How serious? Does $2.2 billion and 15 percent EBIT profits sound serious to you? It does to me, and also to Deutsche Bank analyst Chris Whitmore.

Having slogged through Oracle’s 72-page document dump with a better eye for detail than mine, Whitmore noticed a line in a January 2010 email from Dave Donatelli, now head of HP’s Enterprise Group (specifically Exhibit 17, for those who want to scroll through and find it) saying that HP’s Business Criticial Server business combined with its Technology Services business, which includes the support and services associated with the Integrity line of servers that uses the Intel-made Itanium chip, was at that time larger on a revenue basis than HP’s personal computer business.

The same document, he says, showed that at the time, HP’s “owned operating profit” for the combined hardware, software and services tied to the business of selling and supporting Itanium servers was about $2.2 billion. All in, HP derives — or at least at that time derived — about 15 percent of its profits on an EBIT basis from Itanium and related businesses.

No wonder, then, that HP considered Oracle’s March 2011 decision to stop creating software that runs on the Itanium chip so earth-shattering that it hauled the software giant into court last June. That case is expected to head to trial any day now.

The disclosure is the clearest sign yet of how much HP stands to lose if its Business Critical Server business can’t recover. It has always been known to be a highly profitable business; exactly how profitable was a closely guarded HP secret. But sales of Business Critical hardware have been on the decline. In 2009, sales of BCS hardware were $2.6 billion. In 2011, they had fallen by 19 percent to $2.1 billion. And in the quarter ended Jan. 31, sales were $405 million, down 27 percent from the same period in 2011.

The uncertainty about Itanium’s future is one of the many reasons that Whitmore has been particularly bearish on HP’s turnaround prospects: “Given the growing uncertainty around the long-term viability of Itanium, we expect customer defections to continue, if not accelerate in future periods,” he wrote in a research note to clients, issued yesterday.

However, much as HP lawyers would like to argue that Oracle’s motivation is to help bolster long-flagging sales of its new Sun Microsystems hardware unit, Whitmore argues that the main benefactor is IBM: “While Oracle is responsible for shining a bright light on Itanium’s precarious future, it is probably doing IBM the biggest favor. … We expect IBM to be the greatest beneficiary of Itanium defections and view Power [IBM's server chip] as the market consolidator and eventual standard in the UNIX/RISC server market over the medium to longer term.”

And even if HP prevails in its suit, Whitmore isn’t seeing much benefit: “Regardless of the outcome of this particular suit, we expect HP-UX customers to continue fleeing what is increasingly looking like a dead platform — creating a major headwind for HP’s medium-term earnings.” Ouch.

They’re not quite as juicy — Oracle has always had the better flair for the dramatic in this case — but in releasing them, HP clearly intends to paint Oracle, the new owner of Sun Microsystems, as out to hurt HP by kicking it straight in the teeth by damaging its Business Critical Server operation.

The first of the batch is an instant message exchange between some Oracle sales guys, who happen to use salty language in relation to HP. (Sorry about that.)

The second appears to show that Mark Hurd, while still CEO of HP, was informed about Intel being both aggressive and excited about a forthcoming version of the Itanium chip, which would seem to run contrary to the argument Oracle has made that Intel was prepping for the Itanium line’s end of life, while allowing HP to lie about it to its server customers. In the message, Martin Fink, who figured so prominently in Oracle’s document dump today, writes to Hurd: “I’m not sure what exactly this means, but I have rarely seen Intel so agressive on anything to do with Itanium EVER, and they are working very hard to get this moving forward.”

Another, from February 2011, appears to show Oracle unwilling to release a security software patch for a version of one of its applications that runs on HP-UX and therefore on an Itanium-based server. Another from the same day is an email from Oracle CEO Larry Ellison to Thomas Kurian, senior vice president of Oracle’s server technologies, asking if support documents had been updated to specify “no more one-off patches for Itanium.” The date is key because Oracle first announced that it would no longer support Itanium systems on March 23 of that year. It should surprise no one that the top echelons of Oracle management knew this announcement was coming.

The next is an email showing HP getting ready for a big strategy launch. “Kinetic” was HP’s internal name for a strategy that leveraged all of HP’s IP that enabled mission-critical products into a cohesive whole. Plans for Kinetic included extending HP-UX and Integrity, HP’s line of Itanium-based servers, indefinitely, as well as bringing up X86 chips, like Intel’s more mainstream Xeon, under the “mission critical” umbrella. As HP sees it, this was the plan all along.
 
Finally the last one is another IM exchange between Oracle sales execs. Toward the end, one of them complains about being forced to sell Sun hardware that is described as a “pig with lipstick at best.” Again as HP sees it, once Oracle owned Sun it had every motivation to do whatever it could to hurt HP, including ducking out of previously contracted commitments.

As I did with the Oracle dump this morning, I collated everything into a single PDF. I think I got everything in chronological order this time. Read for yourselves!

HP-Itanium-docs.pdf

The documents were released as part of a new offensive by Oracle to ratchet up the pressure on HP and take its case to the marketplace — that HP and Intel had already planned to bring an end to the Itanium chip’s life, and that HP lied to its customers about the chip’s long-term future.

HP has long denied Oracle’s contention, and has tried to portray this as Oracle’s failure to live up to its end of a contract.

In an open letter to affected customers, Oracle said it was releasing the documents in order to allow customers to “make your own decision” on the matter:

Dear Customer:

A little over a year ago we announced that we would no longer be developing new versions of Oracle’s database and other products on the Intel Itanium platform due to our strongly held belief of Itanium’s imminent end of life. We ensured our Itanium customers would have an easy transition to the platform of their choice by committing to 10 years of support for existing Oracle software running on Itanium.

Hewlett Packard strongly disagreed with our characterization of Itanium’s future and launched an immediate campaign designed, in their words, to foment “customer outrage.”

At this time, there are many documents that have been disclosed through litigation that describe the true state of Itanium in Hewlett-Packard’s own words. Rather than us interpreting this situation for you, we thought we would give you access to the public HP documents so you can make your own decision regarding your investments in Itanium technology.

After reading these documents we are confident that you will agree with our decision, taken with the best interest of our joint customers in mind.

Sincerely,
Jeb Dasteel, Senior Vice President and Chief Customer Officer
Oracle

Bloomberg Businessweek got its hands on some of these trial exhibits, but in its posts this morning — and presumably in the tech section of this week’s magazine — stuck to a fairly limited set of highlights. And in fact there’s not so much that’s surprising, if you read my story on the unredacted version of Oracle’s cross-complaint from January.

Basically, the new documents add more color and a lot more tension to the state of the HP-Intel relationship over the production of the Itanium chip. It also lends a lot of weight to Oracle’s narrative heading into that trial: That HP relied heavily on profits earned from multiyear sales and support contracts with customers who bought its Integrity servers that run Intel’s exotic and expensive Itanium chip. In support of that, it paid Intel nearly a half-billion dollars to keep the chip alive, despite the fact that, outside of HP, there was no other single vendor using Itanium chips.

In the emails, Intel, for its part, certainly looks like it wants out of the business of making the chip, but is willing to accept HP’s money to keep churning them out. Asked at one point what would happen if HP didn’t pay a certain amount to Intel, Intel would — in the words of Martin Fink, then-head of HP’s Business Critical Server business — shut down the teams producing certain chips that were in the process of being designed, and slap “high fives all around.”

On its face, there’s nothing inherently wrong with HP paying Intel to keep making a particular chip. HP had customers willing to buy these servers, and it made money supporting them, so paying Intel to keep them coming — remember, HP for all intents and purposes, is the only vendor buying this chip — was more or less a cost of doing business.

However, Oracle’s argument has been that HP refused to play straight with the wider marketplace, insisting that Itanium would be around for many generations to come. Even Intel itself insisted that was true last year, when Oracle first announced that it would stop making new applications that support the chip, which of course led HP to sue last June.

