate approximately 40% more heat clock-for-clock than the Northwood, and almost every review of it was negative", wikipedia again.

Cedar Mill: 65nm Prescott with better thermals.

Tejas: Promised for 2005, was cancelled.

Itanium: Sights! don't get me started! This was in late 90's Intel's flagship product in every roadmap. When it became apparent that it was too complex, unsuitable for the consumer market, became a high end proposition only. It was supposed to embody the plans for the 64 bits transition Intel had. Once, after years (!) of delays, it finally came to the market, to demonstrate:

Mediocre to very bad on-chip x86 performance, general underwhelmer, hasn't crossed the 100nm barrier (difficult to manufacture? out of preference at Intel?), difficult to improve.

The Itaniums are very complex µ-architectures. I studied the (then known as) IA-64s so much and decided to forget all about it, is because I finally got to the point that I understood that the µ-architecture was so complex that it was easy to see that it wasn't going to ever be implemented well enough.
There is one issue I am delving about: Intel's apparent incompetence to manufacture new processors. I am still baffled by the fact that Itaniums are not produced at the very least at 90nm processes, by the slow conversion to 65nm...

Intel did try other stuff, such as getting into the 3D Video Accelerators game, much before nVidia's debunked 3Dfx from the top, to colossal failure.

Dual Cores: The embarrasment of the dual-dices, until Yonah. Clovertown: a twin dual core? Are you joking? should I be afraid of a product that intrinsically demonstrates incompetence to do the right thing? [remember, a dual die processor is, for all practical purposes, a dual processor except for the number of sockets]

EM64T: Intel's µ-architectures have two kinds of decoders: The simple decoders, and a kitchen sink for complex intructions called the complex decoder. I have explained that AMD64 defines a much larger register file that improves performance by itself. But at Intel processors, 64 bit code runs slower. There is every reason to think that the 64 bits are emulated in microcode, overwhelming the complex decoder. This is important, because it is very apparent that the 64 bits are not pervasive to the whole architecture. Intel hasn't managed to clone this AMD feature right. It must be very difficult, because Yonah was initially promised to be 64bits and it isn't. This led to yet another embarrasment, Sossaman, which HP decided to skip altogether. Sossaman is a Server Chip (is it?) tied to 32 bits (!!), with low power (both as in less electrical consumption as performance capabilities).

Itanium was complicated on purpose to scare the competition away from it. But Intel over did the complication and became enmeshed by it. In any case, just as a clear thinking mind is able to conclude that Itanium is too complex to ever be implemented properly, a clear mind reaches the conclusion that it is very unlikely that Intel can truly cope with Conroe's complexity.

Let me speak about marginal benefits: The efforts to improve are increasingly harder to do, and decreasingly significant, until the benefits that you can obtain are not worth the effort. Intel decided that the Pentium III was a dead end way back in late 90's, that's why they took the Pentium4 route.

But since the Pentium 4 very early on demonstrated its utter inadequacy for low power consumption, Intel gave the Pentium III one last chance to do the "mobile shift" and the Pentium M was born. Since Intel eventually came to the full realization that the Pentium 4 was utterly inadequate all around, not just about power consumption, they awoke to the fact that they didn't have anything in store, but the Pentium Pro's great grand child, the Pentium M to keep producing something.

But since this architecture was already terminally mature at 1999, there was no other recourse but to apply the brute force approach to it: Gigantic cache, widening of data ways, deepening of buffers, proliferation of execution units, some more transistors to turn off all these numerous execution units that are going to be idle most of the time because it is so hard to keep them well fed, and also, some more dauntingly complex logic to push hard the reordering to try to squeeze some more drops of parallelism to feed something to the execution units.

This petty monster is huge, thus will also demand to apply brute force to other aspects: having so many transistors will be much harder to produce; all of these complexities lead very naturally to nasty complications.

