The Coin has three Sides

NOTE TO THE AUDIENCE: My apologies to the audience. I took a long time before siting and doing this one. Actually, I am sacrificing a free Friday to do it, but i figured out that I either do it now or never. Besides, a promise is a promise..... So here it is!

WARNING: LOOOOONG POST!

When I say it, it is obvious. I can hear the audience saying: "¡Well yes, of course, the coin has three sides! Head, tail, and the ..." and there the English speakers stop. They do not even have a name for it. The best they can come up with is "the edge" (I consulted with some native English speakers in my MBA program, from Britain AND the US). In Spanish, at least, we use the word "canto (de la moneda)" for that third side. You see, is rather obvious, but people tend to ignore it. Everybody talks about the other side of the coin, and all people think about the coin is flipping it. One day, I flipped a coin, and it landed on the canto, rolled to a small crevice, ¡and stood on its canto! (I was an undergrade at the time). Yes, the coin has three sides.

Imagine that I show you pictures of €1 and €2 coins, modified so that sizes and colors are the same, and ask you questions about the coin, depending on the question, you will be able to use one or mode of the sides to know the answer, for instance:

¿In which country the coin was minted? You will need the decorative side.
¿How much is it worth? You will need to look at the value side (the value is printed there), or to the "canto" (€1 is alternating stripes and smooth, €2 is all stripes).
¿Is it a collectors edition? Again, look at the decorative side.

But read again the conditions: «modified so that sizes and colors are the same». So, there are other aspects of coins, like color, size, material, or even weight, that are important when analyzing the coin.
Translate this to the blogsphere: many times, you see unidimensional analysis. I takes into account, one, perhaps two, exceptionally three, aspects of the coin. More often than not, the people restrict themselves to performance, and technical merits, and forget about other aspects, financial, marketing, or my favorite, strategy (we will talk A LOT more about strategy in future posts).

Before we begin, CORE2 is here, the benchmarks are here, and the thing is good. Or at least good enough. So, it seems easy for me to say this things now, but Chi is my witness, this is the same I was telling him in January 2006.

Let's revisit some popular and not so popular issues of the AMD vs. Intel debate, looking at some other aspects, strategic aspects. The idea here is that you see that there is more to the debate, and try to open your mind, and perhaps find other aspects for yourself (for instance, if you are a finances guy, we could use some insight there, get the sec reports and get to work!).

INTEGRATED MEMORY CONTROLLER: Lets get this out of the way: from a technical and performance point of view, having an IMC is better than using FSBs and NorthBridges. There, I said it, there is no denying of the truth, but there are other aspects to the coin than performance and technical merit ¿right? (think about it for a minute or two before continuing, you have read a lot already, you deserve a little break).


In the late 1990's, Intel was using RAMBUS RD-RAM all across the board, and working on a µProcessor codenamed Timna with an IMC. The idea here was not to get more performance, but to lower the cost, but that was the perfect opportunity to taste for real the benefits of an IMC. Intel figured that by the time Timna came out, the cost of RDRAM would be much lower. But, lo and behold, because of the "Cloak and Dagger" dynamics of the RAM market at the time (RAMBUS misappropriated patents, while the DDR manufacturers used predatory prices on RAMBUS, do not take my word, google for it; ArsTechnica, as usual, has a good summary on the issue) Timna ended up being a very inexpensive chip, tied up with a awfully expensive memory subsystem, and the chip was scraped. Ever since, Intel has been shy of tying the µProcessor to the Memory Architecture. AMD did, and by doing that (and getting a little lucky with the memory choice) reaped a huge payoff.

But now, AMD is at crossroads, while Intel is, believe it or not, in a better strategical position. As of now, AMD has to watch out for FOUR (4) Memory technologies. DDR1 in the value market, DDR2 in Mainstream and server markets, and the future FB-DIMM and DDR3 in the server space.

If you take any Supply Chain Management 101 book, they will tell you that the more you delay customization, the more efficient your production process becomes. As of today, when AMD has to tailor the memory the customer wants, they have to do it right in the very minute when the masks are put in the FAB. Intel tailors the memory when the chip is dropped in the motherboard. Who do you think has the most efficient supply chain, the less problems doing forecasting (think µprocessors only, not chipsets, at least, not for now), and can take out products faster to market? When Hector Ruiz tells you that they will introduce new memory technology when "it makes sense" he is telling you the truth, but not the whole truth. AMD introduces new memory technologies when it makes sense to the market AND TO AMD. And, to top it of, if this time around AMD picks the wrong technology (they are backing DDR3 instead of FB-DIMM) there will be hell to pay!

Have you heard that upcoming AM3 processors will fit in AM2 boards, and will support both DDR2 and DDR3 memory (but not in the same board). That is AMD trying to get out of this bad strategy position. Right now, some clever engineers at Intel are trying to get CSI done, and I guess that a lot of their thoughts are on ¿How much of the memory controller can we put inside the µProcessor AND STILL remain Memory Architecture Independent?

MULTICORES: Up until now, whenever we move to a higher number of cores (one to two, two to four), Intel puts two slabs of silicon in the same package, and only later comes with a real multicore, while AMD comes out with real multicores from day one. Again: from a technical and performance angle, having a real multicore is better than having two slabs of silicon. But, as usual ¿are there other angles to the issue? (¡WOW! ¿You are still here? Think about it while you fetch a snack, a glass of water or a take a pee break, before continuing).

Nowadays, Software licenses for big apps are paid per socket, not per core. That includes things like DB2, MS-SQL (Oracle uses a very weird pricing scheme, and world + dog is complaining about it), HP-UX, ExchangeServer, or SAP (some of those have (F)OSS alternatives, other do not). That means that, as long as one does not use more sockets, no matter how is done, is better, because a µProcessor price is in the range of a $1000,oo range, while a SW licenses is in the many tens of thousands of Dollars PER SOCKET.

So, for example, if one is running a one socket Intel server with a single core proc, and needs more processing power (electricity and cooling aside; sometimes those are important, sometimes they are not; in many large organizations, the budget for air conditioning and electricity does not come out from the IT people, so, as long as this is not the server that breaks the camel's back, the IT people have not much incentives in taking that into account), one can:

* Get an Intel Crippled Dual Core now and get a 1.7 performance boost on the same server, and replace that with an Intel RealDualCore latter on, getting in the end a 2.2 performance boost over the initial configuration for a couple of grand.
* Do a forklift upgrade to a dual socket AMD config now for around 10 grand + SW certification costs (you are changing the configuration), with a 2.6 performance boost and DOUBLE the SW price.
* Wait a few months (if you can, and you not always can) do a forklift upgrade to a single socket AMD with 2.5 performance boost over the old configuration for around 10 grand + SW certification costs.

Of course, you can construct an scenario where is better to use AMD, but AMD has been 0 to 26% of the server market, so I guess that case is more frequent than the alternatives. The same case can be extrapolated to dual or quad socket machines, or machines with free sockets. But the important thing with the example is to force you to think and grasp another side of the coin.

If one is in the market for QuadCore servers is not because QuadCores are cool, or perform better, but because one wants A GIVEN LEVEL OF PERFORMANCE WITH MINIMUM SW COST. The first one to market with QuadCores, is the one which will give us that. And, lo and behold, even Crippled, the first ones to market with that are the guys from Intel.

There is another issue. Every time one gets to a new increase in performance, the market for it is the upper tail of the bell curve. Intel slaps together two cores, not much R&D expenses there, and satisfies (more or less) that market. When that market becomes more mainstream, Intel invests the resources in making it right (finances 101, Time Value of Money, delayed investments are better). AMD, on the other hand, has to make the sizable investment in designing "yet another set of masks" right here right now.

Finally, we run again into the Supply chain 101 issue. The more you delay customization, the more efficient you are. At least in the beginning, Intel delays customization (¿two cores or four?) up until the testing and packaging steps of the fabrication process, while AMD does it right when the µProcessor is made. If there is an error in demand forecasts, ¿who will get in trouble (obviating for a second packaging issues, like the one AMD faced in December 2005 ;-))?. And no, APM will not save AMD from bad forecasting.

Of course, ¡AMD is not stupid! ¿Why don't they do the same and pack two slabs of silicon in the same package and call it a Quadcore? Aside from Hector Ruiz's reasons (which are true, but not the whole truth) I can think of two reasons (sure the audience can think of more):

* AMD lacks the expertise. Putting to slabs of silicon in the same package is easier said than done. Intel has been doing it since the PentiumPro, and probably, to get to the point of being confortable doing it with a mass market part, they were doing R&D on the subject long before that. By the way, since this is the second time I mention R&D, head to the IEEE Spectrum website and see the survey of R&D expenditures for 2005 (Jan. 2006 issue). See where is Intel and where is AMD.

* If you put two AMD dual cores in the same package, each dual core will have its own memory controller, but the pinout should be the same as that of the DualCore parts (otherwise, you loose the drop in replacement market). Therefore, one of the DualCores (lets call it A) will talk to memory directly, while the other one (B) will, essentially, have an external memory controller (the IMC of B will talk to the IMC of A which will, in turn talk to the memory; if that is not an external memory controller, tell me what it is). Therefore, for two of your four cores, the IMC advantage is gone, without the corresponding increase in bandwidth (pin compatible, remember). Evidently, since their design is inferior, for Intel this is not an issue ;-)


MICROCODE UPDATES: (Thanks for getting here. I saved the best for last. This is the last one).

Engineers are humans, and humans make mistakes. In the mid 1990's Intel made two mistakes with the original Pentium. The FDIV bug, and the F0:0F bug. Intel learned their lesson, and, ever since the PentiumPro, they have something called Microcode Update. Basically, is a way to patch the microprocessor on the fly to correct errors. You can put it in your machines BIOS, or you can run a piece of SW to do it for you. But you have to do it each time you boot your machine. The point is, you patch in just one point, not in every single OS AND/OR Application known to man.