AllThingsD has compiled all of these documents into a single 75-page document; you can read the entire collection below. They’re ordered by exhibit number rather than chronological order. I’ll probably have more to say as I go through them.

HP just sent a statement:

“Intel has provided unequivocal and repeated statements to the marketplace that Itanium is not at an end of life. The undeniable fact is there is committed support for Itanium that extends out toward the end of this decade. Statements that Itanium was at or near an end of life are false. With the unsealing of court filings, the public can see the undisputed facts of Intel’s Itanium roadmap clearly showing a long and sustained future for Itanium.”

An Intel spokesman had no comment, saying it is not a party to the lawsuit.

Update: So let me try to curate these documents a bit. They cover a time period beginning in August 2007, and go through to April 2011. In the first, (Ex. 6) Fink writes to another HP exec and says, “Intel dropped a bomb on us last night” during a meeting that included talk of “canceling Poulsen,” a future version of the Itanium chip that was on internal road maps. Poulson, for the record, is Intel’s code name for a 32 nanometer version of Itanium that was to be released sometime this year. The response: “Call Pat G,” referring to Pat Gelsinger, the once very senior Intel executive who was at one time widely considered to be a possible successor to current CEO Paul Otellini, but is now the COO at EMC, and likely to be its next CEO. Fink’s response: “I did, spent an hour … This was a high tension call.” Intel was worried that an HP server was being built using a competitor’s chip, presumably one from Advanced Micro Devices.

From there, skip forward to Exhibit 43. The email to Fink from Scott Stallard, now a retired HP exec, details a discussion with Intel’s Tom Kilroy, then VP of its enterprise business. The message to Intel: “Don’t possibly signal to the world” the end of the Itanium road map.

The next document is notes from a meeting between Intel and HP led by Otellini and then-HP CEO Mark Hurd in September of 2007. According to those notes, Intel’s Kilroy concedes that the then-current core used to build the Itanium chip has reached its end of life, and that there are two paths forward, one expensive, the other painful — a “crash landing.” Otellini then says that Intel can’t continue to lose money on the product. Hurd goes on to say that HP had by that time sold a combined $9 billion worth of Itanium-based servers, and that it “would be hard to walk away from those customers.”

Otellini then says, according to the notes, that “we need to address the inevitable on the future of Itanium.” Both sides then agree that over the next several years they’d like to glide toward using Intel’s more plentiful and more mainstream Xeon server chips, and essentially keep Itanium alive until 2013. Intel then proposed a new business model that would turn Intel essentially into a contractor for HP. Its goal would be not so much to make money on the Itanium business, but to stop losing money on it. Hurd agrees to take a serious look at the numbers.

Next in line is Exhibit 55, in which Stallard outlines the November 2007 Intel proposal to HP. The key point: HP would pay Intel $488 million over five years to keep building Itanium chips. It includes provisions for an annual “true up,” where Intel gets paid for any difference between its costs and what HP has already paid it for that year. Stallard writes: “So you ask, why should that be that we are forced to true up Intel to break-even? lt is because Tom [Kilroy] says Paul [Otellini] has been consistent on one thing all along, that if we do any other scenario than Tukvale (e.g. shut down the business early) then “Intel can’t lose any (more) money on this thing.’”

Next is Exhibit 15, a PowerPoint deck outlining the strategic rationale for HP to consider buying Sun Microsystems. Key phrase: HP-UX, its version of Unix developed specifically for Itanium servers, “is on a death march” because of Itanium’s inevitable demise. The slide also shows HP’s worries concerning a scenario in which IBM acquires Sun. The key phrase there: Such a deal “Isolates and exposes HP-UX as 3rd tier player, accelerates our decline (product/service) as customers look to consolidate vendors.”

We all know what happened instead: Oracle acquired Sun in 2010 and, in a stroke, took over its server business, giving Oracle an obvious motivation to cut its support for Itanium and hurt its new rival HP in the process. I’ve hit a few high points here, but I think you can get the gist from a careful reading of the documents below.

Update: I’ve re-uploaded the exhibits to Scribd in more logical order, so you don’t have to skip around. Sorry if that was confusing before.

Oracle Itanium Exhibits Chronological

New documents in the case came public yesterday, essentially spelling out Judge James Kleinberg’s ruling from May 1 in turning back Oracle’s motion for summary judgement. It’s not a terribly big deal, because both sides asked for summary judgement and failed to get it, as happens nearly all of the time in cases that get this far.

One key piece of their dispute arises from the fact that when they settled another lawsuit in 2010, stemming from Oracle’s hiring of former HP CEO Mark Hurd, there was, as HP argues, a provision included requiring Oracle to continue making software that supports servers running Intel’s exotic Itanium chip. A good deal of the fighting between the companies at trial is going to revolve around this point, and whether or not that agreement is enforceable or even exists. What that provision called for, essentially, was for Oracle to continue supporting Itanium as it had previously.

A key paragraph in the judge’s ruling:

“In the Court’s view, it is not unreasonable to interpret the Reaffirmation Provision as imposing a prospective obligation on Oracle to continue to offer products for HP’s platforms; the plain language is readily susceptible to that interpretation. If the prior, existing obligation before [Mark] Hurd’s hiring involved a clear and consistent practice in which Oracle offered its product suite on all HP platforms without written porting agreements or payments, then the Court sees no inherent contradiction in ‘reaffirming’ that this arrangement will continue going forward.”

Both sides in this case never miss an opportunity to poke each other in the eye with public statements. HP struck first last night:

“HP is pleased that the Court ruled that the language in the HP/Oracle agreement can be interpreted to require Oracle to continue porting its software products to the HP Integrity platform, as Oracle did for years before the agreement. As the ruling states, Oracle’s interpretation would make the agreement ‘illusory’ and ‘should be rejected.’ We look forward to trial, where the details of Oracle’s deliberate, anti-customer business strategy to drive hardware sales from Itanium to inferior Sun servers will be revealed.”

But it’s important to remember that HP lost its motion for summary judgement, too. Also, didn’t HP convince the judge that the Itanium provision of the Hurd settlement agreement means exactly what it thinks it does? At least that’s how Oracle attorney Dan Wall saw it, in a statement sent to AllThingsD this morning.

“HP cannot be happy with this decision. The Court did not accept HP’s interpretation of the Hurd settlement agreement; in fact, it rejected out of hand the most recent version of HP’s argument, which equated the contract with terms HP proposed, but Oracle rejected. HP’s lawsuit, like Itanium itself, is living on borrowed time and will never succeed.”

Anyway, the 29-page judge’s opinion that kicked off this latest pretrial PR salvo is below:

endorse_80790_203163_A

Nvidia said it expects sales in the second quarter to come in between $990 million and $1.05 billion, well ahead of the the $976 million analysts had forecast.

And the cheerful forecast came on top of earnings that also beat expectations. Sales in the first quarter fell to $925 million from $962 million a year earlier, which, despite the drop, was better than the $916 million consensus.

Nvidia’s profits were $60 million, or 10 cents on a per-share basis, which was also a drop from 22 cents in the year-ago period. A rather hefty fall at that, but it was in line with expectations.

It looks like Nvidia is scoring some important wins in the desktop space, now that Windows 8 — which supports variants of ARM-based chips and not just x86-type chips from Intel and Advanced Micro Devices — is coming. Also, notebook graphics chips are growing. Nvidia also landed a version of its Tegra chip inside a phone from HTC that launched with 22 carriers in Europe and Asia.

XtremIO makes storage arrays based on flash memory chips, and is a would-be rival to Violin Memory, the Silicon Valley start-up that’s revving its engine for an IPO later this year, following an $80 million Series D funding round which AllThingsD reported exclusively last month.

Another player in the all-flash storage array business is Pure Storage, which came out of stealth mode last August with a $30 million Series C led by Redpoint Ventures.