Thus, the bottom line is that Intel would have to execute perfectly a long chain of challenging activities to mass market these very costly beasts that anyway won't be able to sell expensive because AMD will remain very competitive; so, in the best of the scenarios, if Intel succeeds, it may have products that regain the performance crown fleetingly and from which they won't be able to profit much.

Where is the money going to come from to keep the profligate expending in marketing, in building "Copy Exactly!" inflexible fabs, and in sustaining the Wall Street patronage of dividends and buy-backs?

There is a point when marketing doesn't provide the products the market requires because those products need solid engineering to be made. That's why in this whole 7 year period, Intel has been able to only come up with only two worthy products: The Pentium (III) M, and the Corpse Duo, designed by the same team that designed the Corpse µ-arch (Conroe). But come on, politics at Intel must be so intense that it had to be from the outer confines of the company, in Israel, where they found a designing team that will lay out the future of the company. And these boys really, paraphrasing Sharikou, seem to be apprentices when compared to the truly awesome Grand Masters assembled at AMD, the creators of DCA, HTT, AMD64, Pacifica, Presidio, innovations in the Alpha µ-arch., DDR, SOI, sSOI, APM...

The fundamental question is this: Do you really believe Intel will succeed at the Core µ-architecture's complexity contravening important design principles given this track record of failures, and at the same same AMD will stand still having a µ-architecture so well designed with so much room to improve?

I stick to Dr. Ruiz and Mr. Meyer's management, with the Grand Masters designing products, and the German Produktionsleiten operating the factories. In all three dimensions I am going to keep succeeding, I can bear mediocrity at marketing. And I respect Mr. Richard's work, but he has a tough job working for a company so focused on production and engineering that really doesn't indulge in marketing displays.

Monday, April 17, 2006

Intel down will be interpreted as AMD's jeopardy

What would happen if Intel reports bad results?

For sure, AMD will tank. The market will interpret Intel's failure to even meet lowered mid quarter guidance as a crisis that will demand drastic measures, and Intel's desperation, although directly caused by AMD's superior all-across-the-board technology, won't be interpreted as AMD's possibilities, but as jeopardy.

With an Intel fighting for the survival of its monopoly, the market will perceive AMD as a riskier investment, with the extra risk not compensated by the confirmation of superior technology, improvements in brand equity and the demonstrated improved ability to supply and actually *sell* the products. I say this because all of these facts have been confirmed already by AMD's latest earnings report, that produced a 16% plunge (and counting), thus I don't see why the market will appreciate them better after Intel's report than what it is now.

Thus, AMD will go down even further.

Paradoxically, it seems that a positive result from Intel will ease the pressure against AMD, the market will just say:

"Oh, very well, so Intel is back on track, regaining market share from AMD. We are not going to downgrade AMD because giving back market share was already priced in, but perhaps we can analyze again forward earnings"

If the market does that, then it will give AMD a deserved 20x (forward) P/E and AMD will climb to more or less $34, which provided resistance to the thesis of giving back market share, Intel's price war before the introduction of Conroe, and the Conroe family effect on the competitive situation. Of course, this thing is moot because Intel won't report positive results.

But the market is very wrong: AMD has an 8-lane freeway completely clear to sell everything it manages to produce from here to the mass production of Conroe and derivatives, that we have calculated can't happen before 2007. Intel won't recourse to a price war (I comically demonstrated the absurdity of such price war here) other than to clear its channel, thus the margins will keep high, and earnings will soar. By the time Conroe pressure really affects the market, I am very confident that AMD's Grand Master architects, which are vastly superior to Intel's apprentices, will come up with newer appealing products superior to the NGMAs.

And that's accepting the claims that Conroe is superior to the expected FXs for the 2H, which are very dubious; giving Intel the benefit of the doubt about being able to cope with the complexity of the Corpse µ-arch., that it manages to raise the capital needed to build the fabs it needs to mass produce them ("Copy Exact!" seems to have proved extremely inflexible due to the mix of miniaturization levels in Intel products (Itaniums, the flagship high end product is produced at 130nm!!)), and that AMD doesn't kill them before with a smash such as 16Mb L3 caches (based on Z-Ram).