Some ten years latter the innovative and technologically leading AMD has nothing similar. And yes, AMD chips have bugs too (google for them). OK, so far so good, is easier for Intel to patch the chips that it is for AMD. Are there other implications. This is my post, so you bet there are!!!

What this means is that AMD has to take longer to weed errors out of their chips (because having severe errors for them implies costly patches in many applications, or even worse, a recall), while Intel can go a tad faster. So, when Mr. Otellini enter the design room and says "we are moving forward the launch of the CORE2" the engineers grumble and move on, but if Mr. Ruiz ever tell his engineers they need to move a launch forward, there will be a riot!

I remember, in the month preceding the launch of CORE2, having a grin whenever Chicagrafo and Sharikou denounced that CORE2 would be unstable and buggy. I thought: "¡Well of course it will be unstable and buggy! The question is ¿for how long?. How could Chicagrafo and our respected Ph.D. overlook the Microcode update feature is beyond me....

This feature is part of the reason why Intel could pledge to roll a new architecture every two years, and AMD can not match those stakes. And that (architecture every two years) issue will be discussed in more depth in a future (shorter) post.



Thanks for bearing with me. I wait now for your comments... Contrarian comments are welcome, but lets keep the thing on a high level, no flames!

Apple up like a rocket, Parallels and Virtualization

The hottest news in "digg.com" is that Parallels is providing support for Mac OS X 10.5 "Leopard".

And the second hottest is that Apple debuts a major advertising campaing in print.


See this excellent clip from the advertising that explains it all:

I have no positions on AAPL, nor Microsoft, and I do have only bearish positions on Intel, thus I am not trying to further my investments with this gratuitious publicity for Apple computers.

But everything they say in this excerpt is true. I have explained the many defficiencies that a Windows system has. Mac OS X, on the other hand, is based on Berkeley Software Development UNIX (BSD), and those roots make it several orders of magnitude more robust than any Windows, but yet the user interface has the characteristic good taste of Apple products.

That Mac computers work the way they should guarantees that Apple will multiply its market share this year.

To further convince the skeptics to at least give it a try, they now have a Virtualization offering, Parallels, to run inside a Mac any "PC" operating system such as Windows XP with is Microsoft Office and all while at the same time enjoying all the benefits of "Leopard". In my circle of acquaintances, those who have been exposed to Mac OS X and the excellent Mac computers get hooked, including "Yours, truly".

Also, the iPod market seems healthy and there are rumours about an iPhone which would combine cellular telephony with iPod functionality; a product that well done (not as the "Rokr", the "underwhelmer") pretty much gives Apple stock a very bullish outlook.

Unfortunately for us, Parallels, although is a true hypervisor that seems to make use of Pacífica (AMD-V) (at least suports something I don't know about called "AMD Secure Virtual Machine", AMD-SVM "that drives unmatched virtual machine speed, performance, stability and isolation on SVM-powered computers"), doesn't seem to support any AMD64 host nor guest operating system, at least according to the official web site (s). I think that I will be contacting Parallels to let them know that they are missing a large potential market, because today the best way to run an AMD64 operating system is relying on Virtual Machines with an OS at 32 bits with the drivers the AMD64 OS lacks, just like described in "AMD64 Practical".

Hewlett-Packard welcomes Dell to the AMD market

Mark Hurd, CEO of HP speaking at Citigroup's 13th Annual Global Technology Conference in New York, was quoted here referring to the Dell decision to do AMD computers the following:

"It's a good thing for AMD to get critical mass"

This brief statement has very significant implications. For me, it is as if he was saying:

"We are pleased to see that AMD is gaining traction in all market segments because we, HP, are the undisputed leaders of AMD consumer computers thanks to all the years of experience and research and development that we have accumulated with AMD. Any company marketing AMD processors ultimately helps our own AMD marketing efforts because we are perceived to be the leaders today and for the foreseeable future in AMD computers. Being Dell in particular, with its size and notorious previous exclusivity of Intel processors, the company who is behind this marketing push, our worst obstacle to market AMD, consumer skepticism, may be dissipated. This also means that we have Intel by the gonads and not the other way around, which is a "good thing" for everyone"

Intel, ladies and Gentlemen, is in a world of hurt.

Mark Hurd's words were brought to our attention by the message board here, and I posted this idea here. In our blogosphere neighborhood, Sharikou also covered these news.

Autofool

Do you use any Windows XP version?

You most probably are vulnerable to a very simple attack that may make your life miserable.

1) Have you heard of the "Sony Rootkit Scandal"?

2) Do you know what the "autorun" feature is?

3) Do you always do your normal work in windows in a restricted user account?

If your three answers are negative, you belong to the highest risk group of autorun infections. If it serves of any consolation, it seems that your high risk group is majoritary.

Last year, a very smart guy at "Sysinternals.com", Mark Russinovich, discovered that Sony basicly put a malicious trojan horse software in audio cds. That malicious software automatically ran if the victim put the audio CD in a computer drive to play it. If the user had administrative privileges, then the virus corrupted the operating system configuration and sent over the internet some private information about the system that we, the public, still don't know exactly what it was. All of this supposedly with the intention of restricting the number of CD copies the user could do in the computer. The rootkit also was designed in such a way that if the victim deleted the rootkit files, then the system would be rendered unusable. That is, using the excuse of preventing piracy Sony hijacked the computers of its customers.

The very successful spread of this attack tells us the following, besides that Microsoft Windows sucks and that Sony doesn't have any kind of ethics:

1. You can not rely on antivirus. A trojan horse as the Sony rootkit is trivial to detect by any antivirus. But they don't detect it:
   
   1. First, because if the design of windows security is brain-damaged, the "security" software design is brute force stupidity:
      
      1. The Sony Rootkit goes on to modify operating system drivers, and all kinds of delicate configurations, and on top of Windows itself not even noticing the user, the antivirus, that supposedly adds extra checks also keeps mum
      2. The SW that is doing the configuration changes is running off removable media, which should tag it as non-trustable
      3. The changes themselves are no simple "configuration change" but a "diservice pack", an antivirus should understand that this is not peanuts.
         
   2. Second, cry and weep, because Symantec itself, the maker of "Norton Antivirus" installs its own rootkit that hides files and messes with the system, supposedly to "protect" the users from their own folly [more details]. This mess can and has been exploited by viruses. Thus, this "security guard" company makes holes in your computer security but forgets to tell the guards to check them.
   3. Third, The existence of viruses is actually a subject in the highest interest of antivirus providers. The more paranoid and ignorant the users are, the greater profits they make. What I am saying is that the attitude of "security software providers" is to tell their users/customers: "Be as ignorant as you have always been; we will magically solve the problem for you, provided that you give us handsome money". As you may see in this article, that attitude only leads to user/consumers abused by triplicate: By Microsoft, that provides them an inherently faulty and insecure Operating System, and also puts pressure on the customers to use antivirus (see the "security notification" in XP SP2 that complaints that the computer doesn't has an antivirus); they are abused by the Antivirus providers that take money providing worthless, if not worse, software, which is not subject to any accountability of efficacy; and of course, by the hackers/crackers themselves.
   4. There are rumours that some Antivirus providers discovered the Sony rootkit, but after contacting Sony, they thought that it was Ok. This rumor, in other words, means that the antivirus companies do not simply protect your computers, but they may decide which companies' softwares are allowed to hijack them.
      
2. Demonstrates that far too many users run day to day tasks such as listening to music in accounts with far too excessive administrative priviledges
3. Demonstrates that the "autorun" feature is a grave security concern.

In Windows, there are no other ways, but to sometimes use an "Administrator" account to do otherwise mundane tasks. Some SW for Windows abusively requests the user to have administrative rights. Why? If it is for installation, most probably to install some form of a rootkit; that is, to hijack the computer. If it asks for administrative rights for day-to-day usage, then most probably the software does a task that the operating system does or should do, that reflects, either bad Windows design, that the application is not well designed to request from the Operating System the services it requires, or that the application doesn't want to use Operating System services, perhaps because the application has something to hide from the auditing tools of the O.S. services. Although this may be argued as "consensual"

In any case, my advise is to strongly prefer software that can be installed and run in very restricted accounts over software that requires too many privileges. If you like that software, then you may install it "System-Wide" using the administrative account. That kind of software exists, and tends to be Open Source. If it is Open Source, try to enjoy compiling it yourself. Then, you know that if some day you want a feature, in the worst case scenario you will very probably be able to hire someone to program it for you.

Second: TURN OFF THE AUTORUN. Right now, there are some guys developing the concept of malware that picks up the private information such as passwords and credit card numbers from a system with the autorun enabled in which a simple USB flash drive is inserted. If the user, on top of having the autorun enabled also has administrative priviledges, then the computer may get infected for good. Microsoft is so negligent about security, that XP doesn't provide any User Interface applet to completely disable the autorun, there is no reliable way other than doing it through the registry:

"NoDriveTypeAutoRun" registry key, I here reproduce the values for convenience:
HKCU\Software\Microsoft\Windows\CurrentVersion\Policies\Explorer

Value	Meaning
0x1	Disables Autoplay on drives of unknown type.
0x4	Disables Autoplay on removable drives.
0x8	Disables Autoplay on fixed drives.
0x10	Disables Autoplay on network drives.
0x20	Disables Autoplay on CD-ROM drives.
0x40	Disables Autoplay on RAM drives.
0x80	Disables Autoplay on drives of unknown type.
0xFF	Disables Autoplay on all types of drives.

[note: This information is official documentation of Windows 2000, probably applies identically to XP]
Autorun
AutoRunAlwaysDisable
NoDriveAutoRun (in HKLM)
NoDriveAutoRun (in HKCU)
NoDriveTypeAutoRun (in HKLM)

If you are not an "administrator", you are still vulnerable, because the program may lift all the data that your user account is able to read, including *your* passwords or credit card numbers...

