13
Aug

NVIDIA Q2 2015 Results Point to a Healthy PC Gaming Market and More

NVIDIA’s reported results for its 2nd quarter, 2015 fiscal period exceeded management and analyst expectations. Based on NVIDIA’s results, the consumer market for PC Gaming hardware looks strong. The results also include a report of substantially larger sales of NVIDIA’s Tegra SoC platform into the automotive market.

The company also guided higher for likely sales for the 3rd quarter of 2015 and pointed to consumer GPUs as its most popular product line. There was no indication of any margin erosion in the near future. Jen-Hsung Huang spoke to very deep strength and health in the global PC Gaming market and likely increases in average sales prices (ASPs).

If one can extrapolate from these results to broader markets, perhaps the global consumer PC market has more depth than would otherwise appear to be the case. These game consumers are an entirely separate segment from business users who, one might argue, have been driving up sales to renovate older sets of Windows XP desktop computers. The NVIDIA results also included mention of the Chromebook PC as one platform likely to experience substantial growth. So-called “Wintel” OEMs (HP, Dell, Lenovo) all have entries to the global Chromebook market. It may make sense to increase expectations for sales volumes for these companies.

A hot PC gaming market may indicate increased consumer appetite for XBOX One and Playstation 4. This assumption looks reasonable given remarks by Jen-Hsun Huang during the earnings conference. He pointed to the release of a number of games, scheduled for later this year, which carry very high levels of consumer anticipation. It is likely these games will be offered not only to PC gaming hardware consumers, but to console owners as well.

Worth Noting: When Matt Ramsey, an analyst from Cannacord Genuity asked Jen-Hsun Huang to speak to the promise of the data center, cloud market for NVIDIA GPUs built on ARM architecture, Huang responded by identifying this market as the most promising emerging market for NVIDIA, going forward, and, further, the market with the best promise of increased ASPs for the business. If they can win here they will achieve an objective AMD has failed to reach.

As we have written earlier to this blog, in our opinion Intel has fortified its position in the Data Center through its support of Hadoop and OpenStack, to the detriment of ARM OEMs.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

21
Jan

Comments on Intel Q4 2013 Conference Call

Intel’s Q4 2013 Earning Report triggered a now familiar pattern of analyst commentary. Pundits focused more on management’s very conservative forward guidance — flat year over year earnings for 2014, continued shrinkage in legacy PC markets, modest gains in enterprise markets, and comparatively larger gains in tablets, and other smaller form factor computing devices — than they did on the reported resilience of this business, which made it through fiscal 2013 with only minor bruises (gross revenues down 1% year over year). Even better, management reported on a greater market appetite for PC computing devices (Q4 2013 actually delivered 2% year over year growth) than I would have expected.

I’m confident Intel will eventually establish itself as one of the most important producers of chips for new mobile devices — tablets and smart phones. In an article titled Intel Inside Your Portfolio? It Should Be, Dimitra Defotis wrote in Barron’s “Intel has invested a cool $60 billion on manufacturing in recent years, and says it will give the company a leg up as chips advance from the current standard of 22-nanometer circuit dimensions to 14 and even 10 nanometers” (quoted from Ms. Defotis’ article, a link to which has been provided in this paragraph). Smaller mobile devices, like the “wearable” concepts attracting a lot of commentator interest, will benefit from these smaller circuits. Consumers will also benefit: Smaller circuits are less costly to build than are their larger siblings. Bottom line: I’ve invested in Intel in the past and am bullish on their near term future.

I would point to one other set of data included in the presentation, which I think anyone appraising Intel’s near term future fortunes should consider: Intel ” . . . saw strong tablet growth in the back half of the year, and inclusive of PC and tablets, [Intel’s Tablet] unit growth in the fourth quarter was up almost 10% from a year ago.” (this quote is excerpted from Intel’s CFO Commentary on Fourth-Quarter and Full Year 2013 Results). The Atom processor is doing much better than almost anyone would have expected. Dell’s Vue 8 tablet appears to have done well during the 2013 holiday shopping season. HP, Lenovo, and Asus each have their own entries in the same tablet device category. So I wouldn’t be surprised to see some positive upside in this segment when Intel reports for Q1 2014.

However, as Tiernan Ray noted on Saturday, January 18, 2014 in his Technology Trader weekly article for Barron’s, A More Mobile Intel Still Must Fix Its Financial Reporting, ” . . . Other IA is where the company records sales of smartphone and tablet chips.” (quoted from Mr. Ray’s article) Investors must take the following point, made by Mr. Ray (and substantiated by the CFO Commentary materials for this quarter) into account, in order to put together the whole story of Intel’s foray into improving its performance in the tablets and smart phone chip markets: “Other IA ran an operating loss of $620 million in the latest quarter, quite a contrast to the 40% operating profit of the PC division and the 49% of the server business. And that’s before Intel even reached its goal of taking market share in mobile—that is, before the rebates kick in. (Intel plans to cut some 5% of its workforce to reduce its costs.)” (ibid).