But, as Lord John Maynard Keynes, 1st Baron Keynes of Tilton, famously summarized: "The market can stay irrational longer than you can stay solvent"

Wednesday, April 12, 2006

Earnings and conference call

Recent update (today 4:46pm)

The official data here

$0.38 EPS, beating consensus ($0.29) by 30%; this can't be possibly "priced in", therefore, other things being equal, this justifies a jump of 30% over the prices after Q4 earnings, you do the math, I don't want to be accused of pumper.

Gross Margin Increased from 57.3% to 58.5%.

ASP up thanks to desktops and mobiles, Operons units up a lot (penetration in server space)

Guidance: flat. Conservative according to management and everybody else. Therefore, huge potential for upswings. Will Intel commit suicide by giving away its processors in a futile attempt to keep AMD from selling theirs? Remember that AM2 and Turion x2 are in store for this quarter, as well as the Analysts meeting, that could unveil "products and technologies that will put the competition in a reactive position", or something like that. It could be quadcores, zram roadmap, who knows what at 65nm, a new invention from the Grand Masters...

Management confirmed that long term projects are well on schedule.

Very lean inventories, demand for the highest end surpassed supply at times

They refused to say what percentage of production will come from Chartered while asked about the dramatic production increases reported (but Management didn't denied the increases either), so, we don't know how much it could be.

And R&D has grown a lot, the company believes so much in its future that it wants to keep being an attraction pole for top flight talent.

Where these positive news?: yes, very positive. But I am disappointed. Should this stock be at $35? no, but Wall Street doesn't want to give AMD the stock price it deserves based on forward guidance.

Is it in any financial, commercial, technological jeopardy? not at all, so you may roll over your options to shares.

Quarter GAAP
non cash charge

Year EPS
Q2 06 0.38 0.38

Q1 06 0.38 0.38
Share Price 31.8

Q4 05 0.45 0.21

Q3 05 0.23 0.23
1.44 1.2 Est. Q2 22 27
Q2 05 0.09 0.09
1.15 0.91 Now 28 35
Q1 05 -0.04 -0.04
0.73 0.49 Q4 05 38 56
Q4 04 0.12 0.12
0.4 0.4 Q3 05 95 95

This table tell us that we are trading at 28x P/E. I got into AMD at 100x P/E.

Tuesday, April 11, 2006

Core Microarchitecture

In summary:
Core is very complicated. It is theoretically capable of executing 4 instructions simultaneously, for which it has been designed a set of features to try to keep those numerous execution units busy.

It will be very difficult to improve the architecture itself (no integrated memory controller ever, nor Hyper Transport), so despite its name, it isn't a new architecture in the revolutionary sense the Hammer/Opteron still is, nor it is conceived to last for a generation.

As soon as 64bit benchmarks come out, look for the comparison between the speed of the same programs compiled at 32 and 64 bits. If the performance at 64 bits is not better than 20% faster, equal, or even slower, then Core is dead at 64 bits, Intel won't ever be able to overhaul the arch. for 64 bits. But be prepared to see a jump of over 40% speed improvement compared to 32 bits.

Chances are that it will be difficult and costly to manufacture, do not expect it to be available in market dominating quantities before 2007

You can also expect the Grand Masters to come with a Grand Slam that could make look Core as primitive and obsolete as we look at pentiumIIIs today.

Saturday, April 08, 2006

Core Microarchitecture for AMD investors

These are the points of the summary:

1) Complexity: It is very ambitious. I am sure that Intel will experience delays at development, because there are a number of features that directly interact with most of the µ-arch. This means that these features may generate combinatorially large numbers (millions) of pair interaction problems and running conditions extremely hard to nail down.