If you look on the internet about how to disable the many autorun features, you will come across many tools such as TweakUI that do this kind of system tweaks hiding the complexities of managing the registry. Well, if you think it is acceptable to use "TweakUI" or any of its equivalents without caring to research how it is done without any tool, then you haven't get the principal idea of this post: You can not become dependent on software that you don't know exactly how it works, what it does, what it doesn't; you can not remain ignorant about the security problems that Windows has. It is very similar to do your own Due Dilligence about the stockmarket to get interested in the security of your computer.

Windows Operating Systems must be approached by you with a lot of distrust for your own sake.

Let's say that you follow the advise of rather than relying on antivirus, antispam filters, antispyware, antiworms, popup blockers; you opt to research how the computers get infected, and how it is possible to prevent the infections: Then you not only get out of the vicious cycle of malware -> paranoia -> expense -> anti-malware -> false sense of security -> malware; then you start to really understand that most antimalware is complete bullshit; that Windows sucks so much that one really has to try to use alternatives such as Mac OS X, Linux, Solaris, or any other reasonable Operating System, that tools such as Virtualization are not geek ways to lose time, you learn how to really take control of nearly indomitable Windows Operating Systems; and above all you liberate yourself from lots of frustrations, making your computing experience more enjoyable and productive.

The Case For Virtualization, Part II

About 1999 I started to experiment with WMWare because in those days I was really using Linux hardcore, but just like everybody else, I needed some stuff in Windows once in a while and the hazzle of rebooting was unacceptable for my legendary Linux uptimes. Those were the times in which the ultimate demise of Transmeta were still a non-decided issue.

In any case, it was yet another "fringe" experience I had, or so I thought, until early last year when I noticed that the subject of Virtualization became a hot topic again because AMD and Intel initiated roadmap wars around the subject. Thanks to Howling, the other blog contributor, who brought my attention to the subject, I approached the subject from another perspective.

It is clear that current processing capabilities have covered the needs of most usage patterns and then some. Thus, both AMD and Intel began to hurt due to the lack of compelling reasons for ever more powerful processors, stimulating them to find new markets for high performance. Besides, the trend towards multicore processors was already very clear, they had to also find markets for multiple cores in a world of predominantly single threading software. One answer which fitted both issues was Virtualization: Let us help mechanisms to put multiple computers inside a single hardware, that will require raw performance and also suits very well multicore/multiprocessor computing.

Then, it was clear how important the advent in full swing of this technology was going to be. There are many reasons for going the route of virtualization, I have wrote to fairly large extent about that in the previous articles; but I want here to remind of one which is crucial: Today the expenses in Software licenses and maintenance is much larger than the expenses related to hardware, therefore, it makes sense to configure every important, expensive, software package such as Oracle to the exact specification that the SW provider recommends. Often enough, the only way to do that is to dedicate a specific computer of the organization to run that software. Following that route, you fairly quickly stumble with the problem of server sprawl, that in your IT department the count of servers proliferated wildly. Obviously, it is very innefficient to have tens of uni-application servers each very underutilized, then it makes sense to "consolidate", that is, to reunite, all of those weak, inefficient servers, into a single powerful server, but partitioned into many virtual computers just like the fellow blogger of "Tall Sails" chronicles here and here.

I have been very attentive all of this year to technology commentary, but odly enough, I didn't see the subject of Virtualization to gain much traction, despite how crucial I think it is. For instance, I wrote "Pacífica Vs. Vanderpool" as early as Febraury, many months before the actual launching of AM2 and Rev. F; but that article didn't receive much attention either. Then, all along the year, I watched with delight how the subject became mainstream. Our friend from "Tall Sails" wrote about his Virtualization project in April, I kept blogging about the subject with "AMD64 practical" in July, and by that time the subject had become truly mainstream, as attested by the many invitations Diane Greene, President/Co Founder of VMWare received to attend just about every major tech. event such as AMD's Technology Analysts Day and Sun Microsystems, despite the truly uninspired participation of Mrs. Greene. In our local blogosphere neighborhood, I am pleased to have been blogging about Virtualization for over half a year before Sharikou, who emits opinion about everything and anything but haven't touched this subject yet, as far as I know, before "CM1" in which he just makes a passing mention of it*. Even "Jayelliii" is posting messages in "Ireland" about isolating from the newest DRM restrictions in Microsoft O.S. firing up a Virtual computer with an older O.S. that doesn't have the new restrictions.

Even our frenemy Bill Snyder posted an article about the subject, "EMC Becomes 'Virtual' Target"; that I want to prologue:

It can be safely said that this year is the year of the discovery of virtualization as an important computing tool. Nevertheless, there aren't many providers of V. technologies beyond VMWare and Xen. Microsoft is dong something, but incomplete; what matters is that there is no important "pure play" in the virtualization arena, VMWare, which is by far the most important provider, is merely a subsidiary of EMC.

The Eagle-Vision investor should be very attentive to these technologies, because they have assured exponential growth such as VMWare's 70+% revenue jumps year over year for the foreseeable future, and many different phenomenons are creating "a perfect storm" for it to succeed, such as the exploding power consumption bills, the combinatorial explosion of multiciplity of servers in datacenters, the jump in computing power due to AMD's and Intel's war to annihilation, the introduction of linear scalability x86 multi core computing by AMD Opterons, increased market awareness, the help Intel-VT and AMD-V (Vanderpool and Pacífica/Presidio) provide to Xen for paravirtualized approaches to run Windows on Linux, and many others.

By the time being, we can appreciate that the market doesn't know much about the subject because errors such as Snyder's happen without correction.

At the most basic level, virtualization allows a group of servers to be treated like one large computer. If one server is overworked, its load can easily be shifted to another running below capacity
This is not something only for servers, my previous posts demonstrate that it is as useful at the technical user level. And that rebalancing just happens "under the hood", automatically, without human intervention: All the single partitioned computer power can be dynamically distributed among the virtual computers that require it the most.

"Intel began adding virtualization to some of its chips as far back as 2005 and is adding more as it rolls out new processors. AMD is behind, but it's an open secret in the industry that the company's "Project Pacifica" will add similar capabilities to its chips in the near future."

This article was published "after the fact" that AMD trounced majesticly VT with AMD-V thanks to the help the integrated memory controller provides for virtualization. AMD is currently way ahead of Intel for I/O virtualization, only waiting for chipset manufacturers to come up with partitioning mechanisms for the I/O.

"However, virtualization capabilities in the hardware do lower barriers that have either kept out competitors or confined their efforts to low-end or niche markets, Bittman argues. "This will put VMware's business model on its head," he says."

I rather think that either VMWare or others will take advantages of hardware support to take the whole Virtualization idea to much higher planes of usefulness, to great market enlargement. Microsoft's entrance to the fray with a free product, "Virtual Server 2005 R2" (which Yours, Truly hasn't tested yet), only pushes forward existing VMWare businesses, Microsoft is using its marketing muscle to promote virtualization, a market in which undoubtedly VMWare is leader and therefore is a free rider of Microsoft's attempts at popularization. Besides, VMWare has the outstanding credibility of having supported Linux hosts from day one (even before Windows hosts!), Microsoft has yet to convince critics such as Yours, Truly that one can really run seamlessly a Linux O.S. in Virtual Server. But it is unpromising that Virtual Server is only able to run for "non-production use only" in XP Professional x64; I totally refuse to even consider installing a windows braindamaged server operating system.

(*)It caught my attention that Sharikou in his blog mentioned that he runs Parallels, a comparatively lame 15 days trial to the free of charge and feature rich VMWare Server, in a Windows 2000 host!, that is, at 32 bits rather than AMD64!, his blog is supposed to be about 64 bit computing...

On the other hand, here you have seen discussion of running XP x64 as host (or any other AMD64 O.S., the proper thing to do!) and whatever as guest. (I also did the opposite test, an XP 32 host with XP x64 guest, and the x64 ran on all "16 registers").

Virtualization Articles Index

Hello Audience.

I am overhauling the blog creating some categories such as Virtualization, Dell, Microsoft, Options and Derivatives, to post catalogs in which I cross reference what I say about them and put the indexes in the side bar.

Toghether with the backward links in the articles themselves, the "links to this post" blogspot feature, and the indexes, I hope the dedicated reader who finally finds the hours it takes to read my book-long posts to have an easier time to dig deep in these subjects.

Of course, these "Index Posts" will grow with time.

"Apple up like a rocket": Apple computers are gaining market share very fast, and to convert even more skeptics now Parallels offers hypervisor level virtualization for Mac OS X 10.5 "Leopard" host computers.

The Case for Virtualization: A "Chicagrafo style" introduction to this fascinating subject, followed by "Part II".

Practical advise, links and hardcore information about technologies surrounding Virtualization in AMD64 the Practical Way.

Commentary on an article comparing Intel's Vanderpool with AMD's Pacífica/Presidio, a bit heavy.

Stupidities of Microsoft

Note: this is an "index" post, which will grow as long as I find material to include.

Curiosity #1:

According to the official Microsoft FAQ on XP x64, unbelievably, the 32 bit drivers reside in a folder with 64 in its name: SysWOW64 (System Windows On Windows); but confusingly enough, the 64 bit drivers reside in... System32 (!!)

The reason is that Windows is such a pathetic operating system when it comes to security or organization, or for that matter anything that mundane users don't see directly, that it allows everybody + dog (including viruses) to mess with the critical system files. Thus, along the years, the practice of blatantly and carelessly writing to "System32" without a system call check meant that now that the fixed name stuck and can not be changed. But since a 32 bit driver can not be just run on a computer at 64 bits, but on top of an emulation layer (WOW64), they have to be identified, and are therefore susceptible to be moved by the OS to another place.

