Intel Rides Mobile Revenue to Strong Q3 Earnings

From E-Commerce News

Bolstered by a 20 percent increase in mobile product revenues, Intel (Nasdaq: INTC) late Tuesday issued a strong third-quarter earnings report that discussed record-level shipments of processors, chipsets and flash memory.

The Santa Clara, Calif., company's Q3 revenues came in at US$10.1 billion, a 15 percent increase on a yearly basis and a 16 percent uptick when compared with the second quarter. Intel reported operating income of $2.2 billion, net income of $1.9 billion and earnings per share of 31 cents.

Additionally, the veteran chipmaker announced gross margins of 52.4 percent for the quarter. Its Q2 gross margins were 46.9 percent and it said the operating income figure represents a 64 percent increase compared with the third quarter of 2006.

Future Looks Bright

"A combination of great products, strong and growing worldwide demand and operational efficiency from our ongoing restructuring efforts," are responsible for the company's performance, President and CEO Paul Otellini said. All signs point to continued growth in the fourth quarter, Otellini said, adding that he is pleased with the results and optimistic about the company.

Intel shipped more than 2 million quad-core processors during Q3 and now offers more than 20 quad-core processor designs, the company said. Company officials are also proud about their position in the server market.

"The biggest shift in the last six months certainly is our ability to participate very aggressively in servers," said Otellini. "The fact that we have record server unit numbers is a very good leading indicator of Intel back at its game across the board, I think. Servers have always been a very good business for us and I think we're outgrowing the industry right now."

Forays Into Mobility

The company credited its efforts to make moves in mobile device processing for being the primary driver of its quarterly growth in revenue. It experienced a 14 percent rate of growth for its Mobility and Digital Enterprise Group processors, while related chipsets and other products gained by 19 percent.

Intel predicts its increased production of 45-nanometer processors and its goal of providing chips for a larger variety of mobile devices will spur year-over-year revenue growth in the 30 percent range.

The company noted its presentations at the recent Intel Developer Forum (IDF), where it announced it will be introducing on Nov. 12 the world's first 45nm microprocessors, units based on its "breakthrough" 45nm Hi-k metal gate chip technology.

At IDF, Intel also demonstrated its second-generation 45nm "Nehalem" architecture, designed to go into production during the second half of 2008, and the production of test chips using the 32nm process technology, scheduled for 2009 production.

IDF was also the venue where Intel said its 2008 notebook platform, called "Montevina," will include 25-watt dual-core processors "that enable even thinner and lighter designs." A number of computer makers are planning to next year build Montevina-based notebooks capable of using WiMAX for Internet access, Intel said. "Nokia announced plans to include Intel WiMAX silicon in its Internet tablet products, scheduled for 2008," added Intel.

Remaining Competitive

Intel shareholders have reason to be happy, particularly because Intel reacted aggressively to competition by designing new products, said Jack Gold, founder and principal analyst of J. Gold Associates.

"Intel is on a new product cycle uptick," Gold told the E-Commerce Times. "The industry is cyclical in a sense. You come up with new products, you ramp up, stay at the top for awhile. As products get little old, you fall. It's a typical business curve."

Intel during the past year "has been doing an awful lot of work getting new products to market and they are hitting now and people are taking notice," Gold said.

Additionally, basic capitalistic competitiveness plays a role, he added.

"Intel got a fire lit under its butt by AMD in the past two or three years," he said. "It was actually good for Intel. AMD right now is on the defensive.'

Tom and Jerry way: Frenemies forever

From The Economic Times

Often used to describe females who tangle with their female friends, it didn’t take long for the term to become part of our contemporary lexicon when the popular HBO series, Sex and the City put it out there in no uncertain terms. Well, we’ve known politics to make strange bedfellows, but it seems that even business is ready to make friends out of enemies.

Globally, whether its telecom, PC giants, media houses, banks, automobile industry or FMCGs, companies are fast learning to be friends with their competitors.

Examples are plenty. Without Intel - AMD wouldn’t exist - yet they are fierce competitors. Toyota is licensing its hybrid technology to it’s competitors in the auto industry.
Nestle sells countless food products to retail - yet competes with it through their Nespresso subsidiary (which sells coffee direct to consumers). Google, a business partner of WPP, competes with the latter in the advertising world. So what gives?

If both are partners and competitors at the same time, it cannot make for an easy relationship . More generally, frenemy also refers to two opposing parties, be it in personal relationships or in larg- scale interaction between nations, organisations , political parties, etc., that are mutually beneficial , yet are at odds to be mutually destructive.