2) All that complexity only produces marginal benefits. If you take at face value Intel claims, having widened the µ-arch. from 3 to 4 issuance, in the very best of cases they achieved a 33% performance improvement compared to Banias; but it can be demonstrated that the theoretical maximum is not achieved in practice, not even with superlinear features such as instruction fusion.

3) All that complexity also translates into lots of transistors to support the advanced feautures, this makes the processor larger, costlier to manufacture, and hotter when running.

4) All of the extra features can't be possibly used 100% of the time, therefore they reduce the overall utilization of resources, expect less power efficiency too.

5) If 7 years ago the obsession for higher clock speeds that gave birth to the infamous Pentium 4 was in the opposite direction to where industry was moving, which eventually proved Intel catastrophically wrong; the newest "reordering" obsession (trying to extract parallelism from sequential instruction flows instead of the current industry focus on easing explicit parallelism) is again, the opposite of what the rest of the industry is trying to do.

6) see below

7) Even Hannibal agrees with me in that this µ-architecture just doesn't have room to grow. (Although he mentions that Intel may have 5 years in store with it, he is very explicit about that the improvements won't come architecturally but through miniaturization)

8) This emphasis in reordering (to extract paralellism from serial instruction flows) suits single-threaded execution. Intel supposedly is designing for the future processors fine tuned and optimized to run old fashioned serial and single threaded code. The software community is trying its best to go parallel; this reinforces my appreciation that Intel's NGMA is really a stop gap to contain AMD in 2007-2008 when they can come up with a truly new architecture with internal memory controller and all.

9) No possible way to integrate in this mess the memory controller, it is far too complicated already. So, AMD's main advantage will continue to make all Intel's efforts futile for the foreseable future.

Remember that AMD64 has two different things: a) the architectural difference of having the extended register set, which is more important than: b) the computation in packets of 64 bits

6) The introduction of Instruction Fusion implies a major chance in all the decoders and most execution units already, thus there is every reason for Intel to include the REX prefixes decoding essential for EMT64/AMD64 into the simple instruction decoders rather than the complex sequencer. Thus, the AMD64 architecture won't be "emulated" through microcode as it seems now. Also, since Intel widened so many components, it is totally reasonable to expect normal computation at 64 bits; therefore AMD will not have an specific advantage here.

10) But, there is one issue: AMD64 defines a register file twice the size; this exponentiates chances to do reordering. For that reason alone one could get over 50% performance benefits. Thus, in Core, code for AMD64/EMT64 could actually run much faster than in today's Opterons.

I guess that Intel may be up to something radical such as extending EMT64 with another 16 General Purpose Registers, or extending the instruction set with three-addresses operations to make use of the enhanced width. Today, the whole x86 arch. is two-addresses (it is too technical to explain this issue here in greater detail).

Don't panic if Core processors run much faster at EMT64 than AMD's; this is not something hard to solve for the "Grand Masters" in future generations

In conclusion, I seriously doubt that Intel could succeed being a contrarian to very evident design principles; but further than that, there is an obvious performance improvement when you follow the brute force approach of putting "more of everything" in a µ-processor.

But with larger caches, and bloated execution units, Intel is multiplying costs to obtain marginal performance benefits.

That is the nature of their price war: They will do brute-force chips to (try to) outcompete in performance AMD's well balanced propositions.

Just one trick in store from Mr. Derrick Meyer's team and the whole game is over for Intel; if things keep the same, AMD still will have very competitive products for the mid-performance (and value) segments, and undisputed leadership in 2-way processors and up.

The architectural situation is extremely important because it defines which company is going to make successful products, it is also an issue of long term ample consequences, that's why I think it is so worthy of being carefully looked at. To help myself with the insight some posters at the message board can provide, and also to stirr some discussion, I have posted early drafts of most of what you see here in the last few weeks, posts that garnered good discussion threads, still worthy of taking a look. This summary was posted here at the Yahoo AMD message board

Also, I posted my impressions about the information that came out of IDF here, but I have changed my opinion on aspects such as 64bits since then. And very importantly, the famous Bob Colwell's Stanford Lecture (video link here) (he is the father of the P6 architecture) which I commented about here.