This is a excerpt of that link:

Q.	What is the SysWOW64 directory?
A.	The \Windows\SysWOW64 directory is where 32-bit system files are installed. 64-bit system files are in the \Windows\system32 directory for compatibility reasons.

Also, this is nice to be seen officially acknowledged:

Q.	I have an Intel x64 processor, but my copy of Windows XP Professional x64 Edition has an \amd64 directory, but no \em64t directory. Did I get the wrong version?
A.	No, you got the right version. Because the Intel and AMD processors are binary compatible, they use the same version of Windows XP Professional x64 Edition. Since the original x64 processors were designed by AMD, they were called "amd64" processors, and that is reflected in the folders on the CD.

Has AMD bottomed?

In response to a comment by Mike in this blog, I want to get ahead of me for the third time and mention the following:

Mike, I don't know if it has bottomed, it seems so.

Now, I am "going with the flow", I got burned by stupidly arguing with the market that AMD was a good investment. Fortunately, I have some months already contradicting myself between what I think about AMD and the stock market, just like I described in my previous posts: Selling short term call options, reducing my shares and almost all of my call options just after the Dell announcement, selling fairly deep in the money calls after the tech. analysts day and the New York announcements, and now also buying puts. But lately, I have been "opening" my portfolio for AMD to grow; from the roller coaster that went from current prices to $17.5 and then back I made about $1.1 per share and now my position has a combined delta of about 0.4, that means that every dollar AMD gains my portfolio grows $0.40, and I am waiting to keep milking the shares writing more covered calls for the Dell announcement, thus it may be said that I am bullish.

This is why:

AMD is in a bubble due to Dell coming in and the awareness that Intel new products were clearly paperlaunched.

On top of that, today I was surprised with the depth and the variety of committments and designs for Opterons F, it demonstrates that the market is solidly convinced by AMD and perhaps understands very well the marketing game of bullshit from Intel.

Dell is massive volume. But absolutely every bit of research that I have done lately indicates that Dell is stinking now more than ever before. That company hasn't done a single thing to improve, on the contrary, it has insisted to suicidal degree into fooling the customers with many different fraudulent schemes. I think that Dell is a bitch from which AMD should benefit as much as possible short term to dump it as soon as possible, long term, Dell is a liability.

There are a lot of questions to ponder about the significance of the Dell deal. A short list:

1) is Dell receiving the best pricing AMD has given, better than Sun Microsystems or Hewlett-Packard?

2) is Dell going to switch wholeheartedly to AMD due to the preferential treatment Intel is giving to Apple?

3) Do Intel yields and production schedule stink so much that Dell now is forced to do AMD deals even while probably not receiving preferential pricing?

4) Are there even graver concerns about "Core"?

5) Is Dell's presence going to allienate much better partners such as Sun Microsystems and H-P?

6) Is it possible that Dell, through their business practices, will erode the building reputation of AMD?

7) Is the deal compromising in any way for AMD?, some have said that the ATI purchase was a Dell requirement, if so, and Dell retracts, AMD may be left with ATI's debt and an allienated nVidia going to the arms of Intel.

This is the most important thing: This deal was in the making for years and years, now that we all believe that it is to be announced, we are clueless about how good for each party it is; thus I wouldn't be overly optimistic. I am loading some Puts and covering any written calls this week (my form to go long in a spread for AMD since I almost always have written calls, thus covering them has a similar effect to going long on calls for other people).

On the other hand, there is the issue of the ATI purchase itself. That's a tough nut to crack for me because I wasn't tracking nVidia/ATI and the GPU market in general; but I will venture to say that AMD didn't *need* to buy ATI, with a joint venture would have been enough. Of course that the joint venture has some issues, that I think could have been resolved, but this deal is bad because instead of enticing nVidia to do the same as ATI, that is, to participate in an exciting joint venture with the hottest processor company, it is jeopardizing excellent initiatives for AMD such as the nVidia Business Platform that specifies AMD processors and gives nVidia very good reasons to rather partner with Intel now that AMD will be a more direct competitor.

I think that Wall Street somehow knows that the deal is not good for AMD, and is using its leverage in the financial media to give it as good press as possible so that both companies approve the deal to fill their coffers (remember that everytime one of these major mergers a lot of investment banks and Wall Street in general makes billions, literally) and then the reality of a not so good deal will sink in and the stock take the hit. Remember what happened with the ultra hyped Compaq purchase that catapulted Carly Fiorina to the celebrity status and a possible Senate candidacy to end up in tears.

There is also another reality operating: AMD is not able to do $0.40 in earnings per share in any quarter. Look at the latest Rahul Sood post:

We anticipate that our high end desktops will transition from 100% AMD to around 50/50 with the possibility of more growth from either side. This should give you a good idea of where the high end market is going.

Think about it: with 5% FED interest rate, the EPS multiplier for the stock market should be around 17x, but AMD is *very* volatile and risky, especially now because of ATI, thus expect a significant discount in the multiplier for that, although of course, AMD also is growing, which deserves a premium. I just think that 17x is ok. for AMD, predicting about an annualized earnings per share of $1.2 you have $20.40 per share.

I keep researching intensely about the shift from uniprocessor servers to multiprocessor servers that AMD singlehandedly is creating, because in two processors and up AMD is simply unbeatable for quite some time, but I don't see this market to grow so fast as to compensate the full effect of "Core" when Intel manages to produce enough.

I keep seeing too much optimism about the 65nm; I have reasons to think it is not as "hyper" as some expect, thus it is going to be very tough thing for AMD to make every dime, but still possible.

This is not a time to conclude anything, it is a time to observe attentively, diminish the risk in your portfolio and be ready to jump at the opportunity if it shows itself with clarity.

Sharikou's denounciation of Western Civilization

I just had a hard laugh thanks to Sharikou:

http://sharikou.blogspot.com/2006/08/matrix-interpretation.html

He basically says that the whole western civilization is smoke and mirrors, being the media the apparatus for the massive delusion of freedom.

Well, very understandable social comment coming from the most active "media manipulator" in the AMD blogosphere. Read Sharikou's posts and you will see manipulation in the form of systematic bias toward his points of view, disregard for his mistakes and disregard for evidence contrary to his beliefs; actually a parallel universe.

I guess that Sharikou wouldn't understand what credibility is, that's why his denounciation is so laughable.

But I can agree with Sharikou in that there is rampant manipulation in the modern world, that's why I realized early this year that us, the little "retail investors" only have each other to help us navigate the turbulent waters of the big shots pulling the strings in Wall Street. Among those lines, inspired by the torrent of links, information and commentary that Sharikou poured on the community, I thought that if each of us could replicate to our capacities that effort, then the quality of the information would overcome the manipulation. Eventually, I felt that Sharikou's blog was over the top, and withdrew my endorsement.

To my satisfaction, the community of AMD investors who gathered in the Yahoo message board has proved to be beyond the attempts to manipulate it: I see a lot of active members of the comunity still posting on every phase of our cycle: The climb to $42, the debacle to $17, etc. When Yahoo decided to come with this dreaded new format, our community simply moved out to "Ireland" in an eyeblink (there is a wonderful link: http://tinyurl.com/pg8um). The community first fed itself up of the mindless pumping of "Hash", and then also progressively ejected Sharikou for his lack of credibility. I was also, to a degree, put to the test after my diametral change of stance on AMD. I am Ok. with people not trusting me as much as before, it is only natural after such sudden and drastic change of opinion, but I hope that the same good qualities that allowed the community to eject true "positives" of mindless pumpers will eventually recognize that I am a false positive of a basher.

This humble effort of mine at least is guided by principles such as transparency and honesty, that's why I am so proud of having a growing audience of unmet friends that remains even after the change of stance. These pages remain open to post criticism and contrarian opinions, I will keep trying to answer the best possible way to at least what I feel to be the most intelligent posts, no matter if contrarian or in agreement.

I think that these words to a degree disproves Sharikous thesis, they may not reach mainstream, but I guess that they produce an effect of de-manipulation on readers. In the mean time, what Dr. (?) Sharikou fails to understand is that Western Civilization, or Western Democracy, is ultimately what people makes up of it. It is indeed possible to create environments of meritocracy, such as our message board community.

If you liked "The Matrix", I would advise you to download and watch the awesome Open Source short movie "Elephants Dream" and come by to leave a comment about it.

More on Sharikou's ramblings

This is a continuation of "Sharikou's dennounciation", article which should be read before this.


Sharikou presents his interpretation of "Matrix Revolutions" as "authoritative", in his typical arrogance. He is so arrogant that he resembles a cartoon character, Syndrome of "The Incredibles", with his frustration of not being a true super hero (a successful investor), and the bitterness of having been rejected (his lost credibility), also his incapacity to understand that not because he wants it so badly then what he writes is true. That strikes me as kind of funny when I disregard how pathetic it is.

After his un-especial interpretation of "MR" he goes on in full-fledge political and social commentary displaying his precariousness, thing that also made me laugh, you know, the blatant ignorance in a loudspeaker arrogant voice.

I am not a Ph.D., but I will try to comment on the subject with my sub-masters degree credentials and you be the judge if Sharikou speaks with a higher quality that may indicate that his claimed Ph.D. title is more than a cereal-box-conferred one:

I am a researcher in Artificial Intelligence, thus I have come across the philosophical question of "Hard" Artificial Intelligence versus "Soft" A.I., that is, the discussion of whether mind and thinking are deterministic physical processes susceptible of being completely formulated and therefore emulated by a computer, or "Soft", that is, stochastic. It is important the distinction, because if mind were "Hard AI", then it will be guaranteed that eventually there will be computers smarter than minds, but if the mind is soft AI, then there is the chance that our brains have some sort of peculiarity that would prevent them from being emulated in computers. For instance, the monumental work of the great theoretical physicist Roger Penrose in "The Emperor's New Mind" attempts to demonstrate that mind includes quantum processes not possible to be emulated by digital (actually universal turing machines) computers because of fundamental reasons. (I don't agree with Penrose, by the way).