Yet, in the world of business, the terms ‘frenemies’ and ‘coopertition’ , probably capture the real transition happening in the marketplace

Coopertition has been around in the Silicon Valley for a long time now and is the basis for huge developments in the software industry. Says Radhesh Balakrishnan, director, competitive strategy, Microsoft India: “Organisations can create more value for the customer if they come together at a certain level. Customers, today, are using heterogeneous environment. Making it all work together makes it necessary to interoperate.

For instance, Microsoft and Yahoo have made the IM services interoperable, which means that Yahoo users can directly interact with MSN users and vice-versa . However, we would still compete with Yahoo and love to see the number of MSN users grow.”
The frenemy mindset allows companies to come together to work on a specific development effort that helps speed up the whole process and capture value for certain technologies each has developed.

It also allows companies to use the benefits of wide ranging technology solutions while remaining focused on its core technological capabilities.

In fact, Stuart Read, marketing professor at IMD, Switzerland, points out another classic example of how companies cooperate yet compete.

Take Barco and Sony. Barco is into projection systems industry, buys tubes (components) from Sony to build its projectors - and also competes with Sony’s own finished projectors.

Competition to grab the largest market share doesn’t stop telecom giants like Airtel and Vodafone from proposing to share infrastructure or Coke and Pepsi to come together to lobby for their reputations in the pesticide crisis.

”The concept of frenemies or coopertition is becoming an increasingly pressing issue as business systems become more complex and as firms try to focus on only their core competence - outsourcing the rest of the business system to ‘partners’ (perhaps friend - perhaps foe) who have unique expertise. When taken together its easy to see when the environment gets more complex, and firms want to simplify their own role/position the natural outcome is that they have to collaborate with more organisations and some are inevitably competitive,” says Read.

It may be too early to say how encompassing the frenemy tactic will be for industry as a whole, but it’s imperatives are compelling enough.

The growth guru, Verne Harnish, founder & CEO, Gazelles, an outsourced corporate university for SMEs says, “The need for instant and continuous communication, and the power of globalisation, has driven competitors to create industry standards.

This has been an initial key driver for getting competitors to cooperate at the most basic level. For growth firms, they often need to partner with their large competitors, serving as subcontractors on various projects. The large competitor has the market clout; the small competitor has some special expertise.”

Though competition is largely irrelevant in early markets, the basic logic being there is no point competing over something that does not exist. The priority, therefore, is to create it and then argue who gets what.

“IBM and MS who collaborated heavily, 20 years back, to create the PC market, are today, competing with each other,” says Read. They now fall into the broad group of frenemies.

Just as the Internet helped make the nonsensical phrase ‘All your base are belong to us’ a well-recognised piece of the gen-Y lexicon, in a cluttered market segment aimed at an over-stimulated demographic, frenemy as a strategy just might work.

PC Mehra, professor sale and marketing, IMI (International Management Institute) says, “Companies are fighting for shelf space. There is a tough competition not only in product but also among various product categories.

For instance, if a consumer wants to spend a leisurely evening, he has the option of buying an expensive dress, going for a movie, eating at a nice restaurant. The need for collaboration among competitors arises to create the demand within your category. Once there is a demand, companies can compete for shelf space.”

This could mean transcending the flash and fizzle of what is considered traditional competition, which by no means is over.

And that could, after a little inward look.

“The reason companies often need to create external enemies is so they can provide their employees something to rally around - give them a reason to forget their internal challenges and focus on ‘beating someone’. It plays to the competitive juices that flow within people. It was like Nike declaring early on ‘we want to crush Adidas,” says Harnish.

But what will companies have to do to avoid waving the white flag? The answer boils down to balance, says Read. “In the Barco/Sony example - all Barco wants to assure is that it gets to compete with Sony’s projectors fairly.

That Sony components does not give an advantage to their own internal customer.”

Putting frenemy in charge of your strategy also means knowing your rivals really well. “One needs to listen to the customers and understand their demand to identify the ideal competitor to associate with. Also there is a need for an alignment of core values,” says Balakrishnan.

Mehra agrees, “Wavelengths have to match. If the other company doesn’t appreciate the ideas generated by your company, the whole exercise is a waste. There has to be maturity within the brand as well as the people working for it. Then only can the benefits of these alliances trickle down to the customers”.
The neat dividing lines of business are being erased and redrawn.

