Whenever one of these sell-side analysts comes out with a vague "warning" that something is going wrong with a company that Wall Street hates, you have to do your own due diligence and not blindly panic. When JMP Securities came out with a rather ill-timed downgrade of shares of Intel (NASDAQ:INTC) citing issues with the integrated voltage regulator on the firm's upcoming "Haswell" chip, the first thing I did wasn't to panic, but instead to calmly parse the claims to see how they held up to scrutiny - and they failed. Miserably.
The note from JMP had this to say regarding "Haswell,"
In a note to clients, analyst Alex Gauna cited the "discovery of technology roadmap issues that add to an already challenging outlook." Specifically, he believes Intel is having problems with the chip architecture known as Haswell that is expected to figure heavily into microprocessors expected to hit the market later this year and next. Gauna said he has learned of "a voltage regulation stage" that is "not producing the desired results," adding the prediction that Intel "will consequently reverse course and not pursue this power management scheme with subsequent products."
First, note the careful usage of "not producing the desired results." This doesn't say that the chip is broken, nor does it say that the launch is going to be delayed, but it merely states that the integrated voltage regulator may not be providing all of the benefits that the team had hoped for. That being said, Intel very quickly responded to these allegations and publicly stated that "Haswell" was "on-time" and "healthy."
The point, though, is that sell-side analysts tend to want to generate trading revenues/excitement, so they will routinely take information/facts out of context as an excuse to issue an upgrade/downgrade/reiteration. According to a post over at iHub, from someone alleging knowledge of the situation, Intel found a bug with the integrated voltage regulator over a year ago, and that the problem has since been "99% contained." All microprocessors ship with bugs known as "errata," so this is no different than what other processor vendors, be it ARM (NASDAQ:ARMH), Intel, IBM (NYSE:IBM), or Oracle (NYSE:ORCL) face on a day-to-day business. Making processors is damn hard, and there are always issues that the engineers need to fix.
Conclusion - Haswell's Fine, But Intel Still Hated
You don't see this kind of PR for Qualcomm (NASDAQ:QCOM) or ARM, both of whom I'm sure also don't have perfect silicon. Why? The Street loves those stocks and wouldn't dare put out anything that could possibly paint them in a bad light. Intel is currently a punching bag for the sell-side as well as the typical day/swing traders alike, as it is easy to fool the stock trading masses, most of whom wouldn't know a transistor from a transmission, into thinking either the sky is falling (Intel) or that earnings will grow exponentially for 20 years or more (ARM).
But just remember - once Wall Street actually likes Intel again, everything will be spun in a positive light, as the momentum will be on the long side of the trade. If you're an investor in Intel, then do your due diligence and understand what's going on so that you can see through these half-truths, and so that you can understand also when a legitimate problem comes along.
Sorry, bears, all's well with Haswell. The only question now is how well machines based on this new chip will sell - and that's anybody's guess at this point.
Additional disclosure: I am short ARMH