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved

11
Dec

HP Remains Cautious On Its Prospects for Fiscal 2014

On November 14, 2013, Hewlett Packard reported on its business performance for the fourth quarter of 2013. Included along with the otherwise positive assessments of current performance from its CEO, Meg Whitman, were some forward looking remarks more likely to be made by a CEO of a business somewhat unsure of its future performance.

These remarks can be found in the Q4 2013 HP Quarterly Earnings Webcast. Katy Huberty of Morgan Stanley asked the first question: ” . . . Does the fiscal 4th quarter revenue performance give you any confidence that there is, at least, an opportunity to perform better on the revenue line than you had originally planned for fiscal 14.” Meg Whitman, CEO, replied to this question. She emphasized that ” . . . the characterization that we laid out at the Security Analyst meeting just six weeks ago remains the same.”

Ms. Whitman used the next couple of sentences of her reply to add a couple of specific impediments to a “better” forecast for fiscal 2014, which would otherwise make sense following on a quarter where almost all targeted objectives had been achieved. These impediments include ” . . . macro economic headwinds, almost across the board . . . “, and a need to further improve their “go to market” strategy. What caught my attention was a curious comment: Ms. Whitman noted ” . . . it’s prudent to characterize the business the exact same way we did at the Security Analyst Meeting.”

So, if the CEO is not prepared to provide any forward guidance beyond the ” . . . exact same way we did at the Security Analyst Meeting”, then I can’t help but think management is either fundamentally unsure about how “macro economic headwinds” are going to impact the bottom line, or, somehow, the fourth quarter, 2013 performance was not nearly as impressive as it would otherwise appear to be.

At least 2 weeks remained in the actual fiscal fourth quarter after the Security Analyst Meeting. Based on Ms. Whitman’s comments, nothing new has transpired since the meeting. I’m skeptical about the HP 4th quarter 2013 report based on these remarks.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved

11
Nov

NVidia Q3 2014 Results Support Notion PC Sales Are Approaching a Bottom

NVidia’s Q3 2014 results support the notion PC sales are approaching a bottom. NVidia’s GPU (Graphics Processing Unit) business rose slightly (2.1%) from the 2nd Quarter, 2014, but declined by a tame 1.9% year over year. GPU products are sold into PC computers, workstations and laptops.

NVidia’s Tegra product line did not fare so well. Revenues were up 111% from Q2, 2014, but down 54+% from Q3, 2013. I should explain the Tegra product line is NVidia’s System on a Chip (SOC) effort on the ARM Cortex quad processor chip. The firmware features render a flat panel display into a touchscreen tablet, or game console. Acer Corporation appears to be one of NVidia’s largest customers for this product. Acer is an aggressive PC competitor in emerging markets. But the Tegra product is targeted to the high end of the market with a matching price point (approx $500.00 retail for a 27 inch “smart display” featuring the Android Jelly Bean O/S). I should note the feature set for the Tegra products position them squarely against some of Samsung’s offers. I’m not sure whether this positioning works to NVidia’s advantage, or not. It would likely be safer, at this point in the market cycle, to back off of Tegra products, while, perhaps, putting more muscle back into the GPU product line.

The revenue shortfall for the Tegra product line points to relentless competitive pressure, in my opinion, in the high end tablet/gaming console markets. As I’ve written elsewhere in this blog, I’m convinced the high end tablet market is mature, well defined, and characterized by aggressive competitive efforts, by players, to cannibalize customers, where ever possible.

With PC markets approaching a floor and tablet markets in a mature state and clearly defined, companies like NVidia can provide analysts with highly useful indicators of where consumers are headed. I should note NVidia produces some of the better GPU products on the market today. So they certainly qualify as an industry leader.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved

25
Oct

Do Intel’s Q3 2013 Results Indicate an Approaching Bottom in PC Sales?

Intel reported Q3 2013 earnings today, October 15, 2013, after the market close. Despite earning an impressive $3.0 Billion in net income, sales of key chips for desktop and mobile PC computing reflected year over year declines from the same fiscal period of fy 2012.

But the declines, in my opinion, are comparatively minor, given the declines, year over year, from previous quarters. Intel sold approximately 5% fewer desktop PC chips than it did in Q3 2012, and approximately 3% fewer mobile PC chips for the same time period. If this trend continues, for another couple of quarters, it may be safe to say we’re approaching a bottom in the market for these devices.

If we are approaching a bottom, then sales of small, smart, mobile devices (including tablet computers and smart phones) may have already peaked. I think this is likely the case given two big moves on Apple’s part:

  1. The new iPhone 5S and 5C models do not address the mass market represented by emerging economies. Apple is making its satisfaction with top rank clear. Instead of developing more affordable products for these larger markets, they appear to be fortifying their position as the number one brand
  2. The recent executive change at the top of the Apple retail store apparatus reinforces the likely veracity of pt 1). Hiring the former head of the ultra chic woman’s fashion Burberry brand is likely to mean a lot more branding at the top of the market and not much attention to what’s below

Turning back to Intel’s quarterly performance, if their chips start to cut into ARM Holding’s dominance of the tablet markets, and, at the same time, they start to power a lot of Google Chromebooks, then it might be safe to project a resurgence for Intel, and, in all likelihood, its principal competitor — AMD.