News of the deal gave shares of Fusion-IO a jolt. Fusion-IO rose 50 cents, more than 2 percent, to $21.63, just as the markets opened for trading in New York. As of yesterday’s close, Fusion shares have fallen by more than 6 percent since its IPO debut last June.

Fusion is a founding member of the Flash Madness Club. Its flash memory insert cards for servers are widely used in data centers of companies like Apple, Salesforce.com and Facebook, speeding up the ability of servers to process data by eliminating bottlenecks created by conventional hard drives. Its customers also include Hewlett-Packard, Dell and IBM among other server manufacturers.

The two companies had asked the judge essentially to throw out the other side’s complaint and rule in their favor in a pair of dueling filings last month, and made arguments to that effect in late March. Now being heard in a California State Superior Court, the case is going to trial, with no hope for a settlement, Reuters reported.

It all started up in late 2010, when in reaching a settlement of a lawsuit concerning Mark Hurd’s taking a job as co-president of Oracle, HP asked Oracle to include some language that it argues committed it to continue to build software that would support Intel’s exotic Itanium server chip. That chip, you may remember, was, for all intents and purposes, a market failure, and HP was the only vendor worth mentioning that ever made a go of selling servers using it.

In March of last year, Oracle said it would cease developing versions of its software that would work on Itanium-based systems, and argued that Intel had plans to end manufacturing of the Itanium chip. HP was outraged, and Intel said it had no such plans. Oracle was in earnest. HP got its Itanium customers to publicly lobby Oracle to reverse the decision. It didn’t work. So HP sued Oracle last June.

The pretrial arguments have been colorful. Oracle accused HP of being sneaky when it negotiated the Hurd settlement. It later compared HP’s ongoing reliance on Itanium to the movie “Weekend At Bernie’s,” the corpse in the analogy being the Itanium chip, kept alive by HP funding. For HP, the argument is a simple one: Is there an enforceable agreement between it and Oracle, or not?

Oracle argues, among other things, that there is no such agreement in place, and even if there were, HP was, at the time of the agreement, about to hire Léo Apotheker and Ray Lane as its CEO and chairman, two people who, for various reasons, Oracle thoroughly distrusts. Also, Oracle says, for HP, the Itanium business is all about the billions in support and service fees it charges its customers, fees without which HP is “strategically screwed.” And by the way, the uncertainty around Itanium servers is starting to hurt HP for real.

(Image is of this T-shirt)

The chip sector has many specialized vendors, some regularly hit by cyclical swings in the business. Others with ample cash reserves or borrowing power are snapping up smaller players, betting they can quickly make better returns on their money than other investments.

Read the rest of this post on the original site »

He calls it “the highest-performing handset on the market, as far as we can tell.” It has taken a few years to get to this point, but there’s a two-billion-unit addressable market to be carved out.

In the video below, Otellini also talks about the competitive threat — though he seems not to consider it much of a threat at all — coming from Microsoft’s Windows 8 and its variant that will support chips running the ARM architecture. How much market share does he expect to lose? None. Intel’s chips can offer the same performance and power efficiency that ARM chips do, while being 100 percent compatible with existing PC software. See the full interview below:

The company has weathered a series of problems lately, particularly chip shortages stemming from manufacturing problems at Globalfoundries, the company formed by the spinoff of AMD’s manufacturing operations. AMD last month restructured its relationship with Globalfoundries, triggering a $703 million charge for AMD but giving it more freedom to make some of its products elsewhere. AMD also agreed to give up its remaining 8.8 percent stake in the manufacturer.

Read the rest of this post on the original site »

But shares sank 6.3 percent to $62.80 after hours, then recovered about half that, as third-quarter earnings guidance came in below expectations. Through the close, the stock was up 22 percent so far in 2012 and it has been on an upward trend for much of the last two years.

The San Diego semiconductor company raised its full-year earnings guidance, now forecasting $3.61 to $3.76 a share. In February, Qualcomm boosted its income guidance to $3.55 to $3.75. It reaffirmed its revenue guidance.

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First and foremost, non-GAAP quarterly profits are down by about 13 percent from the year-ago period, while sales were up by less than 1 percent.

Even so, the results beat the expectations of analysts: Per-share earnings were 56 cents versus the consensus expectation of 50 cents. And sales at $12.9 billion beat the consensus by about $600 million. Not exactly a blow-out quarter by any means, but Intel’s first fiscal quarter is always seasonally slow.

What’s probably bugging Intel shareholders who are selling it off after hours is the results of the PC Client group that sells chips into the personal computer sector. While Gartner just reported quarterly PC shipments that were better than expected (results which last week helped goose shares of Hewlett-Packard), Intel saw sales into PCs decline by almost 2 percent year on year to $8.45 billion. Sales in the data center group fell slightly to $2.45 billion.

Geographically, Intel saw its sales rise in Asia by 1 percent and fall in the Americas by 6 percent, while Europe increased by 8 percent.

Another thing that has investors worried a bit is probably the operating expenses line. They rose by about 20 percent to nearly $4.5 billion. The main boost seems to have been in research and development, on which Intel spent $485 million more than it did last year.

The conference call is set to begin shortly. Expect lots of questions from analysts about what’s going on and what Intel’s outlook really is.

Earlier:
2:03 pm: And the call is under way. CEO Paul Otellini is speaking. “Our committment to long term research and development is paying off.” Examples: We are ramping our 22-nanometer process and moving to tri-gate manufacturing. Basically, Intel is pushing the envelope on its manufacturing technology. “That’s allowing us to do things others can’t, like improve our Atom processors at twice the rate of Moore’s Law. … Our lead over the rest of the industry continues to grow.”

Otellini on Ultrabooks: With more than 21 designs already shipping and more than 100 designs in the pipeline, we’re very happy with the results. We expect Ultrabooks to reach mainstream price points. By the holiday season, he expects touch interfaces to give the experience of the tablet with the functionality of a notebook.

Otellini: China is the second-largest server market in the world.

Otellini: McAfee posted best first-quarter bookings in its history. Oops, Otellini called something a Day-Zero attack, when he meant Zero-Day.

Otellini: First Intel-based smartphone is coming this week.

Now CFO Stacy Smith is speaking. First-quarter results were slightly better than expectations. “Our business was impacted by the hard drive shortage. We believe it did not impact actual sales of PCs in the quarter.”

Smith: As hard disk drive shipments recover, we’ll see the beginning of an inventory replenishment this quarter.

Smith: We will be ramping up Ivy Bridge production and three factories.

Smith: Spending was in line with expectations. He expects spending as a percentage of revenue to come down in the second half.

Smith: Inventory grew by $400 million with nearly all that growth attributed to Ivy Bridge.

Smith: Against the backdrop of the hard drive shortage and weak macroeconomic conditions, our execution remained strong.

2:12 pm: Time for Q&A

2:13 pm: Question about unit costs.

Smith: It was consistent with what we expected. We have three new 22-nanometer factories. At the start of that ramp, the first products absorb the cost of the factories. Costs peak in the second quarter and come down as the ramp continues.

Question from Sanford Bernstein: Asking about the hard drive shortage impact. Have we seen all the snapback from hard drives coming back or is there potential for more seasonal growth?

Smith: Q2 is consistent with underlying demand. Inventory replenishment begins in Q2. We saw significant reduction in inventory in Q4 and then more in Q1. What you see in Q3 is where you really start to see the worldwide replenishment. They will replenish with Ivy Bridge, and a good Q4 with lots of catalysts driving the market.

And now a question on gross margins. It looks like they’re a little lower on some unit costs. Is this some evidence that the initial ramp of Ivy Bridge saw a push-out?

Smith: If you remember, we shifted the Ivy Bridge launch by three weeks. That was to make sure we had enough inventory. Ivy Bridge explains the good news in Q1 and the Q2 forecasts.

Question from McQuarie: A question about desktop and notebook.

Smith: We don’t forecast at that level of granularity. In general, what you see is that notebooks are growing on a unit basis. Emerging markets are growing and that’s a desktop market. We continue to actually see notebook demand growth.