I have already settled on a stance about Core, summarized in this article, but I encourage you to leave comments/questions (with a callsign at least, please!), that may help.

Thursday, April 06, 2006

Conversation with the Ticker

I am looking at AMD's ticker every once in a while, and I don't believe what he is telling me. So, we got into an argument, that goes more or less like this:

Chicagrafo: "You've got to be kidding me! Is it down today?"

Ticker: Yep, Chi, it is down.

Chi - How come? Any bad news?

Tic - No, only good news, the usual stuff. Joe Osha bashed Intel, Fraunhoffer-Gesselschaft announced a R&D partnership with Infineon and AMD, a German magazine announced Dual Core Turion Features such as 1Mb L2 x 2, independent core voltage management, DDR2 - 800 dual channel; there are talks to expand/build factories in Dresden to the tune of 5.8 Gigadollars... should I go on?

Chi - Nah, not necessary. What has Sharikou been fighting about today?

Tic - That Chartered is 65nm and that Fab36 started commercial production in late Feb the latest.

Chi - Sounds like right to me, if not, the fact that there is a discussion about it means that at the very least they are ahead of schedule. What about the Hash and Ace?

Tic - Ace has been bullish, and Hash has been quiet, both for a change.

Chi - Cool. That means that we are about to break out with vengeance

Tic - Oh, no, you are down another 2%

Chi - What about the indexes?

Tic - They are all up

Chi - Fuc*, I don't Fu***** understand what's going on!

Tic - Another 1% down

Chi - What are the bashers saying!?

Tic - They are just repeating themselves: the Coredump, Mere-0 and Whocares prayers, saying that AMD is a POS, how much they have won shorting, saying that longs are stupid, bashing Sharikou.

Tic - Oh, another 0.5% down

Chi - Damn! that's 3.5% in a few minutes.

Chi - I will go back in a few minutes, I want to re-check my calculations for Earnings

After 5 minutes

Chi - It is more than $0.49 EPS, that means over $2 year, at 20x multiplier (5% APR on investment) $40 minimum per share. How are we?

Tic - Low 34s

Chi - What the hell?? why?

Tic - It seems that Q1 earnings are a moot point

Chi - Is that so?

Tic - Yeah, you know, the price war

Chi - The price war that can't happen? But if AMD has outclassed Intel so much, that they are not competition, who cares about the prices of the (de)celerons and xeons? Who is going to throw away good money on the rest of the computer to put an underperformer at the center?

Tic - Don't ask me, I am not guilty...

Chi - Aren't you? there must be something in your charts that say that you've to sell AMD...

Tic - Oh, no, it is that the Technical Analysts see that after the multiyear high there is no support

Chi - You're not convincing me, some people in the message board say that the specialist has been manipulating the closing price

Tic - Don't mess with my master. Are you one of those who believe in conspiracies?

Chi - Well, no, I don't; but there's got to be an explanation about why with so great news AMD goes down... do you know well your master?

Tic - Nobody knows well my master

Chi - Man, it is very frustrating all you are telling me, you are not helpful

Tic - I always strive to be of service, but some people wants to kill the messenger of bad news...

Chi - What are you talking about?, you always bring good news about AMD, and absurdly low share prices, there's got to be something wrong

Tic - I am well connected...

Chi - It is a conspiracy. I can't think of any other explanation... Let me check again, who are AMD partners or customers?

Tic - Sun Microsystems, nVidia, Rackable, Hewlett Packard, Soitec, eMachines/Gateway, Lenovo...

Chi - Ok!!, who among them is not doing well in the stock market??

Tic - They are all doing terrific. You interrupted my list, even Google is doing AMD. Just after the news of Google going AMD it was included in the S&P 500 index with an appreciation of 12.5%... Let me tell you a secret: All AMD partners/customers are doing fantastic, because AMD has magical properties.

