16
Jan

Is the response to Intel’s Q4 2014 Results overdone?

2-Color-Design-Hi-Res-100px-widthOn Thursday, January 15, 2015 Intel reported the results of its Q4 2014 business activity. In the aftermath of the report, which included conservative guidance for the coming business quarter below analyst estimates, analysts expressed skepticism.

I should also note the conference included details about the extent of the costs Intel continues to incur to enter the market for CPUs for mobile devices. Finally, rumors circulated about the possibility of Apple changing CPU architecture for its Mac PCs and laptops.

But is the analyst negativity overdone? In my opinion it is. Market entry is never an easy process, especially when the business attempting to enter a market is the largest manufacturer of PC computer CPUs, and the target market is already mature and dominated by other vendors with well received products (the ARM chip architecture and its licensees, including Qualcomm). So there is a cost associated with this entry, which, admittedly, Intel has been paying out for several quarters.

However, the Q4 2014 results included a beat on the profit number and an increase in gross margin. These numbers, of course, include the losses just mentioned. If Intel is not only able to carry the cost of mobile market entry, but to, at the same time, increase its overall profitability and still hit estimated sales targets, then why all the gloom? Perhaps the answer is Q4 2014 is behind us and we are already nearly a third of the way through the next coming quarter.

I am not interested in debating this argument. Nor am I interested in analyzing the Apple rumors. What I am interested in doing is merely pointing to a very positive reception for one of the new Android tablets on the market powered by Intel’s Atom processor and the new Broadwell chip set. The tablet is manufactured by Dell, the Venue 8 7000. No less a fierce Intel naysayer than Joanna Stern of the Wall Street Journal wrote a very positive review of the device, in sharp contrast to reviews she published earlier about Microsoft’s Surface tablets.

The value of positive consumer press about these devices should not be underestimated. Stern’s review may mark a change in sentiment for precisely the right group of critics to influence affluent consumers to think hard about just which tablet they ought to buy next.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2015 All Rights Reserved

13
Mar

A Couple of Points Worth Careful Consideration from Mark Zuckerberg’s Keynote Presentation, Mobile World Congress 2014

Mark Zuckerberg’s Keynote Presentation to Mobile World Congress, 2014, is much more of a discussion with David Kirkpatrick of Techonomy than an actual address to the audience. Anyone making a study of facebook will likely want to carefully consider a couple of points Zuckerberg makes during this discussion.

As I wrote in another recent post to this blog, Zuckerberg’s assertion, during this discussion, of a 200% upside potential for further growth in the size of the community of Internet users, world wide, is heartening. If nothing else, this assertion supports the notion of facebook as a real growth opportunity for investors. Assuming facebook supports approximately 1 billion active users, presently, (for the record, I do not think this figure is credible), once today’s Internet audience expands as Zuckerberg thinks it will, then facebook’s audience will be at 3 billion active users, which would constitute an enormous increase in opportunity for any revenue model.

Eighty percent of the world’s population not connected to the Internet already have high speed network options, but are not using them

But when I listened, once again, to the video recording of this discussion, I noticed an important comment by Zuckerberg: in actuality, 80% of the “disconnected” Internet audience can already connect to the Internet (he mentioned 2G and 3G wireless networks already in place for this potential new audience), but choose not to do so.

So how does Zuckerberg plan on convincing the “disconnected” that paying “a few dollars” for an Internet connection is worth it? Internet.org. So how much cash will it take to make this not-for-profit consortium of several businesses working together to promote Internet usage for emerging markets into the express train it needs to become to ferry the “disconnected” along to a connection? Zuckerberg isn’t sure, but it will certainly take a lot of resources (he mentioned $1 Billion of his own money), with not hope of profit any time soon.

Bottom line: the obstacle impeding the Internet “disconnected” from signing up isn’t a lack of data communications network plant, it’s something else. Therefore, analysts will have to reach their own conclusions as to whether or not Zuckerberg’s argument is plausible.

Any Online Service (WhatsApp included) with 500 million subscribers has got to make some money, some how

When Kirkpatrick asked Zuckerberg to explain why it made sense to buy WhatsApp for $19 Billion, he got an answer in 2 parts. The first part amounted to an argument based on fundamental nature: Zuckerberg alluded to the difficulty of online SaaS offers like WhatsApp achieving a critical mass of 500 million users. Given how difficult it is to reach such a plateau, any SaaS achieving this goal has to make some money, some way or other.

Does Wikipedia make money? Does WhatsApp, as it is currently structured, make money? What about Twitter, or Tumblr. Unfortunately the list of Internet businesses with a lot of audience still struggling to survive is too long to list here. I don’t see the logical necessity of a SaaS like WhatsApp making money any time soon.

Ira Michael Blonder

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