Then, there is the issue of the incompleteness of logic. Kurt Gödel demonstrated that no mathematical system can provide the tools to demonstrate every truthful assertion, that is, there are mathematical theorems that require to go beyond what the formal system provides with a bit of "intuition" to demonstrate. From this, the opposers of Artificial Intelligence say that logic is incapable of encompassing intuition, and in a failed logical implication, they say that computers being supposedly logic can't evidentiate intuitive behaviour, dismissing the fact that stochastic processes such as what occurs in neurons are replicatable in hardware.

If you accept that Artificial Intelligence is possible, then The Matrix is possible, that is, a simulation so perfect that minds can not tell the difference between the simulation and reality.

Now that the world is shifting to Quantum Computing, it has been proposed that quantum computing is viable only because the Universe is a quantum computer itself. If the Universe today is a state on the execution of the quantum configuration (program) in a quantum computer, then it is clear to consider the posibility that we are a simulation.

By the way, an English medieval philosopher (sorry, don't remember his name) got to the conclusion that we are thoughts in God's head, I sort of remember that since that philosopher subscribed to the idea that change is not possible (Zeno's paradox), the only way he could concile the illusion (for him) of change was that we were thoughts. It would be the same thing to say that God's mind is a computer.

Speaking about thinking, René Descartes summarized in "cogito, ergo sum", "I think, therefore I exist", or my interpretation: "since I am capable of doubting my existence, I am not a "nothingness", and I have demonstrated my existence" that even if we are a simulation there is a loophole: to doubt of true (real) existence, which leads me to think, Turing's test withstanding that if Zion's simulation is so perfect as to make it indistinguishable from reality, then it is demonstrated that it is a reality. But I don't remember much about "MR", so I will leave it at that.

It is important to mention that if a simulation is undistinguishable from reality then it is reality, because Sharikou's Western Civilization's Matrix is not provable to be false. That is, there is no evidence to demonstrate that Sharikou is wrong: If you keep throwing evidence at him of democracy, and freedom, then he will just reply that the simulation is so good and pervasive; but if we are content with degrees of satisfaction of those principles, we may see if there is enough evidence to call something a democracy, or freedom, or not.

I am a guest in the United States, thus, I shouldn't emit an opinion on whether this polical system is a democracy of free people, or not. I will, nevertheless, mention that my hosts (citizens of this country) tend to take for granted the freedoms that previous generations were able to preserve and expand through dilligent vigilance, and have become, quite frankly, sloppy at that. That is, this country is less democratic, and less free, than what it was 70 years ago, even including the huge advances it meant of broadening the real citizenship to people of other races than just anglo saxon.

We operate in a stock market. It may be full of manipulation, but in the end, nobody forces me to sell or buy at a price that I don't accept, thus, we have but one crucial freedom that allows me to categorically speak of a free market. As in every sort of freedom, success (and its preservation) depends on eternal attentive vigilance: We listen, we read, we see what Wall Street says, but always should do our own Due Dilligence, which is to corroborate the facts (or the data accepted as fact) by ourselves as much as possible. We should mistrust the companies we own, read their filings, inspect the actions of our managers (that is, the managers of our companies), watch the watchers, that is, make sure that the S.E.C. does it job, demand objectivity and truthfulness from the financial media, etc. That is the way to preserve freedom and democracy, if we fail at that, as simple as that we lose them.

And by the way, it is not individualism. How is it possible to accomplish all of the above? Only by partnering. If you have read this far, chances are that you got to know about this blog through the AMD investors message board, thus you may already have a fundamental understanding that the secret to the protection of my liberties lies on the protection of the liberties of others, and everyone.

I hope to have sounded very different to Sharikou, not only because we have exactly the opposite opinion, but because he speaks with comical arrogance about subjects to which he displays equally comical ignorance.

The Case For Virtualization

Part I

I read yesterday an article, EMC Becomes 'Virtual' Target by our old "frenemy" Bill Snyder of "thestreet.com" about Virtualization that inspired me to keep developing the subject for the blog.

Before getting into Snyder's article, I would like to restate some of the reasons why the topic of Virtualization is gaining relevance among technology investors and technologists. The reader may like to know that I have previously dealt with the subject in "Pacífica versus Vanderpool" and "AMD64 Practical with XP64 + VMWare Server", but I guess that I failed to justify why it is so important. Thus, if you are new to the subject, begin here. Mind you that I am not an expert in the subject, just an enthusiastic user.

What is virtualization?: A modern computer may "multiply" itself as many different computers running concurrently in the same hardware, that is, the same hardware may host different computers, so different, that they may be running different operating systems such as Mac OS X, Windows, and Linux and all. In VMWare's classic terminology, there is one computer running either Windows or Linux in which you install VMWare and convert it into the "host" of as many virtual computers (guests) as you choose. To accomplish this, VMWare is an application that simulates the different computers.

The top two providers of Virtualization technologies are the company VMWare, who offers free of charge an hypervisor (application that hosts the guests), VMWare Server, that may be installed on either Linux or Windows; and the Xen project, Open Source (and free of charge, of course) that runs on top of Linux. To ease and deepen the reach of virtualization, both Intel and AMD have developed extensions to their microprocessor architectures, AMD did "Pacífica", a more complete solution, and Intel "Vanderpool", which is harmed by the non-existence of an integrated memory controller. I don't know so well about Vanderpool, but if you want to take my anecdotical word for it, I fail to perceive performance differences between virtual computers running on top of my AM2 processor and the native "bare hardware" real computer. Microsoft is also getting into the fray preparing a repertoire of technologies relating to Virtualization.

From the perspective of a common day-to-day user, Virtualization is a really helpful technique:

1) Allows to run old operating systems (legacy) with those very old applications that don't work anymore in Windows XP and the like.

2) Allows to incredibly toughen the security of your Windows OS. Most friends I have are utterly unaware of how easy is to contaminate with malware a Windows computer and also are utterly misled on the impression that antivirus software, personal firewall, or even the Microsoft Updates will really help them protect their configuration and privacy. With regards to antiviruses and firewalls, they don't correct at all the problems, sometimes they just obfuscate the system making it harder to detect activated malware, and they stupidly deccelerate the computer for nothing. Regarding Windows Updates, nowadays they are so concerned with piracy that some actually send information about the computer to Microsoft, that is, they are spyware themselves, only that "officially sanctioned" by Microsoft. Question: Who's computer is your computer, Microsoft's or yours?...

Seriously, Microsoft Windowzes have more security holes than a colander because there are many reasons, including Microsoft business reasons, for those holes. That is subject for many posts, but follow this lead if you want to know more about the subject.

What can be done, then? A clean windows system is relatively protectable. This can actually be done if you reduce your host computer to the bare minimum needed to host the virtual computers at top speed, eliminating the great mamajority of the hooks that malware exploits to infect your system, and then defer the work to virtual computers. In my host computers I tend to do the following:

• To only install the Operating System,
• the bare minimum of services,
• to break the Internet Explorer on purpose,
• not run nor install an antivirus, nor any non-open source software, including not installing printer or scanner drivers; with the exception of VMWare,
• and never run on user accounts of adminitrative privileges but to really do administration.

Then, on VMWare, I create virtual machines to do these kinds of tasks:

• Web Surfing
• Video, Audio and Photographs editing and transcoding
• Software Development
• Network Administration
• Printing, Scanning, and installing other device handlers
• Nasty stuff such as software trials and dangerous experiments such as resizing an NTFS partition in KDE's QTParted.

All in different operating systems, working simultaneously in the same hardware.

Then, if any of these VMs is compromised by an operating system problem, a mistake, a virus, or whatever, the Virtual Machine acts as a sandbox in which the problem keeps contained without damaging the rest of my whole system. With the help of the host and other virtual machines, I can audit very deeply what may be wrong in any particular virtual computer, and learn a lot about misbehaving applications, viruses/worms/spyware in incubation, etc. In the worst case scenario, I simply go back to the latest known safe snapshot of the compromised virtual computer and keep doing business as usual in five minutes.

3) With that palette of VMs available, in any given moment, I fire up, "awake", the configuration for the task I want to do. Since it is possible to have open, "alive", as many virtuals as desired, I don't experience limitations on the tasks that I can do. Moreover, since the virtual machines are ultimately files in a harddrive, I can, through my 1GBps network, fire up a virtual machine in any of my hosts; thus, it really doesn't matter which physical computer I am using, I do the work exactly the way I like in the environment that I customized to my tiniest desire with the same virtual machine but running on a different host. This is "portability", and also reliability: If a catastrophe happens to a host, it is trivial to make its VMs to run in another.

4) It helps to consolidate: A large organization that provides many different services may need to multiply by every service its hardware and maintenance budgets. But since you can put toghether in the same computer partitioned through virtualization all of those services, configured to the exact specification that the application providers recommend, you slash the proliferating expenses of many computers to the expenses of only one powerful server. For AMD investors this issue is key, because Virtualization is by far the best excuse to go up the scale of the server: One dual processor to do the work it takes two single processor servers, one 8-way machine (with 16 or soon 32 cores) to do the work of 8 single processor servers. Intel, since quite frankly doesn't scale at all, and can't possibly be up to the robustness of the Pacífica (AMD-V) virtualization, is totally excluded of this market in fast growth.

5) It helps with efficiency too: Having many emulated different computers each with an operating system may seem redundant and inefficient, but in the end I have seen the opposite: For instance, since security, and other services are provided by the host and other VMs, I tend to install very thin and specific VMs. I install things like a mere Windows 98 Se stripped of everything non-essential to do web browsing, multiple computers who share a virtual read-only harddrive with the same configuration for applications (especially useful for Linux guests).