Dr. Neil Rackham, author of the classics SPIN Selling and Rethinking The Sales Force and a top sales researcher in the world and makes a key point - in the future all the real value gains will be between companies more than within companies i.e., all the action is at the boundaries between organisations.

This means that the way organisations work together is changing, significantly.

The AMD, Intel Duel Moves Up The Scale To Quad-Core Stage

Advanced Micro Devices is joining an exclusive club, makers of quad-core chips.

On Monday, AMD (NYSE:AMD) AMD plans to roll out Barcelona, its first quad-core microprocessor, which will once again ratchet up its bitter battle with archrival Intel (NASDAQ:INTC) INTC.

But more than that, AMD is counting on Barcelona to lift its sales and move it back into the black.

Intel released its first quad core in November, joining the small group of quad-core chipmakers that also includes IBM (NYSE:IBM) IBM, Sun Microsystems (NASDAQ:JAVA) JAVA and Fujitsu. But those latter three make their multi-cores mostly for their own systems. Intel and AMD are focused on one another. And AMD touts Barcelona as a big technology leap over Intel.

"We believe it's the most advanced microprocessor on the market," said Randy Allen, the AMD vice president in charge of its server and workstation chip lines. "In terms of performance per watt, nothing today delivers as much."

Quad-core chips, as the name implies, have four cores, or what can be called four identical chip designs, on a single piece of silicon. This boosts performance over single- and dual-core chips but without any increase in power usage. This is critical for today's computers, which use so many applications that controlling power usage is crucial to keeping machines humming.

On Wednesday, Intel unveiled a line of quad-core chips for servers at a press event in San Francisco. Analysts say Intel's timing was in part to steal AMD's Barcelona thunder.

Quad-core customers, though, for the most part aren't choosing sides.

Among the server makers at the Intel event were IBM, Dell (NASDAQ:DELL) DELL, Hewlett-Packard (NYSE:HPQ) HPQ and Sun. All of them sell both Intel- and AMD-powered servers. Representatives of HP, IBM and Dell told IBD that their companies would be at Barcelona's launch event in San Francisco. AMD plans related events in Beijing and Barcelona.

American Technology Research analyst Douglas Freedman says AMD's Allen overstates the status of Barcelona, but it's a fine chip.

"I view Barcelona as evolutionary, not revolutionary," Freedman said.

He says it's sometimes better to be evolutionary. AMD's Opteron, the first dual-core chip, unveiled in 2003, was revolutionary, he says -- so much so that computer makers weren't ready for it.

That shouldn't happen with Barcelona, he says.

"(AMD's) ability to ramp good and exciting products is a lot better than it used to be," he said. Freedman has a buy rating on both Intel and AMD stocks.

AMD has a lot riding on Barcelona. AMD has lost money the past three quarters, a trend expected to continue in the next few quarters.

After several years of market share gains vs. Intel, AMD started losing share last year as Intel stepped up its product pace. AMD's share of total microprocessor sales has dipped into the upper-teens from nearly 25% early last year, analysts say. Its stock trades near 13, down from 27 a year ago.

Barcelona and the line Intel unveiled on Wednesday, the Xeon 7300, target network servers. One difference is that the Intel Xeon 7300 is strictly for servers and Barcelona is AMD's next big design advance. Other Barcelona chips will target PCs.

Allen says the first AMD quad-core chips will ship near year's end.

Barcelona has a couple of features that Intel can't yet match.

For one, its design is a "native" quad core. That is, AMD builds four identical cores onto a single piece of silicon. Intel puts two dual-core chip designs side by side on a chip, and connects them to form a quad core. AMD says its design performs better.

Intel has said it plans to release its own native quad-core design in the second half of 2008.

Another feature unique to AMD processors is an on-chip memory controller. Analysts say having the memory controller on the processor is faster than having the controller in a separate chip set, as Intel does it. Intel plans to put an on-chip memory controller on its devices starting in late 2008 or 2009.

Intel's new Xeon 7300 quad core, however, has a few advantages over AMD's Barcelona.

For one, Intel's had nine months to work the bugs out of the design, something AMD can't say. AMD had planned to roll out Barcelona last summer but was delayed when it ran into a design problem.

In addition, Intel will start using a more advanced manufacturing process by the end of this year.

Today, both use 65-nanometer designs. Intel will start using a 45-nm design later this year. The measurement refers to the width of the circuitry etching on the chip. The smaller the nanometer size, the higher the performance and the lower the cost of the chip.