Chi - What??? do you, the embodyment of cold computer logic dare speaking about magic?? Anyway, tell me who is not using AMD

Tic - Dell, Toshiba, Sony, Apple

Chi - Yeah, I know about Dell, you may remember that I also have bearish positions against it.

Tic - Yes, I remember. May I remind you that your bearish positions in Dell have given you most of your non-ethanol related recent gains?

Chi - Very kind of you. Well, Toshiba has been pushed over by Acer, right?

Tic - Indeed

Chi - Perhaps in this April, due to the lawsuit, the Japanese may start their new yearly cycle doing AMD, am I right?

Tic - I have no news on the subject

Chi - Thank you. What about Apple?

Tic - Doing very well

Chi - So the Corpse Duo is good!

Tic - I wouldn't say so. It seems that Apple is receiving a lot of help to make the transition from Intel, and it seems that Apple is better at extracting kickbacks from Intel than Dell itself

Chi - Any chance about Apple doing AMD?

Tic - No news about it, but it has been remembered that Apple and Steve Jobs have established a reputation of shooting themselves in the foot

Chi - What? Explain yourself

Tic - Yes, a reputation of doing a great innovative package with inferior components, such as the original iPod with the faulty batteries, or doing awful packages with superior components such as the PowerBook 150. They also do the opposite of what they should, such as allowing MacOsX to run in PCs and being active at allowing Windows to run in Macs...

Chi - ...and choosing Intel instead of AMD... They've got to have a lot of feet to spare!

Chi - But anyway that contradicts your "magic" theory

Tic - Oh, no, it doesn't. AMD's magic is "white", positive, it helps customers and partners, it doesn't gives bad karma to the skeptics.

Chi - That's interesting... perhaps it is not a matter of magic, but cold business reasons: AMD leaves a lot of profits to be made because it is not exploitative and believes in cooperation, the ecosystem; and Apple is doing well because it is exploting Intel, who now is not available to be exploited by Dell, to the detriment of the later.

Chi - What about my article about the subject, Ticker?

Tic - Only has a few reads, but one (contrarian) comment. Sharikou dismissed it, though.

Chi - No, I am asking about your opinion

Tic - I will confide that my fellow newstickers and friends in the Media have been spinning too much positive news about Intel and negative about AMD. My Masters have asked me to do the same, but you're too clever to be fooled, so I will keep being fair to you

Chi - I appreciate that. Thus you agree that once this stock reaches $45+ it will have to slide all the way to the next quarterly report, Dual Core Turions notwithstanding, and stuff like that, right?

Tic - Yes. And instead of selling shares or buying puts your strategy of writing monthly calls seems better

Chi - You are not saying that just to please me, right?

Tic - Oh, no, I see that AMD doesn't have much chance of crashing down, so it doesn't plays all that well to puts, but the core issue is that once momentuous news such as an earnings report is priced into the stock, it has been demonstrated that there are no good news that kick the price up; not even Dellienware was able to sustain a meager 4%, thus little chances of a permanent intra quarter upswing play very well to the short term call writer.

Chi - That's what I thought.

Chi - How are we doing?

Tic - Green. Another bull trap, perhaps

Chi - About your "magic" theory, why is it that AMD is down?

Tic - I think that it is because the positive magic is spent in partners and customers, so there is nothing left for its own stock price.

Chi - I see. It is that Wall Street doesn't see a company governed by greed, that is not appealing to them. Let me explain it to you: Other things equal, every $1 that goes out of Intel's market cap should mean one dollar getting into AMD's market cap, but because of their relative sizes, 1% Intel's market cap means like 7% AMD's. If Intel is down 10%, AMD should be up 70%, but that isn't happening; thus the money that goes out of Intel's market cap doesn't end up in AMD's, something similar happens with Intel's profits. That's why WS may agree about the whole market down; perhaps it is not that at all, but that AMD is behaving like a Robin Hood, taking the extortionately high Intel's profits and leaving them in the ecosystem, and Wall Street doesn't really understand where the money is going.