In the Windows world most applications assume too much about the computer. Some are as abusive as to demand administrative priveledges not only for installation, but for mundane usage. That's why most users introduce security risks in their computers without even knowing. Have you heard of the Sony rootkit scandal discovered by Mark Russinovich (see this article)?, well, that rootkit got installed when the user put one of the music CDs infested by Sony, regardless of whether the user didn't accept the terms of use (of course that the rootkit required the user to be running on admin privileges, but that's a digression on a digression). But some applications do not work if you don't completely disarm the security of the computer. For those applications, the sandboxing that VMs provide is ideal. Also, some applications, perhaps legitimately, prefer to have a very specific computer configuration, there the VMs also are ideal.

I have an example, my VM for video transcoding: I install there any codec that may do the job with total disregard for the security, in the end, I won't have viruses in the resulting XVid videos, but I couldn't do that with a "real" computer with other applications; thus I see a lot of *synergy* that improves efficiency. Don't tell anybody this secret, but I guess that you can install trial software in computers that "go back in time" and never expire the trial, especially if the computer doesn't have a way to connect to the internet... because it is virtual...

Like I was saying in #4, Virtualization demonstrates that the market is as performance-insatiable as it ever was, because it makes it practical, easy, to do "megatasking". My friends laugh when I tell them about the setups I have at home, they say that most of it is overkill. Then, one day they get to my place, and experience firsthand all the comfort and productivity that I get from my setups; then the next step is to ask me to help them do the same at their places. One of the primary reasons for my HW expenses is to get the most of virtualization.

See at the bottom of this article the "links to this post section" that provides the forward link for the Part II.

Sharikou's dennounciation of Western Civilization

This post has a typo in the title, the article was moved here:
http://chicagrafo.blogspot.com/2006/08/sharikous-denounciation-of-western.html
I hate of blogspot that you can not assign yourself the permalink of articles, so if you modify the title you have to lose the original link

Derivatives Primer

[
Extra-article comment:
Hello Friends. I am publishing this draft because I want to give to the loyal following a hint of the glut of articles for the blog I am working on, I haven't finished any because I am researching on many different subjects, I have been busier, and the articles are though, those that require extra effort and that I am proud of. Since this is a work in progress, I am not announcing it, but allow you to see it. Expect potentially substantial changes before I delete this notice
]

The Options Strategies Thread.

Part #1: A primer on Derivatives pricing.

Before describing the workings of the Angelwarewest-Asatru Skald-Knapper Tech-Chicagrafo money pump, it has become clear that the effort wouldn't provide much value to the audience if I don't explain the highly technical fundamentals of Stock Options and Derivatives first. This may be basic for some people, if that is the case, please, try anyway to read this article to post a comment that may be useful for the rest of the audience.

Words of caution are necessary: The Stock Market attracts the very brighest of the people able to understand the sophisticated concepts and issues of financial analysis; it is very tough already to be "smarter" than the market just picking with a modicum of consistency which stocks will go up and down; with options, where you multiply the risks by an order of magnitude and the technicalities are perhaps daunting to even bright investors, the chances of losing everything by getting into too deep waters are very high. It worries me deeply that I have friends and acquaintances in the message boards who regularly trade with options without thorough understanding of derivatives concepts. That is like playing with nitroglicerin. I guess that beginning with the fundamentals I will facilitate understanding of the dangers about hedging or speculating with options. If you think you know a lot about this subject, I reiterate the invitation to keep reading. If something surprises you, please, leave a comment. I myself discovered quite a number of misconceptions I had when I undertook the task of seriously studying options.


First, Derivatives:

I guess that those who trade options want to make money off them. Just as it is important to understand when a company may be over/under valued, it is important to be able to assess the right price of derivatives. In the case of options, it is also very important to understand their "wasting asset" nature: In the case of shares, if you are right about your evaluation of a company, you can go long/short as long as it takes for the market to agree with you; but with options, you not just have to be right, the market has to agree with you quickly enough, otherwise your options will be accumulating losses until they are either worthless if you went long on them, or costing you a fortune of you went short. Then, it is also very important to be able to accurately understand how the options time-decay. As if that wasn't enough complication already, in the case of shares, there is only one price, only one bid/ask pair; but in the case of options there are three more dimensions: Strike price, expiration, and role (whether to go long or short, they are not symmetrical), forcing you to compare among different competing views on the same underlying.

Replicating Portfolio

A Stock Option Contract is a "proxy" for the underlying, it is an instrument that allows you to control 100 shares. If you can do the same that an option allows you to with shares and cash, then the price of that setup (portfolio) is the price of the option.

There is a grave misconception rampant: The pricing on a derivative does not has to do with the expectations of the underlying to go up or not; it only has to do with how expensive it is to replicate a portfolio that simulates the gain curve of the derivative. Let me explain it this way: If AMD is going to go up almost certainly, with almost no chances of going down, that will not affect the price of the options, the price will be affected only if the share price itself, the underlying, goes up as a result of the expectations. That is, the expectations may only indirectly affect the derivatives prices if they are priced into the underlying.

To replicate a portfolio that will behave like the derivative you must take into account the cheapest interest rate, which is the risk-free, or the government bonds because goverments can not declare bankruptcy.

Without going further, a dummy example: Suppose a stock price currently traded at $100 will be priced either $125 (with probability 65%) in six months, or $80 (35% prob); and the stock will not have any other prices but $125 or $80. Suppose that the "risk-free" interest rate is 5% yearly.

Let's price a $100 strike price six months to expiration european-style call option on those shares.

No options-pricing calculator that I know of will tell us a price for that option because the shares are weird in the sense that they will have only two possible prices in two years, but we still can find a methodology to price them. Let's analyze the value of the option at expiry:

• If the stock moves to $125, the value at expiration of the option will be $25.
• If it goes to $80, its value will be 0.

Suppose that it is possible to replicate those cases with a portfolio of shares and cash. The price of the option would be the cost of replicating it with shares and cash. So, let's find how many shares and cash replicate that option:

X is the amount of shares, and Y is the amount of cash.

From the first case, that the price goes to $125, we have:

(1)X*$125 + Y*SQRT(1.05) = $25 (the cash will grow 5% per year, or SQRT(1.05) in six months)

From the second case,

(2) X*$80 + Y*SQRT(1.05) = $0.

Substract (2) from (1) and

(3) X*$45 = $25, thus X = 5/9 shares. And substituting, Y = -5/9*$80/SQRT(1.05) = -$400/(9*SQRT(1.05)) ~= -$400/(9*1.0247) ~= -$43.37

That means that going long on 5/9 shares and borrowing at risk-free $43.37 I will have a portfolio that will give the exact returns that the call option would give, thus, the call option price should be ~ 5/9*$100 - $43.37 ~ $12.19. Notice that it is irrelevant how probable the up or down case are.

Another example: A put option, strike $200, one year expiry:
Case it goes up to $125, the value of the put would be $75, thus (1) X*$125 + Y*1.05 = $75;
Case it goes down to $80 (2) X*$80 + Y*1.05 = $120
X*$45 = -$45 <==> X = -1, Y = $200/1.05 ~= $190.48:

Shorting one share and putting $190.48 to grow at 5% per year the portfolio gives the same returns on both cases, the portfolio has an initial value of $190.48 - $100 = $90.48, that is the appropriate price of the put option.

Risk-Neutral approach:

Do you see that as long as the replicating portfolio gives the same returns as the option in every case, then the probabilities of every case don't matter? If they don't matter, we can assign "probabilities" that suit our calculations better. Let's say that the expected return of one share is the risk-free rate, that is, $100 initially will become $105, thus, being p the "probability" of the stock going to $125, $125*p + (1 - p)*$80 = $105 <==> 45*p = 25 <==> p = 5/9. "Plugging" the probabilities into the put option cases, E(Pp) = 5/9*$75 + 4/9*$120 = $(375 + 480)/9 = $95, with the risk-free discount of the investment, dividing by 1.05, we have $90.48, the same price (!).

We have seen so far that

1) The derivatives are agnostic with regards to the expectations on the underlying,
2) the risk-free rate is essential to price the derivatives,
3) we may assign fictitious probabilities for the cases just assuming that the underlying will appreciate according to the risk-free rate, and those probabilities allow to price the options.

The next step to make the pricing suitable for real life options is to assign (fictitious) probabilities to the infinite number of cases for the evolution of a stock price. The intelligent reader may construct a procedure, although laboriously, to price options in cases in which the next price is a bifurcation: for every two contiguous final prices, you can price the option for the previous step, and use those values to price the preceding step, until the current period, that's the "binomial" method.

But in real life we don't have bifurcations but jumps of random magnitude. For practical purposes, we can assume infinite end prices. In that scenario, one case is a sequence of jumps and bumps. Just as it happens in many scenarios in which you have binomials and want to transcend to the continous analysis, the binomials transform into "Normals" (Gaussian Bells). Here, the number of "paths" or cases that end in a specific price may be modelled as following a "Normal Random Variable" distribution, but of course, not normal in the price of the stock, because there can not be negative prices, but in the logarithm of the relative price variation.

A stock traded initially at $10 that ends up at $100, appreciated 10 times, the (natural) logarithm of this relative variation would be 1, if it crashed to $0.1, 1/100 of the original price, -10, if it remained flat, 0. Taking the logarithm of the relative variation also conveys the true nature of investment: exponential.

To complete a description of infinite cases that we will take into account to price options, we may need a fifth ingredient (the others are Stock Price, Strike Price, Time to Expiration, Risk-Free rate), the volatility of the variations of the stock price

With those five ingredients, Fischer Black and Myron Scholes cooked "The Pricing of Options and Corporate Liabilities" in the excellent year of 1973 (because it brought "Yours Truly" to this world!), just a month (May, of which I am harvest of) after the Chicago Board Options Exchange opened. Both epoch-defining moments eventually enabled the whole market for options to be as liquid and developed as it is today.

