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Robert McDonald

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  • Qualcomm's Growing Dividend [View article]
    Nice article that effectively highlights something that investors should be more aware of. Thanks.
    Jan 5 11:05 AM | 2 Likes Like |Link to Comment
  • Intel Loses The Galaxy Tab [View article]
    Asharaf, I also would like to compliment you on your writing. And now I can also congratulate you on your improved objectivity and more complete understanding of the business world.
    Jan 5 10:46 AM | 1 Like Like |Link to Comment
  • Intel Loses The Galaxy Tab [View article]
    As stated repeatedly in this forum, the only motivation Samsung has in using Intel chips is to:stay close to what Intel is doing. This includes incorporation of a device or two in a production tablet or phone in order to get the closest possible look at what Intel is doing, including providing easy access for reverse engineering any significant Intel technological breakthroughs.

    Samsung is smart enough to know that this is the best way not to be caught off guard forcing their own engineers to eat at least some Intel dog food in order to stay on the ball. This also keeps them prepared to immediately adopt any unexpected Intel industry changing breakthrough should one actually happen - all skids will have been greased.

    We all need to keep in mind that there is plenty of cost effective processor power, modem capability, intellectual property and technology outside of Intel to meet any device makers needs for the foreseeable future. And do so without requiring the premium prices Intel is ultimately going to have to charge in order to sustain their cutting edge manufacturing technology and design competence.

    Samsung owns plenty of the latter and has plenty of low cost Fab capacity to meet their own needs for the foreseeable future.

    I am an Intel fan boy for many reasons but I do not feel very good about the jam they are in. They should have diversified into a number of high margin product lines beyond the X86 years ago, of which mobile device chips would be only one new key business area. There are already too many competent, highly competitive players in the mobile area. Intel should never have allowed themselves to have been forced into making this a major new start up effort for themselves at this late date. A sad tale.

    Ottelini's legacy will be as the man who failed to see the Apple freight train coming and failed to pull out all stops in order to land Apple's wireless device processor and modem business. Krzanich will go down as the man who tried to correct the ship but was caught in the reality that it was just to late to grow a mobile device business that would supplant the lost revenue and earnings from a declining X86 business.
    Jan 5 10:29 AM | 12 Likes Like |Link to Comment
  • Apps Won't Save Apple [View article]
    This demonstrates how useful and powerful Apple mobile devices vs Android. It also demonstrates that high market share percentage in a highly inhomogeneous market is meaningless unless you break it out by market segment. Unfortunately many analysts do just that leaving me forced to bin them out as dysfunctional in ability to interpret market data meaningfully and accurately. This is the nicest way I know how to say it!
    Dec 28 06:19 PM | 3 Likes Like |Link to Comment
  • Apps Won't Save Apple [View article]
    Any who does some basic financial analysis would know that aps are a small part of Apple's revenue stream and there have been no expectations otherwise with the possible exception of the uninformed. The biggest bang Apple gets out of the Aps cannot be measured in market share but by the strength of the ecosystem in keeping and adding new Apple customers. And as an enhancement to its overall image as a supplier of customer friendly quality products.
    Dec 28 06:13 PM | 3 Likes Like |Link to Comment
  • Apps Won't Save Apple [View article]
    Thanks Ashraf for your insightful comment. I would add that Samsung sells a lot of devices at low cost with next to no profit as do many other Android phone makers. At first that might seem that Android is more successful, however, market share that yields little to no profit is not worth much. Apple will not go after that part of the market for very good reason.
    Dec 28 06:07 PM | 2 Likes Like |Link to Comment
  • A Huge Gross Margin Impact That Everyone Is Missing! [View article]
    Sorry for all the typos and incomplete sentences in the first of the two comments above. I think the ideas of what I was saying came through, at least I hope so. Extensive additions and clarifications got lost due to the SA "Edit" time limit. Best to write elsewhere and copy paste here.

    To clarify my comment "this is incorrect" I am referring to the following comment by Mr. Blair: " By putting more transistors on less silicon Intel can earn 70% margins while competitors AT THE SAME PRICE per transistor earn 50%." This comment has not been proven in the competitive mobile device world where Intel has to compete in the marketplace with multiple well established and highly respected leaders: QCOM in mobile device design and intellectual property, and TSMC and Samsung in high volume very complex mobile device manufacturing. Intel's market share to this date is less than a few per cent. (If someone has more recent data that says something higher let me know.)
    Dec 23 08:27 PM | Likes Like |Link to Comment
  • A Huge Gross Margin Impact That Everyone Is Missing! [View article]
    The process technology used to support mobile was developed at X86 expense. It is far from obvious that the mobile business can make up for lost PC chip earnings and cash flow required to sustain Intel's two generation ahead process technology leadership.
    Dec 23 08:05 PM | Likes Like |Link to Comment
  • A Huge Gross Margin Impact That Everyone Is Missing! [View article]
    Simply not true. One of my jobs as an Intel Director level manager was to manage the capital budget the lab network. It was nothing like the amount of money spent on Fabs or Development. I can tell you this is a very well managed process. When the earlier memory devices the X86 family were developed this process was very well managed. Capital spending was I am sure is still very tightly controlled.

