4
Dec

The holiday buying season, 2014, opens with promise for PC manufacturers and Microsoft

The Friday, November 28, 2014 online edition of Barrons included a story written by Tiernan Ray on the outlook for this year’s holiday buying season for consumer PCs. The title of the story is Intel, AMD: This Is the Beginning of the Consumer PC Recovery, Says Wells. The article is written around comments from an analyst at Wells Fargo, David Wong about the condition of the consumer PC market. Wong’s comments, in turn, are based on comments made by HP CEO Meg Whitman, which she voiced during an interview on CNBC. The CNBC interviewer was David Farber.

Whitman’s comments: “We saw pretty strong results from the consumer in the fourth quarter and again, I think it’s a refresh cycle” in my opinion are conservative. The key phrase, for me, is “refresh cycle”. But perhaps renewed consumer interest in PCs goes beyond merely refresh cycle replacement of existing equipment. After all, with laptops running Windows 8.1 available from HP at a cost of a mere $229.00, it’s difficult to see how some segment of the tablet market (not to mention the Chromebook market) won’t pause to think long and hard before plunking down cash on a device without a keyboard and a much higher retail price.

If this segment of the tablet market converts into buyers of ultra low cost PCs, then, in my opinion, we will be looking at something more than simply a refesh cycle. Bottom line: with an improved Microsoft Windows 8.1 O/S, a keyboard, reasonably light weight, and manageable dimensions, these low end laptops represent a much better deal than their tablet competition for consumers in need of a computing experience (as opposed to simply a home entertainment smart box).

Microsoft certainly stands to benefit from any uptick in the consumer segment. One can argue the cost of the Windows 8.1 O/S for OEMs marketing these ultra low cost PCs is likely to be a giveaway, but the opportunity opened for sales of Office 365 Personal, Office Pro Plus, etc. shouldn’t be discounted.

The whole Microsoft, Intel, AMD and hardware OEMs ecosystem looks pretty good, at least on Black Friday.

Ira Michael Blonder

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

18
Mar

Short Life for Asus Transformer Speaks to Product Marketing Mistakes

On February 25, 2014, AMD published some news about its APUs: AMD and BlueStacks to Bring New Dual-OS Android Solution to Retail. BlueStacks, the manufacturer of the BlueStacks App Player product, had developed hooks for PCs and tablets powered by AMD APUs. These hooks were designed to provide retail PC consumers with a seamless experience, side by side, of Microsoft® Windows and Android computing environments.

Before analysts following either AMD or BlueStacks starting applauding, perhaps it’s worth the time to consider a recent attempt by a PC hardware OEM — ASUS — to bring to the consumer IT market the Transformer All in One P1801 and P1802 products, which provide the same capabilities. Note: the ASUS device neither uses an AMD APU, nor does it use the BlueStack App Player. But the functionality is certainly achievable with a combination of the AMD APUs and the BlueStack App Player.

In an article titled Microsoft and Google aren’t happy with mutant Android-Windows Hybrids, which was released only 17 days after this announcement, Ian Paul wrote for the PC World website: “Microsoft may be comfortable with Windows Phone and Android splitting time on a single phone, but when it comes to PCs, fuhgeddaboutit.” (quoted from Ian Paul’s article. I’ve provided a link to his entire article earlier in this paragraph).

Why would Microsoft, or, as Paul recounts, Google, care about a PC device, like Asus’, running dual OSs? After all, PC power users often run Linux virtual machines on Windows PCs? Rarely, if ever, have there been any notable objections from Microsoft or any of the Linux distributions about users compromising functionality by opting for dual mode hardware operation.

The difference here is the how the firmware for the Transformer AIO P1801 and P1802 changes the consumer experience. There is no software to run to change OSs on the ASUS device. Paul explains: “These devices run Windows when they’re in PC mode. Slide out the AIO’s screen or flip the laptop into a tablet, however, and boom! You’ve got an Android slate. The concept is theoretically appealing to users since you get the best of both worlds in one device, but Microsoft and Google apparently weren’t pleased.” (ibid). The tablet included in the product is powered with an NVIDIA Tegra® 3 CPU, while the PC is powered with an Intel® i5 CPU.

What’s important here is what looks to be a big miss by product marketing. Clearly ASUS’s product marketing team didn’t consider all of the implications of the Transformer P1801 and P1802 devices. Product marketing should have anticipated the likely reaction of Microsoft or Google to the performance of the proposed product. It’s disappointing, to me, to see how a mature PC OEM like ASUS could miss this very important point.

The lesson for early stage ISVs is to make sure product development procedures include a summary of how a proposed product will impact other software products in use in a consumer’s likely computing environment. Part of the summary should be devoted to a presentation of the “burning needs” these other software products are designed to meet.

Using the above mentioned mistake, as an example, what I think was missing from the ASUS product marketing plan was any reasonable assumption of why Microsoft would certainly want Windows 8.1 to run on the tablet feature of the dual OS hybrid PC computing device, and not just on the PC.