The complication with the Black-Scholes model is that it requires differential calculus to be understood. As a matter of fact, if you don't have solid understanding of that subject, you would do better staying away from options because you won't be able to detect when the theoretical price is not adequate, won't be able to compare among different strike prices and expirations, and worst of all, you will be utterly incompetent to choose the right expiration times for the options that suit best your strategy.

If you object that the market will price the options for you, then you are very wrong. Not even with a stock so profusely traded such as AMD there isn't enough liquidity in the options market, thus the spreads are high and the prices are susceptible to distortion: The number of investors who regularly trade with options is insignificant compared with plain shares, and the options trader has not only a company to choose, but literally hundreds of options, so the already small liquidity is spread hundreds of times thinner. I don't want to deviate from the main subject, but I have made a bit of a living lately scavenging for minor distortions here and there in options pricing; thus I have first hand knowledge of how easily ignorant option players are losing their money, but not only that, I know that I am making mistakes due to incomplete understanding that the real "Pro"s are taking advantage of.

The next article will get into Black-Scholes to finish the Part #1

P.S.: This approach to explain options pricing was imitated from the book "Investment Mathematics" by Andrew Adams, Philip Booth, David Bowie, and Della Freeth; "Wiley Finance". I don't dare recommend this book, because I don't know nothing about books that cover this subject; while I was looking for a way to explain things about options, I just took the first book on the subject that crossed my path, which was this, and replicated the approach because it made sense to me. I learned in a very dis-advisable way: Googling every concept until I understood enough. If possible, don't make the same mistake.

Amazing Week

Hello Audience!

Ever since I posted "Sell AMD" I've had very intense days, in the following weeks you will hint for yourselves how much, because I will be posting the many events here.

First, it was the period of pre-earnings for Intel in which I had a significant bearish position, which coincided with the period in which I had to receive your criticism for my change of stance, its suddenness, etc, and to reply to that responsibly.

Then, Intel reported, and the following day, I made this mistake in (supposedly) "AMD gains revenue share", and had the embarrassing bad luck of having been corrected thanks to A1 in the blog, and still, unaware of the correction, being fooled by my own calculations to cover my written calls at a loss of $100 each only to lose even more money thanks to AMD results. Remember that I couldn't just sell my shares, my investment strategy, although demonstrably bearish on AMD, includes going long in shares, but of course, this "last opportunity" of going long without the cushion of written calls made me lose.

AMD reported, I had to trade furiously on Friday to fully implement my strategy, in particular buying LEAPS puts, and while doing that, SLAM! the rumor of ATI broke.

Then, the whole weekend I had to do a *lot* of homework to finish setting up the "Angelwarewest - Knapper Tech - Asatru Skald - Chicagrafo" money pump at the cheapest cost, which involved quite a lot of research. I also shared some of my results in the "Ireland" message board, and discussed with our friends there quite a lot about the mechanism, I will detail the results of my research in the blog as soon as I get to organize all the material in public publication format. On top of that, further analysis about Intel's Everest mountain of inventory,
and AMD's results was meritory.

Sunday night, I found out casually looking at my balance that I was in margin call!, I hope to amuse you with the anecdote as soon as I an put it down.

Monday morning, I had to do a number of trades and listen very attentively to the conference call about the merger, and I have been studying the purchase of ATI. I think that the audience that I have garnered thanks to the technology insights will not be dissapointed with the ideas that I am profiling for publication.

From Tuesday on, I have been catching on with my life, and today, I finally got a chance to update the blog. Keep in tune!

Tendencies

Those who read "Sell AMD" know that I was speaking of tendencies that in my opinion are very clearly defined on the bearish sentiment, but there isn't any part on the article with specific timings, and I forgot to include elements which may revert the trend. Although I sustain the whole article because AMD doesn't have a plan, leaving the company in grave jeopardy, new plans may make AMD a good investment again, just that I don't see that likely having watched closely AMD's management for the last months.

But major events such as Intel's reports and AMD's reports take precedence over tendencies.

Also, you should know that I couldn't "just sell" my shares, because I wrote covered calls and didn't want to expose myself to a violent temporary reversal of the trend.

After I saw Intel results, I was able to gauge how good AMD results were going to be for the quarter, thus I decided to go plain long with my shares for the earnings report, covered my written calls, and hope for the best.

Tomorrow, or perhaps a bit later, I will keep implementing the "Asatru Skald money pump" with a bit more of emphasis on protective puts. I also have to describe the details of the "Asatru Skald three-cycle volatility-ripple money pump".

Suffices to say that this is not a "faith crisis", but a rude awakening to the reasons why AMD's stock price went to less than a half.

AMD gains 0.9% processor revenue market share

Update: I made the grave mistake of not accounting for the 14 weeks; thanks to "A1"'s comment I awoke to the mistake, although very late.
Originally, it seemed that AMD had won almost a percent. My apologies. This incorrect analysis misled me to cover my written calls under the assumption that AMD gained terrain. I hope that next time, dear readers, I will be able to make use of your help before it is too late for losing money or being publicly embarrassed for so long. "A1": No, AMD didn't lose revenue share either and thanks for the tip.

According to Intel's report
Microprocessor revenues (Digital Enterprise Group + Mobility Group) are 3.338 G$ and 1.958 G$, or 5.3 G$.

AMD's revenues are 1.22 G$ in 14 weeks, for a 13 week equivalent of 1.133 G$

The combined revenues (13 week adjusted) are 6.43

That means that the revenue market shares are 82.4% and 17.6% now.

Since Intel comes from Q1 (DEG + MG == 3.892 G$ + 2.347 G$ == 6.239 G$, it experienced a decline in processors of (62-53)/62 or 14.5% (by the way, Intel ceased to receive almost one billion dollars, 4/5 of total AMD revenues).

With these numbers, we can see that in Q1 the revenue market share was Intel processors 6239 to 1332 AMD, or 6239/7571 to 1332/7571; 82.4% to 17.6%.

Surprisingly, the proportion remained the same.

Pre - Conference Call

This quarter AMD will present about $0.29 EPS, substantially more than the $0.22 average the analysts expect.

But I am not sure that the surprise will matter. Last quarter, AMD also beat expectations, very well between guidance despite Intel's furious dumping, and yet the stock price slid 15% the following days, until the Dell announcement.

I have been thinking why AMD sells off after good concrete news, perhaps it is that the investors are holding counting on the news, the news come, but there is no reaction, and then they sell. For investors, AMD hasn't had an exit point, a period to reduce the interest on AMD for more than four months now, after significant events such as the earnings report, it is natural to not want to wait any longer.

Then, there is the issue of Intel promising to take over the world with Woodcrest/Conroe/Merom, the evident interest in Woodcrest processors, and most Wall Street analysts wondering whether the gamble of betting the whole company in the premiums of multiprocessor servers and the volumes of scarce profits that Woodcrest/Conroe/Merom and Pentium 4 dumping will leave for AMD uniprocessors.

I don't expect "an answer" to neither Conroe nor Woodcrest, if at all, to Merom with the new mobile architecture expected to debut one year from now.

Going back to the $0.29 EPS, further declines next quarter, and perhaps a "flat to slightly down" Q4 means less than $1.25 per year. At the current interest rate, the P/E multiplier should be about 17 for low risk stock market investments, think about it, $1.25 EPS at 17x P/E multiplier are $21.25 per share. But AMD is not a sure investment. So far, AMD has been growing and that's why it has been receiving far larger multipliers. But, will it keep growing?

Yes, AMD has much greater production capacity. Sad that it lost all pricing power in every uniprocessor segment.

Sell AMD: My best advice

[Updated 2 times]

Time to sell, folks.

[Update]
A brief summary:

Ever since the Athlon, AMD has had the best product. All of today AMD plans assumed that they will keep having the best product. But Intel comes with Conroe, and there is a split between Mobile/Desktop/uniprocessor server and multiprocessor server best processors. So AMD plans are not valid and a contraction comes.
[/Update]

A not so brief summary:

Intel's new products will outcompete dramatically every single processor AMD offering. Extra multi processor server profits for AMD due to the excellent growth in that segment can not compensate the obliteration of the comparatively huge profit volumes of single processor systems missing. With such cut in revenues and especially profits, AMD's plans to finance capacity expansion to bring more economies of scale will be stopped, and probably also its ability to come with improved products and catch up to Intel. On top of that, it seems that indeed the market for computers is commoditized and weak; with the aggravated factor of Vista probably coming making emphasis in 32 bit computing.

This competitiveness stumble was completely un-anticipated by AMD's management, which was even dismissive of the threat this represents. Thus, either management made a great mistake, or misled on purpose, so it doesn't deserve further faith.

The jeopardy is very real, because the much deeper underlying reality of Intel's advantages due to economies of scale now have a timeframe to impose over AMD's recent market/revenue/mind share gains until AMD's bankruptcy.

These risks are already very high, which would demand very low P/E multipliers, but worse yet, all the money earned will be reinvested in capacity and technology, in a feedback loop of risk.

As if the previous wasn't enough, the economy is weak, the Federal Reserve is fighting against inflation, energy prices record high and the promotion to nuclear power of Iran and North Korea may precipitate two major new conflicts.

Reasons in Detail:

Current AMD competitive advantages: AMD lags in everything but:

* Processor Interconnect
* AMD64
* The integrated memory controller's help with virtualization
* Partners
* Brand Equity
* And sSOI is merely a tie, at best, to Intel's Silicon Process

What has AMD done with these advantages?

The processor interconnect enables multi processor systems, that we have already stated that are not enough to sustain everything else. Allows for coprocessors, a market that has been slow to emerge, and allows for even graphics 3d engine coprocessors, that not only don't exist, but that merely today the talk about them has began. Thus, the coprocessors are a perdurable competitive advantage, at least until Intel launches CSI, but that will not help the company to solve its current stumble. Scuba diving, I can be happy if my friends promise me an air tank to keep submerged for another two hours, but if I my air ran out, and I have to wait underwater ten more minutes for the two hours tank, I would be dead by the time it arrives. AMD also needs to breathe.