Otellini: The first Ivy Bridge chips we’re shipping are quad cores, which are going into desktops. The dual core mainstream chips are going into notebooks.

2:22 pm: Question from UBS about Ultrabooks. Can you talk about where you help customers make changes in the bill of materials? I want to know, were you able to help them?

Otellini: The Ultrabook fund hasn’t kicked in to where it is achieving BOM reductions. Some of that is later this year. The biggest change is quite frankly competition. Asus is now shipping a very low profile hard drive in an ultrabook. The biggest change is trying to intercept the Windows 8 launch with sufficient quantities of Ultrabooks with a touch-enabled Ultrabook. Used to be a touch screen added $100 to the bill of materials, but now that is coming down considerably.

2:27 pm: Question from Longbow Research. Give us some insight into the mix you expect in terms of corporate versus consumer.

Smith: We dont get into that. For Q1 our mix was quite healthy. Generally what we see is relative strength based on Ivy Bridge, and then some price competition at the lower end of the market.

Otellini: Typically, the enterprise notebooks tend to be about a third of the businees. But more and more businesses are allowing employees to bring any kind of computer they want into the office. We have some ideas about improving the security and manageability of those devices over time, while still offering the choice.

2:30 pm: Question from Bank of America: Longer term to emerging markets go toward Ultrabooks or tablets?

Otellini: I don’t think anyone in the world knows the answer to that question. In the tablet world, people now buy them as complementary device and they already have PCs. What I’m excited about is the convenience and touch of a tablet with the productivity and the utility of a keyboard in an Ultrabook device.

(Personally, I have to agree here. I get a lot more done on a MacBook Air, which I think is really the first Ultrabook, than I ever did on an iPad. But that’s me.)

2:34 pm: Question from FBR: Can you help us understand what your capacity growth looks like? What do you expect utilization rates to be? (Basically, how busy are the factories going to be?)

Smith: We expect utilization rates to be high through the year. We expect some capacity growth, though probably not as much as you might expect.

Question from Citi: As you talking to potential customers in handset? What matters to them? Roadmap, or the fact that you will have capacity available?

Otellini: The roadmap is the best door-opener we have. … As customers look at the roadmap they want to find ways to differentiate from what’s out there, and services they can charge for.

2:40 pm: Deutsche Bank guy talked way to fast for me to get his question.

2:44 pm: J.P. Morgan asks about the possibility of getting Apple’s iPhone business.

Otellini: Anything is possible.

Another question from J.P. Morgan, this one about geographic regions.

Otellini: We don’t see anything fundamentally different from before. We are going into a year with a new version of Microsoft Windows, and that has been strong for the industry before. Also, we’ll be debuting Touch. Add it all up and the battle for consumer dollars isn’t going to be like it was last year.

Question from Goldman Sachs, asking about the cash position coming down a bit. How low do you feel comfortable with?

Smith: Be careful about free cash flow in Q1 relative. It’s depressed relative to hard drives. Second, remember there are a few big payments in Q1. In terms of cash balances, we don’t peg a specific number out there. In Q1, we’re comfortable with our balance. It’s been bouncing around this level for awhile.

Missed who this question is from: You talked early about manufacturing leadership. Can you update on 14-nanometer ramp? When will you come to market?

Otellini: We’ll give you more granularity in May. Generally its every other year.

And we’re done. Thanks for joining.

It’s also the first of several chip stocks to report in the coming days. Sterne Agee analyst Vijay Rakesh summarized a few to watch in a research note to clients today.

Generally, he says to expect semiconductor companies to report results that range from in line with expectations to slightly up, and the outlook for the June quarter should improve.

One reason for that: PC sales estimates came in higher than expected from both Gartner and IDC last week. “We believe improving shipments were primarily a result of restocking rather than end-market demand. We believe both AMD and Intel should deliver in line to modestly better” results for the quarter ended March, he writes. Of the two, he says, AMD could deliver more upside on its results when it reports earnings on April 19 because its consensus estimates are low. Analysts expect it to report earnings of 9 cents a share on $1.56 billion in sales.

Intel, its strength already established, has higher expectations more consistent with its recent performance. The consensus of analysts calls for it to report 50 cents of per-share earnings on $12.84 billion in sales.

A supply chain disruption in hard drives that for a few months messed with the PC industry is coming to an end. But sales of Ultrabooks aren’t impressing anyone, Rakesh says. “Ultrabook sell-through is weak primarily on higher retail pricing versus mainstream notebooks. There are only 15 Ultrabooks on Best Buy versus 280 Notebooks listed,” he writes.

In the server space, Intel’s Romley chip is ramping up to full capacity, but he expects the competition from AMD to increase in coming months. One reason: AMD’s acquisition earlier this year of micro-server vendor SeaMicro.

One more chip company he likes among those reporting this week: Qualcomm. Rakesh says it has strong tailwinds, including Apple’s expected iPhone5, the latest iPad and wins with phones and tablets at Samsung.

One early customer is Rob Legato, the visual effects supervisor who won an Academy Award for his work on the Martin Scorsese-directed hit motion picture “Hugo.” Legato will be talking about ioFX with Fusion-io chief scientist and Apple co-founder Steve Wozniak at a conference in Las Vegas next week.

Fusion does some cool stuff with flash memory. Here’s the part where I roll out the old metaphor that has served me so well: In pretty much any computer, you can think of the processor as a fast-moving, highly efficient, type-A personality, constantly in a hurry, and always waiting impatiently for the rest of the system to give it more work to do. The slowpoke in the deal is the hard drive, which, though it’s already spinning at a super fast rate, just can’t get data to the processor fast enough. So the processor sits around, tapping its foot and looking at its watch, waiting for the other parts of the system that feed it data to work to keep up.

In high-performance computing, where there’s more data to be crunched than in most average computing situations, this is sort of a big deal. You want the processor to be as busy as possible — mainly because the systems are so expensive, and you want to get your money’s worth out of them — but also because jobs get done faster.

So Fusion-io’s stock in trade is a series of insert cards that bring flash memory right up next to the processor. The flash chips grab great big armloads of data and hold on to it, handing it off to the processor in a way that keeps it happy and busy and not impatiently waiting — at least not so much.

We’ve seen the technology brought to bear at places like Credit Suisse, which added Fusion’s flash cards to its trading systems. And its technology is also used in data centers belonging to Facebook and Apple.

On top of that, Fusion has relationships with all the big server vendors: Hewlett-Packard, IBM, Dell and SuperMicro all sell systems with Fusion-io on board.

Workstations are essentially heavily tricked-out PCs that are used primarily in two professions: Animation and special-effects work for movies and TV and computer-assisted design and modeling, used by folks who design buildings and cars and planes and pretty much anything else you can think of. They have the same problem that servers have — agitated processors constantly waiting for the rest of the system to catch up with them.

At this point, none of the workstation vendors are offering the card as an option, but if you’ve got a professional workstation — like, say, an Apple Mac Pro, which has three PCI Express slots — you might add one of these cards and speed up your work. In the meantime, the company is working with workstation vendors to get the ioFX insert cards certified. My guess is there will be more than a few visual artists who won’t bother to wait.

Fusion-io shares are up almost 11 percent — or $2.64 — to $27.30, as of 11 am ET; not so much on this news — workstations are kind of a low-volume market — but on an analyst report from Piper Jaffray suggesting that Cisco Systems may be close to a deal to add Fusion-io’s flash technology to its Unified Computing System platform.

The report goes on to suggest that Cisco could, over the next three or four quarters, become one of Fusion’s bigger customers, along with Facebook and Apple, and could account for more than 10 percent of Fusion’s business — which could, in turn, lead to a doubling of revenue this year. For the record, sales were $197.2 million in Fusion’s fiscal 2011. Do the math.

Increasingly, that phrase can be applied not only to Las Vegas casinos, but also to Facebook, which takes a 30 percent cut of game developers’ revenues for the right to be on the social network.