    The problem has to do with the business Intel is in,the development of leading edge process technology and its manufacture into complex X86 devices for PC and server applications. This is a hugely capital intensive business the most sophisticated and expensive process equipment the world. This is the problem. Only a very expensive high margin product like the X86 can support this expense level. And if Intel is to maintain its leadership in X86 scale devices and process technology that is two generations ahead of TSMC and Sa,sung, they have to continue to support this treadmill/

    The introduction of relatively low margin mobile devices into this mix can do nothing but erode the margin levels that Intel needs to keep their leadership.

    Intel's free cash flow has already been dropping as a result of the in the decline in the PC portion of their X86 business to the extent that the ability to support future dividend increases is at risk:

    Intel is in a very tight box. This problem is discussed in a more in-depth fashion by Russ Fischer who has been a long term Intel Bull in the following SA article:

    Dec 23 07:26 PM | 1 Like Like |Link to Comment
  • A Huge Gross Margin Impact That Everyone Is Missing! [View article]
    The Intel margin concern is what caused me to sell the last of my Intel well over a year ago. Intel shares are up since then based on on-going analyst hype. However, even if they start to get long overdue mobile design-ins at a decent run rate, the products will have low margin relative to X86. And the real gotcha is that they will remain dependent on MSFT's success in mobile and second tier Android mobile device vendors in China. That is not a very promising scenario. I would not bet my investment funds on that.

    It is absolutely amazing to me that the majority of the analysts, or so they call themselves, writing on Intel either can't see or are choosing to ignore the margin degradation elephant.
    Dec 23 12:23 PM | 1 Like Like |Link to Comment
  • Intel: Google Is Not A Threat [View article]
    The point is not that Google might design its own ARM chips. The point is there is enormous pressure to keep data center costs low and energy efficiency high, to the extent that even a Google is thinking on designing their own devices.

    The point is that someone is going to figure out, if it is not happening already, how to bring cost effective ARM based server chips to the commercial market place and this is going to put another chink in Intel's X86 monopoly armour.

    My reading says that a number of companies are already pursuing this option and are well down this road. Google will not need to design and contract manufacture their own chips, someone else will do it for them as well as for Facebook, Apple and others.
    Dec 15 02:07 PM | 2 Likes Like |Link to Comment
  • Intel's Next Catalysts [View article]
    Intel is going to be challenged to make major in roads into the tablet market for a number of reasons:

    First of all Microsoft's tablets have yet to make any significant dent in the tablet market place and the first Surface tablet had to be given away at firesale prices:

    iOS Rules The Corporate Mobile Market As Android And Windows Scrap For Second Place

    Maybe most troublesome is the fact that Intel cannot count on Android market share as any guarantee of satisfactory revenue, earnings and margins. There are many reasons why this is true:

    1. Samsung, what might be considered the #1 seller of tablets, does not publish mobile device sale numbers, So Sumsung numbers can only be guessed at. They also sell a lot of mid range and low end product which does not have high revenue or high earnings. They are not going to pay big bucks for Intel chips especially when they can internally make perfectly satisfactory, low cost ARM based chips.
    2. Amazon, most likely the #2 Android tablet manufacturer, also does not publish Kindle sales nor the revenue and earnings they are making on these devices. They publically say they are selling their mobile devices at cost. So I do not see them paying big bucks for Intel chips either.
    2. In addition to Samsung there are whole lot of other tablet makers who are bombing the market with barebones low quality white box tablets selling at $99-$199. No one knows for sure but there is every reason to believe these make up a very large part of the Android market share numbers and maybe on the order of 50% of numbers published. Google does not keep track at least no publically. Obviously these guys are not candidates for Intel chips, even at giveaway pricing.
    3. That leaves the midtier like Lenovo. So far all of these folks are darkhorse minority players. This is the only wild card Intel has for making decent returns in tablets. I would not count on that.

    I worked for Intel for 20 years as a Director level manager. Intel is a great company and has done wonderful things. But now that their high margin monopoly X86 product line is no longer growing I regard them as a risky investment, at least from a growth standpoint. Mobile will never be as high a margin area as the X86 product line has been. I do not envy their predicament.

    Due disclosure: Long on Apple and QCOM and sold off all my Intel positions over a year ago.
    Dec 15 01:42 PM | 6 Likes Like |Link to Comment
  • Intel's Next Catalysts [View article]
    I would second that concern. Intel has a problem with forcing new innovative companies it might acquire into the Intel way. It's as much management expectation as it is not just the design groups.

    If you are investing in Intel as a growth story there are much better choices out there right now. If you are investing for the dividend, don't expect any pay hikes there until cash flow starts to grow again.
    Dec 15 01:37 PM | 2 Likes Like |Link to Comment
  • Intel's Next Catalysts [View article]
    If you look at INtel's financials they are going to be hard pressed to raise the dividend without improvements in free cash flow. Intel is gradually running out of options, slowly, but never the less.
    Dec 15 01:31 PM | 3 Likes Like |Link to Comment
  • Intel Focusing On Tablets: What Does It Mean For Investors? [View article]
    iOS Rules The Corporate Mobile Market As Android And Windows Scrap For Second Place
    Dec 15 01:28 PM | Likes Like |Link to Comment