Tic - Thus AMD isn't winning all that money, being so small, doesn't it make it vulnerable?, perhaps it is not such a good long term investment

Chi - Nah, AMD increasingly will get protection from the ecosystem, that will be the moat for the competitive advantages castle that Wall Street gurus like so much. Think about things such as nVidia's NBP (nVidia Business Platform) that is defined with an AMD processor at the core.

Tic - Hmmm... only if it manages to survive until consolidating the ecosystem...

Chi - Of course!, what?, do you honestly think that the perfectionist Germans are going to screw up in production? Do you seriously concern yourself about the Grand Masters not keeping up with outstanding architectures? Do you think that these guys battle hardened who most of them had a close encounter with Bankruptcy and in such circumstances pulled off DCA, ccHTT, AMD64, Dual Cores, SOI, sSOI, Fab36, APM are scared or worried about these times when they have pocketed the whole server market, 80% of Desktop retailing in the U.S., an explosion of production capacity, positive reviews, benchmarks, credibility, etc.?

Tic - You have good answers. It is very instructive to work for you. I will try to recommend these opinions to my other customers

Chi - Thank you, please let them know that History is being made, that whenever that happens, the nature of the changes is not readily understood, but that also principles have the tendency to prevail...

Tic - I sure will...

Tuesday, April 04, 2006

Riding the roller coaster

The little I know of the dynamics of AMD's share price is this:

1) There may be the most impressive stream of good news that I have seen about a competitive situation for a company, and yet AMD's stock price may slide and slide and slide.

2) If I am right about the current situation, we will touch $50 after the CC, but just to avoid disputes, I spoke of $45+

3) But there is no way to sustain that price level without the help of Wall Street. But since the last quarter, AMD became Wall Street's #1 enemy, and I am being serious:
a) This is a disrruptive company, that WS doesn't like because it is not able to understand is cooperative model.
b) This company is destroying a former largest capitalization company not to replace it with itself, but with an ecosystem (!!)
c) Being neither exploitative nor monopolistic, AMD simply doesn't appeal to Wall Street, although the tertiary industries (such as chipsets) that it may create could be good for the whole world

4) Wall Street has to defend the $80 billion it has on Intel somehow.

5) Having WS as your enemy means that the formidable leverage on the media will be exploited to the maximum against you. Every positive spin on Intel (bad) news will be highlighted, every negative spin on AMD will be highlighted too. We have lost the game of perception before hand.
a) Look at Conroe: That is a dead end, over complicated tweaked processor, and it is duped just like the Vergelstungswaffen that will bury AMD.
b) Look at the price war that is not happening but that AMD already lost.

6) Most investors are not able to resist a concerted brainwashing effort from the whole of Wall Street. I am an engineer with solid background in µ-proc architectures; yet, I must confess that I have doubted my knowledge trying to give it a chance to Conroe, all because I intuitively feel that I can't be right and the whole world wrong. Well, this is me accepting a bit of brainwash. Anyway, must investors don't have my experience, so, they are vulnerable, and they will lose faith, they will sell, the money will get out of AMD, and the price will fall

7) Once the price starts to fall, the "technical analysts" will see bearish tendencies on it, and will intensify them, so we will have once again the whole brunt of the day traders selling and the stock price sliding

8) Until new conference calls or news of such caliber take the price back to where it belongs, only to reiterate the cycle.

You see?
We will have plenty of opportunities to buy cheap.

I myself will be aware of when the bashers and the technical analysts start to come back to AMD and speak of bearish signs, not to short AMD, but to write (covered) short term calls to be closed/let allowed to expire worthless, and buy back when the absurdly cheap levels are even understood by the bashers. In this cycle it was $34, next cycle I think it will be $38