“Facebook is almost the same business [as casinos],” said Chris Satchell, CTO and EVP of research and development at International Game Technology, which makes both traditional casino games and social games. “Facebook has real estate and customers, just like the casinos.”

Since 1981, IGT has been developing and manufacturing slot and video poker machines for casinos. Some of its games include recognizable brand names such as Wheel of Fortune, Big Buck Hunter, The Hangover and Sex and the City. Now, the casino game-maker is trying its hand at social games.

To make the leap, in January IGT acquired Seattle-based Double Down Interactive for $500 million. This week, the company launched their latest social game, called American Idol Slot, within Double Down’s casino on Facebook, which ranks in the top 25 by drawing 5.4 million gamers a month.

The American Idol game lets people spin the wheels featuring the faces of Season 11 contestants with host Ryan Seacrest looking over their shoulder. The free-to-play game allows you to win additional chips. Those who aren’t as lucky can buy 75,000 for $1.

The company says the game was in development prior to the acquisition, but says it is an example of how the two companies make a great fit.

Satchell said the idea is to enable cross-platform gaming experiences, so that players can connect to games before, during and after visits to casinos. Obviously, using big names helps.

But he also sees Facebook as a way to introduce casino games to a younger crowd, who are more likely to go clubbing at a casino than play highly profitable slot games.

“If we could just get them to understand that it’s fun. Social gaming is a good way to do that, and it’s a good business in its own right,” he said.

It’s a good business now, but it may be an even better business in the future when online gambling is legalized.

Late last year, the Department of Justice issued a new interpretation of the Wire Act of 1961. Under the new ruling, it interprets the Act as only outlawing bets on sporting events — not all events and contests. With that clarification in place, it will now be up to each state to pass legislation outlining operating procedures.

Some states have already passed laws, encouraging several companies, including IGT, Zynga and Caesars Interactive, to place their bets.

It’s not so much about any shifts in sentiment or intention for spending among large companies, it’s just that the dollar is currently strong against other currencies, so U.S.-domiciled companies are in a weaker position when selling to customers in other countries. When accounting for that discrepancy, Gartner says it expects overall growth in spending of 2.5 percent, but on a constant currency basis, the digits would be transposed for a healthier 5.2 percent.

Spending by governments will likely contract, thanks in no small part to the austerity measures being put in place in the euro zone.

The highest rate of growth will be in the telecommunications equipment sector, which will grow by nearly 7 percent, Gartner says. A lot of that is thanks to mobile going to mobile, but also to speeding up networks. See the rest of the segments and their expected rates of growth in the table I screengrabbed from the press release, below:

Earlier this week, Gartner singled out IT spending in emerging economies, which it said will amount to an impressive trillion and change by itself. And last week we got a glance at the sentiment from 100 CIOs at large enterprises, courtesy of J.P. Morgan, indicating that growth is likely to tick upward this year. Up is good.

Well, today we heard from another bank, and its opinions about Intel’s Romley chip and what it means for data center spending couldn’t be more different. Chris Whitmore, an analyst with Deutsche Bank Market Research, published a note to clients today, arguing that Romley will indeed spur a new round of spending in corporate data centers, and that it will have an equally strong secondary effect on the fortunes of enterprise storage companies, specifically EMC and NetApp.

One of the things that Romley will encourage, Whitmore writes, is a growth in the density of virtual machines running in each server. (Remember that, more often than not, a physical server is virtualized or subdivided into many virtual servers, allowing each machine to act like several machines.) More virtual machines allows you to consolidate your physical machines and add more in the same footprint if you want, which in turn means more computing work getting done overall. Whitmore estimates that, in general, data centers will boost their workloads by 20 to 25 percent by the end of next year.

Roughly 26 percent of Romley chip purchases will be used in these virtualized environments, Whitmore estimates. And that tends to spur demand for storage to support the virtual machines. In fact, the growth of terabytes worth of storage products shipped mirrors closely the unit growth of servers. (See the graphic, below, which I screen-grabbed from the report; click to see it bigger.) In short, it’s good news for NetApp and EMC. Whitmore says both are taking share from other vendors, including IBM, Hewlett-Packard and Dell, with sales growing at north of 20 percent a year — a growth rate that’s higher than that of the overall market, which grew 14 percent last year. He rates shares of both EMC and NetApp a “buy,” with price targets of $35 and $60, respectively.

Great news for EMC and NetApp, but what does it mean for Intel? Whitmore says to expect a mixed bag. Companies wanting to boost their use of virtual machines will be buyers. Companies that aren’t into virtualization so much, maybe not. “We believe our estimate of x86 servers shipped into virtual environments growing from 21 percent in 2011 to 26 percent in 2013 could prove conservative,” Whitmore writes. “As a result, although we expect Romley to have a relatively muted impact on overall server unit demand, we do expect it to drive another leg of virtual machine growth.”

This week, I’ve been testing the HP Envy Spectre 14, a glass-covered laptop that falls into the Ultrabook category. The Envy Spectre hit the market in February, and the base model currently retails for $1,400.

I liked the Envy Spectre. It’s eye-catching, lighter than the laptop I usually carry, and zippy in terms of its processing power. But compared to other Ultrabooks, it’s heavier and more expensive. It’s really more of a premium product, rather than an ultra-light laptop. Also, there were a couple elements of its design, such as the fact that it wasn’t tapered and the lid was hard to open, that might prevent it from being my main laptop squeeze.

The Envy Spectre 14 is 20 millimeters thick — just over 0.79 inches — and has a 13.3-inch-wide body with a 14-inch-diagonal LED-backlit display. It weighs just shy of four pounds. In comparison, the Dell XPS 13, which AllThingsD’s Walt Mossberg recently reviewed, is, at its largest point, 0.71 inches thick and just under three pounds. The 13-inch MacBook Air, which at its largest point is 0.68 inches thick, also weighs in at 2.96 pounds.

Despite its thickness, the HP Envy Spectre 14 is an attractive laptop. Its aluminum body is covered with Gorilla Glass, the thin, chemically-strengthened glass that makes up the displays of many smartphones and tablets. The glass is layered over three areas of the laptop: The lid, the 1600 by 900 pixel display screen and the palm rest. The trackpad is coated with chemically etched glass, which gives it slightly more traction than the cool-to-the-touch, super glossy Gorilla Glass.

The glass is scratch-resistant — I threw my keys into my laptop bag a few times, and the laptop wasn’t scratched — but it’s definitely not smudge-resistant. As with my smartphone and iPad, it was only a matter of time before the Spectre was covered with cloudy fingerprints. Fortunately, HP has included a protective case with the laptop.

The Spectre comes with a 128 gigabyte solid-state drive, 4GB of memory, runs Windows 7 and is powered by an Intel Core i5 processor, with the option to upgrade to a faster i7 processor for an extra $200. For an additional $300, you can also get a 256GB solid-state drive.

When I fired up the Envy Spectre for the first time, I noticed how quickly it booted up and how fast it was compared to my regular laptop, a fully loaded MacBook Pro. I downloaded iTunes, purchased a new album, installed a new Web browser and ran multiple Web pages at once, including a video-streaming site; even with all that going on, the Envy Spectre didn’t seem to slow down at all.

HP claims 9.5 hours of battery life with the Envy Spectre, provided that the user has the laptop set to HP’s recommended power-saving settings. In my test of the Spectre, which involved turning off power savers and setting the display to full brightness, connecting to Wi-Fi, playing an iTunes playlist nonstop and running an email application, the battery lasted just over five hours. With more normal usage, I estimate you’ll get about an hour more.

After a week with the Envy Spectre, there were a couple of elements of its design that bugged me. The first is that it’s actually difficult to open. There’s a barely-there lip on the lid of the laptop, and every time the device was shut, I had to dig my nails around the edges to pry it open.

I also noticed that the Envy Spectre’s screen doesn’t recline as far back as some other laptop screens do. This laptop has a dropped hinge so the bottom of its display butts up against the keyboard, physically preventing it from going back further. I compared the Spectre to an Asus Ultrabook and even a MacBook Pro, and both laptops opened up wider than the Spectre does. For users who prefer a wide range of motion with their laptop screens, this could be a drawback.

But there were aspects of the hardware that I liked. The LED-backlit keyboard is a nice touch, and the keys had a velvety feel to them. The keys also have proximity sensors that sense when the user has stepped away from the laptop for an extended period, dimming the backlighting and acting as a minor battery-saving mechanism. While some people are used to function keys performing common shortcuts — such as F5 for refreshing a Web page — I liked that the Spectre’s function keys adjusted display brightness and controlled music playing.

There’s an easy-to-access volume-control wheel on the right-hand side of the keyboard. This is part of HP’s Beats product, offered in select computers, which is supposed to produce better-sounding audio. While Beats audio isn’t going to replace the sound system in your home or apartment anytime soon, the music tracks I listened to through the laptop sounded fuller with Beats, especially when heard through headphones.

Unlike the MacBook Air, the Envy Spectre comes with an expandable built-in Ethernet port, along with two USB ports, an HDMI port and a Mini Display port.

There are also some other sweeteners that HP threw in with the Envy Spectre 14, including Adobe Photoshop Elements and Premiere Elements (which photo and video hounds will appreciate), a two-year warranty for the price of one year and a two-year Norton AntiVirus software package.

I would recommend the HP Envy Spectre 14 — but as a premium laptop, not as an Ultrabook. For consumers who want a super slim, lightweight laptop, there are options with similar technical specifications that weigh in at under three pounds and cost less.

]]> http://allthingsd.com/20120402/hp-envy-spectre-14-a-premium-ultrabook-at-a-premium-price/feed/ 7 http://allthingsd.com/20120329/finally-things-are-looking-up-for-it-spending-survey-finds/ http://allthingsd.com/20120329/finally-things-are-looking-up-for-it-spending-survey-finds/#comments Thu, 29 Mar 2012 16:45:10 +0000 Arik Hesseldahl http://allthingsd.com/?p=191138 I’ve become a little tired of writing stories about gloom and doom and ongoing difficulty in the world of IT spending. Spring is here and I’m ready for a little optimism. Thank goodness, I’ve found it.

It comes in the form of a survey of 100 CIOs by the investment bank J.P. Morgan. The firm finds that, on average, CIOs say they’re going to boost their IT spending by 2.7 percent this year, up from 2.4 percent in 2011. That may not seem like a big change, but here’s why its important: It’s the first time in a few years that the same survey has detected a directional change in sentiment. CIOs are at long last saying they intend to boost their spending on IT, rather than trimming it back and back and back as they have for the last several years. “In our prior CIO survey in September 2011, the directional movement indicated a reduction in planned spending growth, as at that time CIOs were starting to pare back on spending during more uncertain macroeconomic conditions,” the firm says in its report, which was shared exclusively with AllThingsD.

The optimism is a bit more pronounced when you see it expressed in the graphic below, which I grabbed from raw survey results. More than two-thirds of the CIOs surveyed said they planned to boost their overall IT spend this year, most of them by a modest 1-5 percent, but some by more than 10 percent. Last year, the figure was 58 percent, but it usually swings up by only 3 or 4 percentage points, analyst Mark Moskowitz told me.

“The overall tone we got in our conversations with these CIOs was more optimistic than it has been in a while,” Moskowitz said. “They have the green light to start projects that are going to take several quarters to get done. Most aren’t willing to do that when they’re worried their overall business is going to roll over.” A lot of that has to do with more confidence in the overall macroeconomic environment.

And where will that growth be? And, perhaps more importantly, where won’t it be? Software, storage and security are looking like big spending priorities among the CIOs surveyed. Business intelligence tools and getting mobile devices integrated are also high on the list — there’s that ongoing trend toward “bring your own device” (BYOD), rearing its persistent head once again.

Employee-purchased iPhones, iPads and Android devices are supplanting company-assigned BlackBerrys. “BYOD is real,” Moskowitz says. “And you have to assume that Apple is going to be the one that benefits the most from it.”

Other winners include EMC and NetApp, as they play strongly in networked storage. Server virtualization — making one physical server act like dozens of servers, using software to subdivide its resources — also has a lot of room to grow, the survey finds. That’s good news for VMware.

Losers? There are few. Intel’s new Romley chip isn’t going to be as big a deal in spurring spending on new servers: In fact,91 percent of CIOs surveyed said they don’t expect Intel’s new chip to drive new spending in the data center. Intel’s last big upgrade, Nehalem, did change the game, Moskowitz says. The trouble is, most of the companies using Nehalem-generation chips in their servers are happy with them, and are unlikely to bother with the expense of an upgrade, for now.

Nor is Windows 8 going to cause a new round of PC buying, as both Hewlett-Packard and Dell are hoping. “A new version of Windows hasn’t caused a PC upgrade cycle since 1995,” Moskowitz told me. Asked directly if Windows 8 was expected to drive a major PC upgrade cycle, 78 percent of the CIOs in the survey said no. In fact, at least 30 of the CIOs in the survey said they were still working on deploying Windows 7. Ouch. Perhaps it’s too much to ask for things to be looking up for everyone all at once.

(Image is a movie poster for the 1935 British film starring Cicely Courtneidge, but the title song in this case is, well, awful. What I really wanted was an image of Fred Astaire dancing with Joan Fontaine to the underappreciated George and Ira Gershwin tune of the same name, from the 1937 film “A Damsel in Distress,” but I could find nothing suitable. So — loving Gershwin tunes as I do — just for fun, I’ve embedded both Astaire and Billie Holiday singing the tune, below, courtesy of Grooveshark. Yes, I’ll admit, sometimes I have a little too much fun in this job.)

]]> http://allthingsd.com/20120329/finally-things-are-looking-up-for-it-spending-survey-finds/feed/ 0 http://allthingsd.com/20120327/hp-and-oracle-i-know-you-are-but-what-am-i/ http://allthingsd.com/20120327/hp-and-oracle-i-know-you-are-but-what-am-i/#comments Tue, 27 Mar 2012 14:28:31 +0000 Arik Hesseldahl http://allthingsd.com/?p=190336 The trial date in the nasty dispute around the Itanium chip between Oracle and Hewlett-Packard must be getting close, because both sides asked a California judge to essentially rule in their favor before the trial actually begins.

Lawyers for both HP and Oracle filed arguments seeking summary judgement in their fight over whether or not Oracle has the right to stop making software that has been ported to run on computers using Intel’s obscure Itanium chip. Oracle said last March that it would no longer support the chip, which is, for all intents and purposes, only used in certain exotic high-end systems sold by HP. For its part, HP has argued that Oracle is bound by a contract to continue to support the chip for several more years. I’ve embedded the competing filing documents below.

The legal moves naturally touched off a renewed salvo of public statements between them that added some interesting details to the proceedings, and which provide some fair insight into how the two players are going to argue at trial. Basically, it’s going to come down to whether or not the two companies have an enforceable agreement that was struck as part of a wider settlement they reached when they settled another lawsuit that followed former HP CEO Mark Hurd’s hiring by Oracle.

Meanwhile, Oracle insists that HP and Intel are lying to the marketplace about the future prospects of the Itanium chip, and has characterized their efforts to keep the chip alive in the marketplace as “a remake of ‘Weekend at Bernie’s.’”

HP scored first:

“The information brought to light during the discovery period further underscores the key facts of this case. In fact, it has led HP to seek a pretrial ruling that Oracle is contractually obligated to offer future versions of Oracle’s software on Itanium. It is time for Oracle to quit pursuing baseless accusations and honor its commitments to HP and to our shared customers.”

HP’s statement then went on to use several historic statements by Oracle, emphasizing the partnership and commitment to Itanium. It even quoted Oracle CEO Larry Ellison:

“Ellison testified that in making his decision to issue Oracle’s March 22 announcement that Itanium was “nearing the end of its life,” he relied on a conversation with Intel’s chief executive officer, Paul Otellini. But Ellison admitted under oath that Otellini did not say that Itanium was nearing the end of its life. And the Intel executive responsible for the Itanium business has now testified unequivocally that Oracle’s claim was not true.”

Oracle attorney Dan Wall issued a pair of statements, and one was more or less the standard summary of that company’s position: So important an agreement as the one that would obligate Oracle to extend a strategic partnership wouldn’t be contained in a settlement over what was essentially a dispute over a noncompete agreement.

“We don’t believe, nor do we think HP really believes, that a settlement agreement relating to Mark Hurd’s employment could possibly obligate Oracle to write new software for a platform that is clearly end of life. We are pleased the Court now has the evidence needed to see HP’s purported contract claims for what they are.”

Then, apparently after seeing HP’s extensive statement , Wall shot back with more extensive — and interesting comments. He cites testimony fromformer HP chief communications officer Bill Wohl as admitting that the lawsuit was more or less a public relations stunt that was part of a wider campaign intended to raise outrage among their shared customers and force Oracle to reconsider.

“Rather than filing a legal motion, HP has yet again filed a press release that continues its campaign of lies about the Itanium roadmap. HP’s PR Director admitted the lawsuit was conceived as part of a campaign designed to ’foment customer outrage.’  HP’s documents and executive deposition testimony make indisputable the fact that Itanium is nearing the end of life as Oracle said. Intel documents confirm that as well–which is why despite repeated efforts by HP to get Intel to refute Oracle’s March 22 press release, Intel has refused to say more than that it intends to deliver the two announced versions of Itanium.

“The status of Itanium, meaning its impending end of life, has been maintained as one of HP’s most ’closely guarded secrets’ from customers, partners and HP employees alike in order to avoid giving its sales organization ’another reason not to sell’ Itanium and to continue to ’milk’ maintenance profits from its customers. HP documents reference HP-UX on Itanium as on a ’death march’ and confess that Intel would be doing ’high fives’ to no longer have to develop the chip given its poor performance and market traction and the huge opportunity cost associated with it. HP’s documents also contemplate various options to deal with the inevitability of Itanium’s end of life, including paying Intel to ’elongate’ its life. HP’s documents make clear that HP was intent on ’creating a market perception of long term viability’ and introducing versions of the chip that are ’more of an illusion than of technical significance.’ In other words, HP’s strategy was to mislead the market and its customers as to the real status of Itanium. Oracle will not participate in this fraud.”

The history and context of this lawsuit is long and complicated, and fraught with the fact that for a time, HP was run by former SAP co-CEO Léo Apotheker at a time when Oracle and SAP were locked in their own nearly-nuclear multiyear legal battle. The fact that former Oracle president and Ellison enemy Ray Lane is HP’s executive chairman only adds to the enmity.

However, there’s evidence to show that HP is the one being hurt the most by the ongoing fight. Without the support and maintenance fees that HP collects from companies who buy its Itanium-based servers, the company is, in the words of one of its own executives, “strategically screwed.” Amid the doubts brought on by the fight with Oracle, sales of HP’s highly profitable business-critical servers have suffered. And with the printer business suffering and PC sales flattening, that is the last thing HP needs.

Oracle, by all appearances, can afford to let its Itanium business die, and has argued that Intel would like nothing better than to get out of the business of making Itanium chips that are only profitable with subsidies from HP; and that it has quietly planned to let the chip reach the end of its life and transition customers over to its more mainstream Xeon chip, which it now says is “suitable for any workload.”

Anyway, the dueling filings are below, HP’s first:

HP Summary Motion

Oracle Summary Motion

(Image, obviously, is a screen grab from this epic moment of cinematic history, circa 1986.)

]]> http://allthingsd.com/20120327/hp-and-oracle-i-know-you-are-but-what-am-i/feed/ 0 http://allthingsd.com/20120321/apple-poised-to-unseat-intel-as-top-mobile-chip-company/ http://allthingsd.com/20120321/apple-poised-to-unseat-intel-as-top-mobile-chip-company/#comments Wed, 21 Mar 2012 15:30:55 +0000 John Paczkowski http://allthingsd.com/?p=188751 Apple is now the world’s second-largest mobile chip company. By year’s end, it could be the first, surpassing even industry juggernaut Intel. (Caveat: Samsung manufactures Apple’s processors.)

So says research outfit In-Stat, which just finished up a survey of the chip market that shows Apple on a sharp upward growth trajectory. With demand for the iPhone and iPad growing at an unprecedented pace, and growth in the PC market a bit more lethargic, Apple’s mobile processor business is fast closing the gap on Intel’s. In fact, there’s not much of a gap to close.

In 2011, Apple shipped about 176 million chips in its iOS devices, capturing a 13.5 percent market share. Intel shipped just .4 percent more — 181 million chips, enough to snag a 13.9 percent market share.

With demand for the new iPad running high, the iPhone 4S selling well, and its successor presumably headed to market later this year, Apple will almost certainly pass Intel this year. And if it swaps in its own chip for the Intel chip in the MacBook Air, it may not only pass it, but claim a decent lead, as well.

That said, it should be noted that Intel’s presence in the smartphone and tablet markets is currently miniscule at best. While its chips are used in some tablets, they’re not really used in smartphones at all. Intel, of course, plans to change that — and soon. Its forthcoming Atom chip — codenamed Medfield — is reportedly headed to smartphones and tablets before the end of the year.

UPDATE: It should be noted that In-Stat’s rankings diverge significantly from those of another research firms, strategy Analytics, which in February ranked Qualcomm as the leader in the smartphone apps processor market by unit shipments.

]]> http://allthingsd.com/20120321/apple-poised-to-unseat-intel-as-top-mobile-chip-company/feed/ 0 http://allthingsd.com/20120316/apples-new-ipad-costs-at-least-316-to-build-ihs-isuppli-teardown-shows/ http://allthingsd.com/20120316/apples-new-ipad-costs-at-least-316-to-build-ihs-isuppli-teardown-shows/#comments Fri, 16 Mar 2012 22:19:41 +0000 Arik Hesseldahl http://allthingsd.com/?p=187208 Apple’s new iPad hit store shelves today. That means that along with the lines at the stores and the requisite applause of store employees cheering people who buy them, there were among the many iPad buyers today people who just couldn’t wait to get the gadget torn apart.

The analysts at the market research firm IHS iSuppli, considered by the investment community to be the most reliable of the organizations that conduct teardowns, were among that set. Today, somewhere in Southern California, an iSuppli analyst stood in line at a store and promptly took an iPad to a lab, where it was torn into, initiating the interesting process of estimating what it all cost to build.

Here’s what iSuppli’s team found: First off, there weren’t many changes from the last iPad, in terms of suppliers. “It’s most of the same characters we saw last time around,” analyst Andrew Rassweiler told me today. Wireless chipmakers Qualcomm and Broadcom both reappeared — Qualcomm supplying a baseband processor chip, Broadcom a Bluetooth and Wi-Fi chip, TriQuint Semiconductor suppling some additional wireless parts. STMicroelectronics once again retained its position supplying the gyroscope. Cirrus Logic supplied an audio codec chip.

The 16 gigabyte, Wi-Fi-only iPad that sells for $499 costs about $316 to make, or about 63 percent of the device’s retail price. On the upper end, the 4G-ready 64GB model that sells for $829 costs about $409 to make, or about 49 percent of the retail price.

The new cost figures represent an increase of between 21 percent and 25 percent, depending on the model, from the iPad 2, which iSuppli tore down last year.

So what did they find inside? An expensive Samsung display, for one thing. All those millions of pixels don’t come cheap. ISuppli analyst Andrew Rassweiler estimates that the display, which cost $57 on the iPad 2, has grown in cost to $87 on the latest iPad.