It will be interesting to see how hardware OEMs respond to the availability of the BlueStacks App Player and AMD APUs combination.

Ira Michael Blonder

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

19
Dec

No Breaks for AMD in Market Frenzy for PlayStation 4 and XBox One

Despite manufacturing the CPUs (Jaguar 64 Bit) and GPUs (Radeon) for both the Sony PlayStation 4, and Microsoft Xbox One, AMD has failed to attract any positive interest from investors. Since hitting a 2013 high of $4.64 per share on July 18th, the stock has dropped 21.3% and closed at $3.65 per share on December 6th.

At the same time both video game consoles have sold out for their respective manufacturers. Market demand for these products is enormous. So, one would think, the System on a Chip (SOC) technology built into these processors, which AMD has perfected over the last few years, should be one of the hottest items in the computer hardware business. But the opposite is the case, at least if one takes the current AMD stock price to be a meaningful indicator of the true condition of the company.

The clear disconnection between the fortunes of AMD, and at least Microsoft (as the result of the holiday 2013 blow out for Xbox One) is a subject thoroughly covered by industry commentators. On November 18, 2013, Dan Gallagher published an article on this topic on the Wall Street Journal website, titled Console Bet is Played Out at AMD.

Mr. Gallagher focuses on three problems facing AMD:

  1. The company still looked to its PC chip business for “64% of total revenue in the first nine months of 2013, down from 74% a year earlier” (quoted from Dan Gallagher’s article, a link to which has been provided above)
  2. AMD owes a lot of cash to GlobalFoundries, “the chip-fabrication business it spun off in 2009. AMD will owe about $404 million to GlobalFoundries under a “wafer-supply agreement” in the current quarter and another $250 million in the first quarter of 2014.” (ibid)
  3. A persistent lack of profitability. The stock is trading, even at its December 6, 2013 closing price of $3.65, “at about 33 times projected 2014 earnings” (ibid)

I like the third of Mr. Gallagher’s reason as the most telling of the set. A very useful example of AMD’s consistent failure to win truly substantial profits out of its chip deals can be found in the webcast of their most recent quarterly earnings conference. During this call the CFO mentioned very tight margins on the first sales of this SOC architecture to Sony and Microsoft.

There’s talk now of a new SOC technology from AMD. Pundits claim this technology renders the PlayStation 4 and Xbox one devices just yesterday’s hardware. One would hope AMD will negotiate truly lucrative deals when it presents these products to its OEMs.

Ira Michael Blonder

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

18
Dec

Curious Case of Christmas 2013 Hot, But Sold Out Consumer Tech Products

Three smart consumer electronic devices released for the 2013 Holiday Shopping Season attracted very favorable reviews. Sony manufactures the PlayStation 4. Microsoft manufactures the remaining 2:

  • XBox One
  • and the Surface 2

But all 3 of these devices were sold out for most of this Christmas season. As of my last check, back on December 6, 2013 all 3 were apparently sold out everywhere.

Note: last weekend, on December 15, 2013, My local BestBuy had inventory of the XBox One.

Another note worth considering: I spoke with the Microsoft Online Store crew back on December 6, 2013. They told me the Surface 2 would be back in stock on December 14, 2013. To the best of my knowledge this new inventory never showed up. Once again, my trip to BestBuy on December 15, 2013 produced an availability date in mid January 2014 for the Surface 2.

AMD manufactures the 64 bit Jaguar CPUs and the Radeon graphics GPUs powering both the PlayStation 4 and the XBox One. The huge demand for both of these devices may translate into some good news on the actual volume of units AMD will be able to sell, for the first year, into this market.

The actual profitability of these sales is a point of discussion among AMD analysts. Nevertheless, the Q3’13 AMD CFO Commentary includes the following point worth considering: “Graphics and Visual Solutions (GVS) segment revenue was $671 million, up 110% compared to the prior quarter, driven by our semi-custom business.

  • GVS segment revenue was up 110% sequentially due to Sony and Microsoft next generation products”

Tegra CPUs power the Surface RT (Tegra 3) and the Surface 2 (Tegra 4) Microsoft tablets. NVidia manufactures these CPUs. Recent positive press reception of the Surface 2 product, together with generally favorable early consumer reviews, may fuel more demand for the Surface 2 tablet than analysts have estimated. Of course, if this proves to be true, then NVidia’s shipment volume for Tegra 4 chips may exceed analyst estimates.

But I also need to note comments made during NVidia’s latest quarterly earnings report, where management disclosed tighter margins for the Tegra chips. So greater volume should not be construed, necessarily, as an indicator of greater profitability. Nevertheless, the chip should attract added interest from other OEMs, as a result of the explosive market interest in the Surface 2. There is still room for competitive tablets and other touch screen driven computing devices in this consumer market.

Ira Michael Blonder

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