AMD64's technology is mesmerizing. It took the mess that Intel made of x86 and made it elegant. Its implementation is even better. Today, every AMD64 processor is faster at 64 bits than the same program compiled for 32 bits, as it should, without adding appreciable cost to the processor, which is no small feat, opposed to the possibly microcode-interpreted Intel EM64T that is not even supported in flagship (?) products such as Yonah "Core Duo" and Sossaman servers (!). This should have been a cash cow for AMD, but the AMD64 marketing has been preposterous.

AMD agrees with me on its importance, otherwise it wouldn't have implemented it so superbly in the processors from the Sempron on, moreover, according to the latest AMD SEC 10-Q filing:

We must achieve further market acceptance of our 64-bit technology, AMD64, or we will be materially adversely affected.
Our AMD Opteron processors are criticalto our strategy[.] Similarly, our AMD Turion 64 processors are critical[.] Increasing market acceptance of these processors, our AMD Athlon 64 processors for desktops and the AMD64 technology on which they are based is subject to risks and uncertainties including:
• the continued support of operating system and application program providers for our 64-bit instruction set, including timely development of 64-bit software applications and applications that can take advantage of the functionality of our dual-core processors;
• our ability to produce these processors [...] timely[,] in the volume and with the performance and feature set required [...]
• the availability, performance and feature set of motherboards, memory and chipsets designed for these processors, in the volume and with the performance and feature set required by our customers.
If we are unable to achieve further market acceptance of our AMD64 technology, we would be materially adversely affected.

AMD may help or hinder a lot the market to get enthusiastic about AMD64. What has AMD done about it?

I keep saying it: AMD is losing its efforts trying to convince Microsoft to support AMD64. The real way to have Microsoft on board on AMD64 is to threaten it with Open Source and Linux competitiveness. But AMD is not doing the all-out effort that it requires. So far, practical and pervasive 64 bits has been the sole preserve of AMD, thus every effort AMD would have expent on 64 bit market development would have been reverted in larger markets.

It makes sense, even today, for AMD to identify the projects in which the most 64 bit market development could be obtained by the smallest budgets. Free and Open Source Software, where it is trivial to go 64 bits by just recompiling in most cases, is an obvious choice. It also makes sense to fund projects so that they first provide AMD64 functionality and then 32 bits. Does AMD want to increase adoption of Turion 64 bits? Fund Orinoco with one million dollars to make Linux support all Turion64 wireless chipsets. There aren't that many chipsets, thus perhaps not even 1 M$ is needed; and then, every Linux user will feel extremely enthusiastic about making its default the 64 bits, Linux users will revolt against the limited Core Duo 32 bits, will demand more compatibility, and a whole virtuous cycle of AMD64 acceptance would occur. By the time Intel catches up to AMD, AMD may have biased 64 bits in laptops to AMD64 by extensions that improve power savings, preserving competitive advantages. A project such as this may kickstart a whole ecosystem of AMD64 platforms with the same economics as Centrino, but with variety!

What is happening in reality? that the Linux Turion 64 owner is left on its own. That is stupid.

Beyond Open Source, it is clear that AMD64's marketing efforts have failed miserably, because the whole world seems to think that it is only something related to servers and 64 bit computing, which hides the important benefits of the widened register file.

AMD missed so many opportunities to strike it rich with AMD64 that it gave Intel the chance to finally catch up. And by not putting pressure on Microsoft (through Free/Open Source Software AMD64 support) didn't force a commitment to 64 bits from them, now, Microsoft must be backpedalling with everything it's got about the 64 bits issue: Since Conroes run slower in 64 bits than 32 bits, Vista Premium requiring 64 bits will make Vista to be perceived even more as a computer retardant than what it already is. Why would they bother to port zillions of drivers? And not that they could, the real problem is the lacklustre enthusiasm for doing the Vista 64 bit drivers from hardware and software providers. In the end, it will be much simpler for everyone to patch everything with page address extensions and keep doing 32 bit bussines as usual. That it will suck big time? yeah, but who cares if people buy it?, in three years the complexity of Vista "supporting" 8 GB through PAE will be not a defect, but a feature, or the excuse for yet another Service Pack. I already mentioned this thesis here, I would say that the prediction has been materializing.

In conclusion, AMD doesn't help with the adoption of AMD64, and the market doesn't adopt it. AMD only offers it.

AMD's virtualization technology is another no-small-feat advantage, but even harder to market. I had quite a number of annoyances trying to figure out what is exactly the support for virtualization that AM2 processors offer. I couldn't get to its specification, there were dead links in amd.com, so I still don't know much more about it than earlier in the year when I wrote "Pacífica Vs. Vanderpool"; but being Pacífica much better than Intel's Vanderpool, it made my heart to sink to read the following about Xen, a Free/Open Source Software Project, perhaps the second most important virtualization solutions provider in the world, right after VMWare:

1.4. Does Xen support Microsoft Windows?

The paravirtualized approach we use to get such high performance has not been usable directly for Windows to date. However Xen 3.0 added Intel VT-x support to enable the running of unmodified guest operating systems, including Windows XP & 2003 Server, using hardware virtualization technology. We are working on implementing support for the equivalent AMD Pacifica technology.

So, Xen leverages Vanderpool to run Windows but can't do the same with Pacífica. Ladies and Gentlemen, there is no justification for this screw-up. I wonder if the same difficulty I experience to get hard specification data from AMD to evaluate its technologies is shared by Xen developers. It is absolutely stupid to expend so many millions of dollars into developing, implementing, and announcing to the world the Pacífica virtualization support in AM2 if you fail so miserably at getting the ultra-cheap ultra-important Open Source project to support your technology and thus guarantee its crucial acceptance. It is slightly off topic, but the reason why I could learn so much about the Itanium architecture is because Intel did a wonderful job of making available all of its technical documentation; it also financed Linux, the FSF, and almost everybody doing GPL to the death to get on the IA-64 ship. I very well remember that the first protos of Itanium (Merced), the processor as a board full of circuits, ended up in Linux developer organizations to make sure they could go forward with development. There is no equivalent in AMD's efforts, actually, AMD hinders development with its inappropriate web site.

In the latest 10-Q SEC filing already linked, AMD also mentions the following:

Intel exerts substantial influence[.] Because of its dominant position[,] Intel has been able to control x86 [...] standards and dictate the type of products the microprocessor market requires of Intel’s competitors. Intel also dominates the [...] chipsets, graphics chips, motherboards and other components[.] As a result, OEMs that purchase microprocessors for computer systems are highly dependent on Intel, less innovative on their own and, to a large extent, are distributors of Intel technology. Additionally, Intel is able to drive de facto standards for x86 microprocessors that could cause us and other companies to have delayed access to such standards.

I totally agree: Any tech. company that wants to be innovative can't just be another Intel pushover. That's why they it's so exciting all the possibilities of nVidia, ATI, Broadcom, Marvell, Sun Microsystems, IBM, SOITEC, etc. all joining their combined creativity, market courage, money and channels to AMD's offerings. But perhaps these companies are just the mice having a party when the cat is asleep. With the utter uncompetitiveness of AMD microprocessors once Intel rolls out debugged Conroes, perhaps a shitty Intel integrated video (de)accelerator will cream an nVidia engine, at least in price. The times for a second comming of malignant un-innovative companies such as Dell have arrived. All of a sudden an XPS looks sexy. All it takes is to be a faithful Intel lacay to be "successful" as our textbook example, Dell, shows. Dell doing AMD multiprocessor systems? forget it. Empty promises, Emtpy announcements. The heat is on for the "back to school" season already, if Dell wanted to announce AMD consumer products, what would it be waiting for? Christmas? This is Lucy once again coming back to its true nature.

It is definitely cooler to say "I bought an AMD", but it won't for long, unless Torrenza and 4x4 really catch fire, which I seriously doubt. There are enourmous obstacles to develop software to take advantage of multiprocessing that will not go away soon. Look at what happens in Gaming: An FX-57 has quite acceptable performance, almost as good as an FX-60 that has TWO cores, because it is marginally faster (2.8 GHz vs. the 2.6 GHz of the FX-60). Gaming makes marginal use of the extra core, like 30%. AMD is asking, to justify the extra expense and power consumption, that applications all of a sudden make use of not 1.3 cores, but 3.1, and worse yet, for a technology that only they have (remember AMD64 and AMD-V). Of course that it will provide some enthusiasm, but limited.

This whole post assumes that Intel is willing to do what I said it wouldn't, that is, a real price war. What has changed is that Intel now commands the upper ground. Not just the Conroe Extreme, but the second, and even the third member of the family, the 2MB L2 cache, beat the FX-62. The assumption changes the whole game: Every percent that Intel regains in market share means at the very least, three and a half percents less for AMD. The limited production of Conroes is more than enough to wash out AMD premiums, and the problem only gets worse as we look into the future.

I had high expectations about the K8L, the quad cores, etc. Until I realized that there was a seriously weak issue: The minuscule L3 cache. Why? Because AMD doesn't have the daring to try a multi chip single package processor, in which 4MB or 8MB L3 cache can be put off-chip as the L2 cache in the Pentium-Pro.

Earlier in the year, I thought that AMD was sandbagging with the 65nm schedule, I won't make the same mistake with the processor roadmaps. AMD hasn't crossed the 3GHz, no hurrying of 65nm processors.

I had faith in AMD's management, I thought they had an answer we didn't know about Conroe. But it has been five months since the first serious talk about Conroe, and still no answer, worse, denial.

Leaving everything hanging on the thread of Intel not being able to debug Conroe is not responsible.

I earlier thought that AMD was the leader of a world-changing initiative: To convert the processor monopoly into an ecosystem of innovation. But although that is what they are trying, and had their chances, but the people at AMD are just humans that were caught by surprise.