Rassweiler says that two other vendors, LG Display and Sharp Electronics, have inked display supply deals with Apple for the latest iPad, but only Samsung is thought to have fully ramped up production. Depending on the vendor, the display may cost as much as $90, he said.

One set of components remained essentially the same as before: Those that drive the touchscreen capabilities. Rassweiler says that three Taiwanese companies, TPK, Wintek and Chi Mei, supply parts related to driving the central interface feature of the new iPad, but he says to expect a major shift in how Apple handles the touch interface on future iPads.

The combined cost of cameras, including the front-facing and back camera, is pegged at $12.35, more than three times the cost of cameras found on the iPad 2, Rassweiler says. But it’s essentially the same setup as that on the iPhone 4, he says. As has been the case with cameras, the identity of the supplier wasn’t easy to determine because they try hard to hide identifying information from the prying eyes of teardown analysts. The candidates, however, include Largan Precision Co., a Taiwanese supplier of camera modules to wireless phone companies, and Omnivision. On the iPhone 4S, a research firm called Chipworks identified the supplier of the CMOS sensor in one of the cameras as having come from Sony.

As with other Apple devices, the main processor chip is an Apple-made A5X processor, one manufactured under contract by Samsung. The estimated cost of that chip is $23, up from $14 on the iPad 2.

Another part that’s more expensive than on the last iPad, but also better for a variety of reasons, is the battery. This one is estimated to have cost Apple $32, up from $25 on the iPad 2. But it constitutes a significant upgrade, Rassweiler says, with 70 percent more capacity than before. Apple benefited in part by lower prices in the lithium polymer material used to make the battery, offsetting the cost of adding a vastly improved battery.

ISuppli wasn’t the only outfit conducting teardowns of the iPad today. An enthusiast site called iFixit that encourages consumers to learn how to repair and upgrade their own electronics, flew technicians to Australia to conduct its own teardown analysis.

]]> http://allthingsd.com/20120316/apples-new-ipad-costs-at-least-316-to-build-ihs-isuppli-teardown-shows/feed/ 0 http://allthingsd.com/20120314/were-so-ready-to-sell-chips-for-tablets-intel-coo-says/ http://allthingsd.com/20120314/were-so-ready-to-sell-chips-for-tablets-intel-coo-says/#comments Wed, 14 Mar 2012 13:42:00 +0000 Arik Hesseldahl http://allthingsd.com/?p=186168 Intel COO Brian Krzanich wants you to know that the world’s biggest chipmaker’s fabs are poised to start turning out chips for tablets.

In an interview with Reuters, Krzanich says he has fine-tuned the company’s supply chain in order to meet an anticipated demand for tablets. “We will start to see more and more of our capacity and our output go to things that are mobile, like phones and tablets and other devices,” he tells the global newswire.

Indeed, when the man responsible for Intel’s massive global chip-manufacturing operation speaks, he does so with the authority of a company that tracks the pulse of demand for chips obsessively, so he doesn’t make so public a statement lightly.

Yet the basic competitive problem remains. While Intel still dominates the roughly 300-million-unit-per-year market for PC microprocessors, it has struggled to compete against chips based on designs from the British chip designer ARM, which power most of the world’s smartphones and tablets — including, not insignificantly, the iPad. And while Intel’s lower-power Medfield-generation chip has landed in designs from Lenovo and Motorola Mobility, the wins are seen as progress in a race in which it was already well behind the leader.

Perhaps more interesting is how Reuters casually refers to Krzanich as a candidate to succeed CEO Paul Otellini. Intel shook up its management ranks in January, and promoted Krzanich to COO. Covering Intel includes paying attention to a constant drumbeat of speculation about who the next boss is going to be. Otellini is 61, and the company’s mandatory retirement age is 65, so the succession race, and the perennial handicapping chatter that goes with it, will be something of a marathon.

Krzanich would be a logical successor, mainly because most Intel CEOs become COO first, including both Otellini and his predecessor Craig Barrett. Yet there’s still one rival who bears continued attention: Sean Maloney, the English-born current head of Intel China, had been widely seen as the leading contender before suffering a stroke two years ago. However, people who know him say his recovery is remarkable.

I noted Maloney’s return to competitive rowing last year. A September profile of Maloney in Fortune had more to say on that subject. While he has largely recovered physically, the main lingering effect of the stroke has been on his speech. If he can get close to sounding as he did before the stroke, we may have a real horse race on our hands.

]]> http://allthingsd.com/20120314/were-so-ready-to-sell-chips-for-tablets-intel-coo-says/feed/ 0 http://allthingsd.com/20120311/captain-michio-and-the-world-of-tomorrow/ http://allthingsd.com/20120311/captain-michio-and-the-world-of-tomorrow/#comments Sun, 11 Mar 2012 21:45:58 +0000 Brian Bolduc http://allthingsd.com/?p=183640 By 2020, the word “computer” will have vanished from the English language, physicist Michio Kaku predicts. Every 18 months, computer power doubles, he notes, so in eight years, a microchip will cost only a penny. Instead of one chip inside a desktop, we’ll have millions of chips in all our possessions: furniture, cars, appliances, clothes. Chips will become so ubiquitous that “we won’t say the word ‘computer,’” prophesies Mr. Kaku, a professor of theoretical physics at the City College of New York. “We’ll simply turn things on.”

Mr. Kaku, who is 65, enjoys making predictions. In his latest book, “Physics of the Future,” which Anchor released in paperback in February, he predicts driverless cars by 2020 and synthetic organs by 2030. If his forecasts sound strange, Mr. Kaku understands the skepticism. “If you could meet your grandkids as elderly citizens in the year 2100,” he offers, “you would view them as being, basically, Greek gods.” Nonetheless, he says, “that’s where we’re headed” — and he worries that the U.S. will fall behind in this technological onrush.

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]]> http://allthingsd.com/20120311/captain-michio-and-the-world-of-tomorrow/feed/ 0 http://allthingsd.com/20120308/how-will-pcs-sales-grow-in-2012-sloooooowly/ http://allthingsd.com/20120308/how-will-pcs-sales-grow-in-2012-sloooooowly/#comments Thu, 08 Mar 2012 16:00:35 +0000 Arik Hesseldahl http://allthingsd.com/?p=181687 The worldwide business of PCs is still growing but it’s growing a lot slower than it used to, says the market research firm Garnter, in a forecast out today.

While 368 million units — the number Gartner reckons will be sold this year — seems like an awful lot, it amounts to growth of only 4.4 percent over 2011. The economy — Europe is still weak amid ongoing sovereign debt problems, plus supply chain troubles brought on by the flooding in Thailand where most of the world’s hard drives are made — is weighing the market down, Gartner says.

What will save it? Windows 8 and Ultrabooks, but not before 2013, when Gartner says to expect sales of 400 million PCs. They might stimulate renewed interest among consumers and businesses. But it’s hard to say.

What about Apple’s iPad and other tablets running Android eating into PC sales? There’s no question that they do. But that impact is relative: Gartner last sized up the scope of the tablet market last fall, and pegged it at 64 million units in 2012, which is probably conservative, seeing as how Apple sold 15 million iPads in the fourth quarter of 2011.

What has often happened with forecasts like this is that chipmaker Intel gets batted around a bit in a negative way, as financial analysts work the forecasts into their own expectations for the stock. If PC sales are slowing, the thinking goes, then Intel, which supplies most of the world’s PC microprocessors, will no doubt suffer.

Intel has tended to do well despite these forecasts, and cites growth in certain developing markets, like Brazil, India and Russia, where Gartner and other research firms have more limited visibility, as keeping demand for its chips growing.

Gartner tries to address that point in a summary of its forecast: Emerging markets will be key to driving growth, says its analyst, Ranjit Atwal, and most of the growth in the PC business will come from these countries through 2016. But the upshot is that if all you can think about is buying a new iPad and not a new PC, you’re not exactly alone in the world.

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