PCs will always be in demand for a proportion of the market that needs more than simply a portable entertainment device.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved

7
Nov

Personal Desktop Computing may have More Resilience Against Cloud Options than Previously Expected

If the value of cloud computing options will be diminished as the result of a natural disaster like Hurricane Sandy, then personal desktop computing will be more resilient than previously expected.

We think it makes sense to consider the latest cloud computing imperative, which we have characterized as largely driven by Enterprise IT ISVs, within an historical context. In the mid 1980s computing options included lots of reliance on “time sharing” systems. In effect, these “time shares” were precursors of today’s cloud computing, but with a twist. Of course, web browsers were not yet available, therefore, customers of these “time shares” required terminals in order to access these services.

These terminals were, at the outset, actual hardware devices built to connect to mainframe computers, or “mini” computers over data communications protocols delivered over a modem session conducted over a dedicated, or shared, telephone line.

By the mid 1980s, these “time sharing” systems had been around for at least 5 to 10 years. Despite the benefits they delivered — including access for smaller businesses to the same quality software applications used by much larger peers — there was, nevertheless, an emerging interest in “personal” computing. “Personal” computing promised to deliver a wide, and quite flexible, capability to customers to custom fit software applications to highly specific requirement with precisely the user interface required to ensure popularity and high rates of usage.

We don’t think that now, almost 20 years later, the situation has changed that much. In fact, as we see it, the misunderstood market place message is that cloud computing is capable of delivering an even more flexible, attractive user experience than would otherwise be the case with personal computers. How else would one interpret the attractiveness of a service like Facebook, which is really little more than homestead.com on “steriods.”

It is worth taking a moment to look a bit deeper into the Facebook phenomenon. We think that one of the features that Facebook users really like is the promise of invisibility. After all, Facebook maintains a minimal, rather useless search feature. Therefore, Facebook pages can be built for a private audience of “friends.” This privacy is, of course, great for users, but a highly detrimental feature for potential advertisers.

The bottom line, however, as we see it, is that this extensive flexibility purported to be only available through cloud computing options, is, in fact, a ruse. Cloud computing is designed to service multiple users, simultaneously. Therefore, cloud computing is little more than the 2012 version of “time sharing.” True, hardware terminals have been replaced with web browsers, but the inevitable need for a highly custom, flexible, truly personal alternative in the form of a desktop or hand held device still exists.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved

31
Aug

Dumbing Down the Personal Computer May Not Have Been a Good Idea After All

In late August, 2012, Gartner, Inc. released an opinion that the Bring Your Own Device (BYOD) phenomenon amounts to the most important moment in the evolution of automating enterprise office procedures and daily tasks since the introduction of the PC in the early 1980s.

We agree with this notion, but we think the truly important point that PC manufacturers and enterprise IT ISVs should assimilate from this market shift from PCs to tablets and smart phones is that it illustrates why software like Microsoft® Windows®, and Apple’s graphical user interface were not a very good idea, after all. In fact, these graphical user interfaces enabled a flat and wide expansion of the prospect base for PCs to include users who would otherwise only need a personal word processor, spread sheet processor, or an audio video media player to get their work done. We think this market expansion was problematic.

Once PC manufacturers like Dell planted their flag in this flatter, but substantially richer terrain, where the ability of users to write custom computer applications, or to perform other activities appropriate for the computing power built into PCs, really did not amount to much of a use case, a vulnerability was created, which today, has resulted in wholesale adoption of comparatively “dumb” devices like tablets and smart phones to handle office work in place of more expensive, bulkier PCs and laptops.

Further, this BYOD phenomenon should be instructive to hardware manufacturers and ISVs as they assimilate a golden rule from this lesson: it should be absolutely clear why designing hardware and/or software that meets the minimum market requirements is a much better approach than broadly including lots of features in products in order to appeal to very flat and wide market segments that will not have the resilience to stick with solutions as competitive options are introduced that are more appealing from a cost and convenience basis.

If these tech innovators can truly take away the above noted lessons from the BYOD phenomenon then, truly, the event will prove to be worth the pain for companies like Dell or Hewlett Packard who will need to move on if they are to survive. If your product marketing effort has not been audit to ensure that the principle of designing solutions for the absolute minimum set of market requirements, please consider IMB Enterprises, Inc.

We can be a powerful resource that can review your products, present and planned to ensure that their market message is completely aligned with your product plan. Further, we can analyze your product to for compliance with a market approach that offers only what the market, pervasively, is after. Please call Ira Michael Blonder at +1 631-673-2929 to further a discussion about our monthly retainer based consulting services. You may also email Ira at imblonder@imbenterprises.com.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved