The company announced the departure just after the close of trading on the New York Stock Exchange. CEO Rory Read will handle Ghilardi’s sales responsibilities in the interim while the search for a replacement gets underway.

Ghilardi (pictured) joined AMD in 2008 as senior VP and general manager for Europe, Middle East and Africa. The following year, he was promoted to chief sales officer.

Before AMD, he worked in Hewlett-Packard’s consumer group, running sales operations of PCs and printers in the EMEA region. And before that, he did the same thing for HP’s commercial business, also in EMEA. He joined HP in 1982, and served on the board of directors of HP Italy (I didn’t know there was such a thing!) from 2001 to 2008. Ghilardi holds a master’s degree in electronic engineering from Italy’s Politecnico di Torino.

It’s hard to know what kind of signal this move is intended to send for AMD. Last week, in a meeting with financial analysts, Read confounded the audience with statements that AMD — whose chips are fundamentally similar to those of Intel and use the same x86 technology — might pursue an “ambidextrous” strategy and incorporate technology used in chips from other companies. This has generally been interpreted as a hint that AMD might incorporate designs from the British chip outfit ARM Holdings in some future hybrid design.

ARM-based chips, as you probably know, are in most of the world’s smartphones and tablets, and for AMD to embrace that technology would be a huge shift in strategic thinking. And by huge, I mean Republicans-embracing-Socialism huge. It wasn’t so long ago that AMD was actively sponsoring a campaign to get x86 chips everywhere, including phones, though it obviously hasn’t worked out that way.

Since then, Read hasn’t really elaborated on what he meant, other than to say that future AMD chips might have a modular design that would allow bits of other types of chips, including an ARM core, to be added. Clearly some big changes are afoot at AMD.

AMD’s statement on the departure is below:

AMD Announces Departure of Emilio Ghilardi as Senior Vice President and Chief Sales Officer

AMD President and CEO Rory Read to Serve as Interim Chief Sales Officer

SUNNYVALE, CA–(Marketwire -02/07/12)- AMD (NYSE: AMD – News) today announced the departure of Emilio Ghilardi as senior vice president and chief sales officer, effective immediately. Rory Read, AMD president and chief executive officer, will serve as interim chief sales officer while the company actively seeks a replacement.

“I’d like to thank Emilio for his contributions to the business and wish him well in his future endeavors,” said Read. “Developing relationships with our customers that are grounded in a foundation of trust through consistently delivering on our commitments is critical, and we are making progress toward that goal. AMD enters 2012 with significant momentum, and we are building upon that momentum by embracing the shifts occurring in the industry and marrying market needs with innovative technologies to become a consistent growth engine.”

Mr. Ghilardi joined AMD from Hewlett Packard in 2008.

Its results, as well as the forecast for the coming quarter, were ahead of what many analysts were expecting.

“We are raising our revenue and earnings guidance as our broad licensing partnerships and extensive chipset roadmap, led by our integrated Snapdragon processors, position us well for strong growth in fiscal 2012,” CEO Paul Jacobs said in a statement.

The results contrast with those from rival Nvidia, which last week cut its forecast for the quarter, blaming a slowdown in shipments of its Tegra 2 mobile processor, as well as PC market sluggishness.

As for Qualcomm, I’ll be at the San Diego-based company on Thursday looking at some of their technology and meeting with executives.

A start-up called Tilera today unveiled a chip it calls the TILE-Gx. Essentially, it’s a super-chip with 36 cores which — so the company claims — beats a traditional Intel server chip on the key metric of performance per watt.

For those who don’t keep score in the arcane world of semiconductors, I’ll revisit some of the basics of the above paragraph. We all know that Intel and its one main rival, Advanced Micro Devices, sell chips for servers. Those chips, and those that go into PCs, are generally known as x86 chips, a name derived from the instruction set they share.

On the other hand, there are ARM chips, which are a different breed, and exist in a very different ecosystem. Scores of companies make ARM-based chips for all kinds of different uses, and they license the basics of the designs from ARM, the company, which last year did $636 million in revenue.

ARM chips show up in phones and tablets from the likes of Broadcom, Qualcomm, Texas Instruments and Nvidia, but not so much in PCs and servers. ARM is even the basis for Apple’s A4 and A5 chips. At CES last year, Microsoft said it would create a version of Windows 8 that will support ARM chips. And a company called Calxeda (which I initially got mixed up with Tilera) is aiming to bring ARM cores to chips running in servers.

Tilera, based in San Jose, Calif., is backed by investments from Bessemer Venture Partners, Walden International, Columbia Capital and VentureTech Alliance; plus a trio of strategic investors, Quanta Computer, NTT Finance and Broadcom. Its new chip is based around an entirely new architecture developed by Tilera’s CTO Anant Agarwal, a professor at the Massachusetts Institute of Technology. It forgoes both the traditional x86 and ARM architectures. Aimed squarely at servers, its intention is to get the same work done that a traditional Intel server chip does, while using less power to do it.

That’s not a trivial benefit, especially in data center environments where servers are bunched together and pushed to the performance limit. The biggest operational expense in running them is going to be power. So it’s on this point that server vendors and chip vendors obsess over saving a watt here and there — over the machine’s useful lifetime, the costs will add up considerably.

How it does this is what makes it interesting. Essentially, the cores on the chip do something that an Intel chip can’t do: They communicate among themselves. The way I understand it — and I admit I’m simplifying it greatly — the cores on an x86 chip rely on a single communications channel, called the Bus, to communicate. The Tilera architecture allows each core to communicate directly with the other cores, thus eliminating the need for the Bus and cutting back on the need for power.

The top-end chip — there are two versions — has 36 cores. A core is essentially the main computing engine on a chip. If you’re reading this on a PC, chances are the chip inside it has two cores, maybe four. It used to be that chips had only one core, until it became logical to put two or more on a single chip. I’ve always compared multicore chips to roommates folding laundry together. When there’s a big pile of laundry to be folded, one person can certainly do it, but two or four get it done faster and with less effort. Multicore chips basically prove the old adage that many hands make for fast work.

There’s an obvious appeal to a chip like this, but there are a lot of strikes against it. First, much of the server ecosystem is pretty well entrenched. Companies run what applications they already have, and are usually loath to mess with their computing environments much. Changing the architecture of the CPU chip inside the servers is about as major a decision as a CIO may ever make, and one they don’t make lightly. First they’ll have to test it and run it for awhile, and then see how it interacts with other systems. It’s not the sort of decision that happens just overnight. Also, a new architecture brings with it a lot of software compatibility questions that will give many IT departments pause.

Meanwhile, Intel, which sells chips that go into most of the world’s mainstream servers, will continue to push its power consumption down. At the same time, it’s been trying like crazy to use its Atom line of chips to mount an attack on ARM’s territory and win business from phone and tablet vendors. That effort is just now seeing its first early successes. If there’s a great long-term story in chips that bears watching, the grappling between Intel and the ever-expanding universe of ARM vendors is certainly it.

Correction: I initially thought the Tilera chip was based on the ARM architecture. I’ve revised the story to correct that.

The first was last year in Hillsboro, Oregon, and during the visit, Intel CEO Paul Otellini announced that the new chip plant, or “fab” as they’re usually called, would be built in Arizona.

The main reason that Obama loves Intel is that it’s an example of the kind of manufacturing work that he’d like to see more of in America. As such, the sight of Intel spending $5 billion to build a new plant and adding 4,000 jobs is the sort of thing that any president would like to stand close to, especially at the onset of what looks to be a tough re-election campaign. It’s also one of those rare companies that’s riding high despite an uncertain global economy.

One thing Obama certainly didn’t mention was that Intel added plants in Israel and China in the last year as well. He’s also in no hurry to remind the audience that the chips that Intel makes will be shipped to China and inserted into computers and servers, many of which will be shipped into the United States.

We also learned this week from the New York Times, Obama seemed vaguely baffled by the notion that Apple’s iPhone is manufactured in China, and in a meeting in Silicon Valley last year asked Apple CEO Steve Jobs why they couldn’t be made in the U.S. Jobs’s answer, which is correct: Those jobs aren’t coming back. David Ricardo’s law of Comparative Advantage strikes again.

Anyway, the only video of the full speech that I’ve found came from the local TV station, ABC15, and thankfully they have made it embeddable.

In his remarks, the president is impressed both with the grand scale of things involved in building chips — he remembers seeing an electron microscope at Intel’s plant in Oregon that was powerful enough to display atoms, which is certainly impressive. In Chandler he’s impressed with what he says is the world’s largest land-based crane, which is being used in the construction effort. Enjoy the speech.

(Image is a screen grab from earlier in the video.)

Shares are down more than $4, or about 13 percent. The freakout appears to be coming from gross margins that shrank to 51 percent from almost 59 percent in the prior quarter, and despite the fact that sales more than doubled sequentially to $84 million from $31 million before.

CEO David Flynn called me up a little while ago to talk about the results, and he reminded me that Fusion launched its new IO Drive 2. It’s a transition to a new product line that’s proving tricky. New products built on new technologies are always a little more costly to build up front, and that’s compounded by the fact that early adopters, when they buy the new stuff, take the lower-end version and not the more expensive and more profitable one.

Also, enterprise customers who buy the new stuff are always conservative and take longer to decide whether they want to buy it or not, he says. Even so, the company has sold 10,000 of the new drives.

But? There’s a new customer of record: Salesforce.com is now a Fusion-io customer, and has joined the likes of Apple and Facebook, which is using the flash-based chips in the servers running in its data centers around the world.

And Salesforce isn’t buying it directly from Fusion, but rather through one its OEM partners, which include Hewlett-Packard, IBM and Dell, though Flynn wouldn’t tell me which one it is.

Salesforce is one of six customers who bought more than a million dollars worth of Fusion’s stuff this quarter and of those, four were repeat customers, Flynn told me.

The Salesforce win is also important, Flynn says, because some have wondered whether Fusion’s technology, while popular with high-end enterprises like banks and Facebook, would make sense for applications that tend to be used in mid-tier businesses, which Salesforce’s mainline CRM application often is. The lower end of the enterprise software market is moving toward cloud-based software, which is often referred to as Software as a Service, or SAAS. “By helping those companies, we are indirectly driving business in the mid-range of the market. Apple and Facebook are in the SAAS business too, it’s just that their customers are consumers.”

One interesting fact that Flynn shared with me: His first job out of college was working for Oracle. His boss at the time? One-time Oracle exec and now Salesforce CEO Marc Benioff. A small world it is, indeed.

AMD CEO Rory Read

First there’s Intel, which has parlayed its deep strategic command of the complex and expensive process of manufacturing chips into a commanding position at one of the crucial pivot points of tech hardware, despite the uncertain state of the global economy, and also despite the dire predictions of analysts.

Then there’s Advanced Micro Devices, which competes for the same sockets in PCs and servers that Intel does, but with a lot less success to show for it. While it reported a non-GAAP profit of 19 cents a share on $1.7 billion in sales, its outlook for the current quarter was weak enough to send AMD shares down 2 percent in after-hours trading. Its revenue forecast of $1.51 billion to $1.61 billion caught analysts by surprise, as they had been expecting average revenue of $1.6 billion.

Then there’s the matter of a $209 million charge from the writedown of AMD’s stake in Globalfoundries, the contract chip manufacturer that was cobbled together out of what used to be AMD’s factories in Germany, Texas, and one under construction in upstate New York; plus the former Chartered Semiconductor. That expense went a long way toward pushing AMD’s results into a 24-cent per-share loss on a GAAP basis.

Spinning off its expensive factories was supposed to save AMD, and it may well have done so. AMD now owns less than 9 percent of Globalfoundries. But the strategic shift has yet to pay off in the kind of success that AMD envisioned when it first plotted the move.

The big news is that Intel has a new COO: Brian Krzanich. He’s a former senior vice president who ran Intel’s manufacturing operations. Krzanich will also be in charge of internal IT and human resources functions that previously belonged to Bryant.

Next, Dadi Perlmutter has been promoted to chief product officer. He’s a widely respected engineer who has long been head of Intel’s Architecture Group, which is basically in charge of designing Intel’s chips. Perlmutter is often mentioned as a candidate for CEO.

Diane Bryant, Intel’s CIO, will now run the increasingly important Data Center Group. Bill Holt, head of Intel’s Technology Development Group, will now report directly to CEO Paul Otellini, having previously reported to Bryant.

Kirk Skaugen, who has run that group, will now run the PC Client Group, replacing Mooly Eden, who will be taking over as General Manager of Intel Israel. Kim Stevenson, VP of global operations and services, was named CIO.

Intel’s full statement is below:

Intel Announces Management Changes

Intel Names Chief Operating Officer and Chief Product Officer

SANTA CLARA, Calif., Jan. 20, 2012 – Intel Corporation announced a number of executive promotions and rotations today that recognize outstanding performance and assign new responsibilities as part of Intel’s commitment to management development.

As previously announced by Intel’s board of directors, Andy Bryant will move from vice chairman of the board to full-time executive chairman at the company’s Annual Stockholders’ Meeting in May. In anticipation of that change, Intel is promoting two senior executives, one of whom will take on much of Bryant’s prior responsibilities.

First, the company has promoted Brian Krzanich to chief operating officer, reporting to Paul Otellini, president and CEO. Krzanich had previously been a senior vice president in charge of Intel’s worldwide manufacturing. In his new role, Krzanich will continue to oversee manufacturing and also take on responsibility for internal IT and human resources, functions that previously reported into Bryant.

Secondly, in recognition of his outstanding work in developing the Intel® Architecture product portfolio, Dadi Perlmutter is being promoted to chief product officer. Perlmutter will continue to lead the Intel Architecture Group and continue reporting to Otellini.

Stacy Smith, senior vice president and chief financial officer, will now report directly to Otellini. He had previously reported to Bryant.

Bill Holt, senior vice president and head of Technology Development, will also now report directly to Otellini. He, too, had reported to Bryant. Holt and Krzanich will continue to co-manage the Technology and Manufacturing Group, allowing Intel to maintain the critical, close collaboration between semiconductor process technology development and manufacturing.

Kirk Skaugen, Intel vice president and head of Intel’s data center business, will become the new head of the PC Client Group (PCCG), succeeding Intel Vice President Mooly Eden, and reporting to Perlmutter. After 9 years in the United States, Eden is moving back to Israel at his request and will assume the position of president and general manager, Intel Israel, reporting to Perlmutter. While in the United States, Eden led Intel’s mobile PC business before being promoted to run PCCG, Intel’s largest product group, in 2009.

Diane Bryant, Intel vice president and CIO, will lead the data center business and succeed Skaugen as general manager of that group. She will report to Perlmutter.

Kim Stevenson, vice president of IT Global Operations and Services, will succeed Diane Bryant as CIO and report to Krzanich.

The organization changes will become effective over the next 30 days, and are designed to create a series of smooth management transitions.

Intel (NASDAQ: INTC) is a world leader in computing innovation. The company designs and builds the essential technologies that serve as the foundation for the world’s computing devices. Additional information about Intel is available at newsroom.intel.com and blogs.intel.com.

In 2011, it crossed the threshold of $50 billion in annual sales for the first time, having hit the $40 billion mark only last year. This came after a tough year — 2009 — during which sales declined a bit to $35 billion, down from $37 billion in 2008. But the larger point is clear: Intel continues to be a significant growth machine in a tech ecosystem that is supposed to be on the decline.

Who says so? “The experts.” Earlier this month, Gartner and IDC both reported what they described as the second-worst year for PC sales growth in recorded history, second only to the doldrums of 2001, when the world was beset by the dotcom crash, the onset of the global war on terror and general recession, all in one. This came after the same two outfits made similarly depressing predictions for worldwide IT spending.

Intel’s results tell a different story. Consider its strengths: Sales in its data-center group — chips being sold to companies building servers that will be used to power data and applications running on the Internet — grew 17 percent year on year to north of $10 billion. And the lowly PC? The machine that is said to be on the decline by so many people who claim to know what’s going on? Sales in Intel’s PC client group grew by more than $5 billion year on year to north of $35 billion.

How can that be possible? It’s an argument that Intel has been making for some time now, and is now becoming familiar: Persistent strength in emerging markets. As Intel CEO Paul Otellini said on a conference call with analysts today, emerging markets, where household incomes are improving to the point that consumers are able to buy their first PCs, are accounting for two out of every three units of incremental microprocessor demand. Which means that for every three chips of new growth sold in a year, two are sold in an emerging market.

PC sales in China, by Intel’s reckoning, grew 15 percent, and as yet have only achieved a household penetration rate of 35 percent, which says there’s lots of room still to grow. By comparison, the U.S. market is 90 percent penetrated, meaning nearly everyone who wants a PC has one. India grew 22 percent; Indonesia, 37 percent.

Here’s another really interesting metric that should give you some food for thought: In 2012, Intel will spend $12.5 billion on capital expenditures. That’s more than twice what it spent last year. What is it spending so lavishly on? Four new chip factories — in Oregon, Arizona, China and Israel — which, when completed, will turn out chips built on the very latest, edge-of-reality technology, where chips have transistors and other elements on them that are at the 14-nanometer scale.

How small is 14 nanometers? About one-fifth the size of a typical virus cell, and only slightly bigger than the thickness of the cell wall of a typical germ. Next year, there will be four factories, employing thousands of people, turning out thousands — and later millions — of these miniscule fragments of silicon that arguably constitute some of the most complex implements mankind has ever built.

And Intel does this profitably, which is so difficult and requires such financial scale that most companies that make other kinds of chips long ago gave up running their own factories and farmed the work of actually building them to other companies. Intel is so good at it that its gross margins in 2011 were 62.5 percent. Its full profit for the year was nearly $13 billion on $54 billion in sales.

Yes, we beat on Intel for not having conquered the smartphone industry or the tablet industry as readily as it spent the 1990s bending the PC industry to its will. There is a school of thought that says Intel is less relevant today than it was, say, five years ago, and that its anemic presence in the future of personal computing — smartphones and tablets — is all the evidence one needs to render that judgement. In fairness, smartphones and tablets are still on the rise, and Intel is starting to show some promising progress, though its competition and an industry-wide preference for chips based on the ARM architecture will be difficult to dislodge.

Still, it’s a little hard to find much fault with Intel, when the numbers so clearly demonstrate that, despite the conventional wisdom, it is clearly at the height of its powers.

The company’s profit climbed by nearly 6 percent in the quarter, despite persistent worries that demand for personal computers is down generally in the face of worldwide economic uncertainty, the popularity of tablet devices like Apple’s iPad, and smartphones in which Intel’s chips are not a significant factor.

Yet, as has been the case for the last several quarters, Intel knows the demand for its global markets — specifically Brazil, Russia, India, and China — far better than any industry analyst, and its executives, especially CEO Paul Otellini, have seemed to enjoy bursting the bubbles of the IDCs and Gartners of the world, who continue to preach a catechism of PC doom.

It’s important for the wider tech industry, because if Intel is healthy, it says a lot about the health of the rest of tech. If PCs are selling well, that means consumers and companies are buying them, either to replace new machines or buying a PC for the first time. And if PCs are selling well, then servers are selling well. Behind all that talk about cloud computing and cloud services are physical servers sitting in a data center somewhere, usually containing Intel chips.

The earnings conference call is about to start, so we’ll get some better indications about how and why Intel managed to surprise the Street once again.

2:35 pm: Ah, joining the conference call in progress. CEO Paul Otellini is speaking and, naturally, he’s crowing about Intel landing a chip in a Lenovo smartphone announced at CES last week.

“In the first quarter, we completed the acquisitions of McAfee and Intel Mobile Communications, formerly of Infineon. They will allow us to extend our strategies across computing.”

He’s recounting highlights of the past fiscal year. During Q4, Intel acquired Telap, which specializes in location-based technologies.

Now he’s talking about a smartphone reference design, basically a board around which a phone maker can build and customize. In the reference design is an Intel Medfield chip. Also, a strategic relationship with Motorola Mobility. “While the Lenovo and Motorola designs are first steps, we’re not done making announcements in the space.”

Now he’s talking about more chips for 2012. For example, 70 Ultrabooks are coming to market this year.

2:39 pm: CFO Stacy Smith is speaking. Nice gross margins of 65.5 percent, which were in the high end of the range. That’s Intel’s speciality — efficiency.

Smith: We saw a reduction of orders for microprocessors as a result of the Thailand flooding. The flooding didn’t affect sales directly, he says.

Smith: Q1 revenue will be down a little more from the average seasonal decline, as the flooding will continue to affect sales.

Smith: 2012 growth of revenue in the high end of single digits. Capital spending of $12.5 billion, in order to build a fancy new fab.

Smith: We continue to see strong results in emerging markets, as increased incomes allow more people to afford PCs.

Time for Q&A with the analysts.

First question from Citi: He’s asking about gross-margin projections and revenues. What is the PC forecast assumption that underlies that?

Smith: It will play out similar to this year. There will be some unit growth, and we’ll benefit from a rich product mix. The high single-digit number in perspective. Strip out some things from 2011, we expect it to come down, in part because of lower GDP growth, but we see the same kind of trends in 2012 that we saw in 2011.

Citi analyst asks if the unit costs per chip are coming down.

Smith: That’s a normal phenomenon as we ramp factories to a new process, and then the cost comes down over the course of the year.

A question from Jefferies: As you get more success in the smartphone and tablet markets, I’m wondering if it’s your intention to get more chips up and down the stack, or is it different from PCs?

Otellini: Our intention is to participate broadly in all three of those markets. In tablets, we’ll be well-positioned for that. Who knows where the prices go over time, but we’d use the advanced silicon integration capabilities that we have to drive the costs down. We’re coming in at the top of the smartphone market; we’re aiming at best performance and very good battery life. And the Infineon acquisition has given us a very good position in basic phones. They shipped about 400 million modems.

Jefferies: Do they inherently carry more profitability than the PC processor business?

Otellini: The other guys have lower margins. But we’ll get paid twice. We’ll get paid as the foundry, but also for the architecture.

2:50 pm: Question from Bank of America: There were a lot of announcements on Ultrabooks from CES. Will they cannibalize notebook sales?

Otellini: I have not seen this level of excitement since before Centrino, which was in 2003. Initially, you will see this will be a replacement of existing notebook sales. People will trade up. As we move through 2012 and into 2013 as Windows 8 machines roll out, you have the possibility or even the probability of many of those machines incorporating touch. At that point, the machines incorporate the best of both the PC and the tablet. I don’t know how that plays out, but we’ll be well-positioned.

Question from JMP Securities: I know you don’t guide by segment, but what’s happening on the data center side of the business? And how does Romley change that? (Romley is a future server chip.)

Smith: Let me do a higher-level look. The data-center business can be pretty lumpy, but on a secular basis, we’re pretty confident in the growth trends.

Otellini: We’re seeing stronger growth for Romley than we saw for Nehalem at the same point in its lifespan, two years ago. Initially, it will not drive the same kind of replacement cycle that Nehalem did. It will drive replacement for high-capacity needs. I think this product is the most well-rounded in the genre so far.

Question from Deutsche Bank: Overall, as we look at flood impact, how should we see that snapping back, and against the backdrop of the seasonality?

Otellini: There are more moving pieces as I look out over the next 11 months. Our view is that the industry seems to be hitting the bottom of their output trough in Jan. and Feb. Everyone who seems to want to buy a PC has been able to. There are some stockouts in particular SKUs. You will see some compression of the supply chain. We think there is likely to be some refilling of the pipes in the second quarter, and into the third quarter. Or people will learn to live with leaner supply chains, which is always good for us.

3:00 pm: Question from Goldman Sachs: What’s the incremental growth in capacity? And what is the initial assumption on factory loadings?

Smith: Let’s talk about what’s driving the capital spending. $12.5 billion is a big number, but you have to take in the context of how our business has grown. Then it makes sense. I think my depreciation as a percent of revenue stays in a healthy range. In terms of the makeup of specific capital spending, it’s a two-year cycle as we’re building buildings. That part starts to come down in 2013. Buildings are depreciated over a longer period of time.

In terms of factory utilization, we’re running full-out today. We’re just in the beginning of the 22-nanometer cycle. We took advantage of the flooding by taking some older equipment offline sooner than we would have otherwise. We’re selling every 22-nanometer unit we can get out there.

3:06 pm: Totally missed the question from UBS. Sorry, UBS.

Question from Credit Suisse about Ultrabooks. Are there any sort of milestones you expect — perhaps, say, percentage of total notebooks?

Otellini: Starting with the mix. Core processors are about 70 percent of our mix, and that’s historically high for our premium brand. What we can’t yet predict is the mix between i3, i5 and i7. As we move toward the second half of the year, the mix comes down to i3. In terms of a target, our goal would be to exit the year with about 40 percent of consumer notebooks being Ultrabooks.

3:11 pm: J.P. Morgan asks if Intel is going to continue to spend like a drunken sailor on capital expenditures and R&D.

Smith says Intel is making some important investments this year, but they will come down from here.

A question from Nomura: Android tablet sales seemed like a disappointment in 2011. What was the issue, and is there a reason to be more optimistic this year?

Otellini: They were where I thought they would be, but I was below where others were. Until you get to Ice Cream Sandwich, you’re at a comparison with Apple’s iPad. The other part of that test is the Windows 8 tablets that are being queued up for production. I don’t think anything about the tablet market is settled yet. The jury is out on the long-term segmentation by form factor.

Ew. Questions from Barclays are being turned back. Smith just won’t go where he wants them to go. Too granular.

3:16 pm: Otellini: The data-center storage is not your grandmother’s data-center business of before. Back to lumpy data-center sales, when Facebook or Apple turns on a new data center. We’re seeing a change to the linearity to data-center sales. Expect more short-term lumpiness, but stick to the year-on-year growth.

One more question to go. And it’s from Caris & Co. He’s asking about capex again.

Smith: If you look at spending for capex in 2012, a historically large part of it is the four-factory model. From here, our capex will be a function of two things — the unit growth we see and the speed with which we bring our process technologies to the leading edge. We balance off those decisions as we go forward. With a big increase in units, we’ll spend the capex to support it.

Caris: You’ve taken on some debt in the quarter, as you look for flexibility to buy back more stock.

Smith: Our balance sheet supports taking on more debt, and we certainly have the capability of doing so. We’ve said in the past, our first priority is investing in the business. We bought McAfee and Infineon. We had a significant increase in dividends in 2011, and as a percent of free cash flow. We did take advantage of low interest rates and high-dividend yield to buy back a lot more stock.

And that is the end of the call. Good night!

Sales for the fourth quarter came in at $13.9 billion, and per share earnings were 64 cents, for a net of $3.4 billion. For the full year Intel finished with sales of $54 billion and a net of $12.9 billion and EPS of $2.39, all of them records. So even amid the diminished expectations of the moment, Intel is sounding the victory trumpets, and not unreasonably.

The statement is below. Come back in a little while and I’ll be live blogging the earnings conference call.

SANTA CLARA, Calif., Jan. 19, 2012 – Intel Corporation today reported full-year revenue of $54 billion, operating income of $17.5 billion, net income of $12.9 billion and EPS of $2.39 — all records. The company generated approximately $21 billion in cash from operations, paid dividends of $4.1 billion and used $14.1 billion to repurchase 642 million shares of stock.

For the fourth quarter, Intel posted revenue of $13.9 billion, operating income of $4.6 billion, net income of $3.4 billion and EPS of 64 cents. The company generated approximately $6.6 billion in cash from operations, paid dividends of $1.1 billion and used $4.1 billion to repurchase 174 million shares of stock.

“2011 was an exceptional year for Intel,” said Paul Otellini, Intel president and CEO. “With outstanding execution the company performed superbly, growing revenue by more than $10 billion and eclipsing all annual revenue and earnings records. With a tremendous product and technology pipeline for 2012, we’re excited about the global growth opportunities presented by Ultrabook systems, the data center, security and the introduction of Intel-powered smartphones and tablets.”

Business Outlook
Intel’s Business Outlook does not include the potential impact of any mergers, acquisitions, divestitures or other business combinations that may be completed after Jan. 19.

Q1 2012 (GAAP, unless otherwise stated)

Revenue: $12.8 billion, plus or minus $500 million.
Gross margin percentage: 63 percent and 64 percent Non-GAAP (excluding amortization of acquisition-related intangibles), both plus or minus a couple percentage points.
R&D plus MG&A spending: approximately $4.4 billion.
Amortization of acquisition-related intangibles: approximately $75 million.
Impact of equity investments and interest and other: approximately zero.

Depreciation: approximately $1.5 billion.

Full-Year 2012 (GAAP, unless otherwise stated)

Gross margin percentage: 64 percent and 65 percent Non-GAAP (excluding amortization of acquisition-related intangibles), both plus or minus a few percentage points.
Spending (R&D plus MG&A): $18.3 billion, plus or minus $200 million.
R&D spending: approximately $10.1 billion.
Amortization of acquisition-related intangibles: approximately $300 million.
Depreciation: $6.5 billion, plus or minus $100 million.
Tax Rate: approximately 29 percent.
Full-year capital spending: $12.5 billion, plus or minus $400 million.

For additional information regarding Intel’s results and Business Outlook, please see the CFO commentary at: www.intc.com/results.cfm.

Status of Business Outlook
Intel’s Business Outlook is posted on intc.com and may be reiterated in public or private meetings with investors and others. The Business Outlook will be effective through the close of business March 16 unless earlier updated; except that the Business Outlook for amortization of acquisition-related intangibles, impact of equity investments and interest and other, and tax rate, will be effective only through the close of business on Jan. 26. Intel’s Quiet Period will start from the close of business on March 16 until publication of the company’s first-quarter earnings release, scheduled for April 17. During the Quiet Period, all of the Business Outlook and other forward-looking statements disclosed in the company’s news releases and filings with the SEC should be considered as historical, speaking as of prior to the Quiet Period only, and not subject to an update by the company.

Q4 and 2011 Key Financial Information (GAAP)

Q4 Business unit revenue:

PC Client Group revenue of $9 billion, up 17 percent year-over-year.
Data Center Group revenue of $2.7 billion, up 8 percent year-over-year.
Other Intel® architecture group revenue of $1.1 billion, up 35 percent year-over-year.
Intel® Atom™ microprocessor and chipset revenue of $167 million, down 57 percent year-over-year.
McAfee Inc. and Intel Mobile Communications contributed revenue of approximately $1 billion.

Full Year Business unit revenue:

PC Client Group had revenue of $35.4 billion, up 17% from 2010.
Data Center Group had revenue of $10.1 billion, up 17% from 2010.
Other Intel architecture group had revenue of $5.0 billion, up 64% from 2010.
Intel Atom microprocessor and chipset revenue of $1.2 billion, down 25% from 2010.
McAfee Inc. and Intel Mobile Communications contributed revenue of $3.6 billion.

Risk Factors
The above statements and any others in this document that refer to plans and expectations for the first quarter, the year and the future are forward-looking statements that involve a number of risks and uncertainties. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “will,” “should” and their variations identify forward-looking statements. Statements that refer to or are based on projections, uncertain events or assumptions also identify forward-looking statements. Many factors could affect Intel’s actual results, and variances from Intel’s current expectations regarding such factors could cause actual results to differ materially from those expressed in these forward-looking statements. Intel presently considers the following to be the important factors that could cause actual results to differ materially from the company’s expectations.

Demand could be different from Intel’s expectations due to factors including changes in business and economic conditions, including supply constraints and other disruptions affecting customers; customer acceptance of Intel’s and competitors’ products; changes in customer order patterns including order cancellations; and changes in the level of inventory at customers. Uncertainty in global economic and financial conditions poses a risk that consumers and businesses may defer purchases in response to negative financial events, which could negatively affect product demand and other related matters.
Intel operates in intensely competitive industries that are characterized by a high percentage of costs that are fixed or difficult to reduce in the short term and product demand that is highly variable and difficult to forecast. Revenue and the gross margin percentage are affected by the timing of Intel product introductions and the demand for and market acceptance of Intel’s products; actions taken by Intel’s competitors, including product offerings and introductions, marketing programs and pricing pressures and Intel’s response to such actions; and Intel’s ability to respond quickly to technological developments and to incorporate new features into its products.
Intel is in the process of transitioning to its next generation of products on 22nm process technology, and there could be execution and timing issues associated with these changes, including products defects and errata and lower than anticipated manufacturing yields.
The gross margin percentage could vary significantly from expectations based on capacity utilization; variations in inventory valuation, including variations related to the timing of qualifying products for sale; changes in revenue levels; product mix and pricing; the timing and execution of the manufacturing ramp and associated costs; start-up costs; excess or obsolete inventory; changes in unit costs; defects or disruptions in the supply of materials or resources; product manufacturing quality/yields; and impairments of long-lived assets, including manufacturing, assembly/test and intangible assets.
The tax rate expectation is based on current tax law and current expected income. The tax rate may be affected by the jurisdictions in which profits are determined to be earned and taxed; changes in the estimates of credits, benefits and deductions; the resolution of issues arising from tax audits with various tax authorities, including payment of interest and penalties; and the ability to realize deferred tax assets.
Gains or losses from equity securities and interest and other could vary from expectations depending on gains or losses on the sale, exchange, change in the fair value or impairments of debt and equity investments; interest rates; cash balances; and changes in fair value of derivative instruments.
The majority of Intel’s non-marketable equity investment portfolio balance is concentrated in companies in the flash memory market segment, and declines in this market segment or changes in management’s plans with respect to Intel’s investments in this market segment could result in significant impairment charges, impacting restructuring charges as well as gains/losses on equity investments and interest and other.

Intel’s results could be affected by adverse economic, social, political and physical/infrastructure conditions in countries where Intel, its customers or its suppliers operate, including military conflict and other security risks, natural disasters, infrastructure disruptions, health concerns and fluctuations in currency exchange rates.
Expenses, particularly certain marketing and compensation expenses, as well as restructuring and asset impairment charges, vary depending on the level of demand for Intel’s products and the level of revenue and profits.

Intel’s results could be affected by the timing of closing of acquisitions and divestitures.
Intel’s results could be affected by adverse effects associated with product defects and errata (deviations from published specifications), and by litigation or regulatory matters involving intellectual property, stockholder, consumer, antitrust and other issues, such as the litigation and regulatory matters described in Intel’s SEC reports. An unfavorable ruling could include monetary damages or an injunction prohibiting us from manufacturing or selling one or more products, precluding particular business practices, impacting Intel’s ability to design its products, or requiring other remedies such as compulsory licensing of intellectual property.

A detailed discussion of these and other factors that could affect Intel’s results is included in Intel’s SEC filings, including the report on Form 10-Q for the quarter ended Oct. 1, 2011.

This fact caused chipmaker Intel to slash its sales forecast for the quarter by $1 billion, to $13.7 billion plus or minus $300 million. Today we’ll see just how bad the damage was, and how bad it’s going to be going forward, as the company reports its results after the close of markets today.

In a note to clients, Deutsche Bank analyst Ross Seymore says not to expect many surprises from Intel. Despite the lower sales guidance, he sees little change to Intel’s overall profitability. He expects Intel’s gross margins, a key metric in measuring profitability, to come in only slightly below the 64.5 percent that Intel had previously forecast. “We see little risk to gross margins despite the lower revenue because product mix continues to be solid,” Seymore wrote.

And while the first half of the new year is always seasonally slower than the second half, Seymore expects it to be slower still for Intel. He’s expecting sales in the first quarter of 2012 to come in at $12.73 billion, with a per-share profit of 51 cents, which is below the consensus of analysts who expect Intel to book sales of $12.8 billion. He also expects the hard drive shortage to hit Intel harder in the first quarter, as the supply of hard drives dries up. Gross margins in the quarter, he expects, will drop below 61 percent. Expect conservative guidance on PC demand for the quarters ahead.

Even so, Seymore rates Intel a Buy, with a $27 price target. “We believe Intel is well-positioned to benefit from new product introductions, improved execution and stable PC demand,” he wrote. He said that competition in chip prices from Intel rival Advanced Micro Devices should “remain benign,” mainly because AMD is fabless and so is at a competitive disadvantage with Intel. Other sectors of Intel’s business, including its flash memory operations, are showing improvement.

This is, of course, bad news if you’re in the business of making the commodity Dynamic Random Access Memory chips that go into PCs, servers and smartphones. A state of oversupply coupled with weak demand means the chips command lower prices than they otherwise would. The situation can be good, however, if you’re buying computers, because memory upgrades get cheaper.

The problem, as related by the research firm IHS iSuppli, is a rise in inventories of chips that its analyst Mike Howard describes as “alarming.”

ISuppli measures how much unsold inventory the chipmakers themselves have in their warehouses — which include Micron Technology in the U.S., Elpida in Japan, and the South Korean pair of Samsung and Hynix. The higher the number is, the more intense the downward price pressure becomes.

The stockpile of DRAM chips as of the end of the third quarter of 2011 stood at 12.8 weeks, which is nearly a third higher than it had been three months earlier and double what it was in early 2010. It’s also a lot higher than the typical average of 9.2 weeks.

There are a lot of factors creating the glut. Tablets like the iPad and Kindle Fire are eating into notebook sales, and don’t require nearly as much DRAM as notebooks do. And new operating systems don’t require the incremental boost in onboard memory as had been typical.

Nor is the economic uncertainty caused by the sovereign debt crisis in Europe helping. Flooding in Thailand has also disrupted the supply of hard drives which has in turn affected the overall demand for PCs and servers. Computer makers who can’t get hard drives simply won’t build as many computers, and thus won’t be buying the DRAM they otherwise would be.

Something similar happened in 2008 when the global recession sapped computer demand and caused a pileup of DRAM chips that lasted nine quarters. This cycle could turn out to be worse, iSuppli says.

Overall, iSuppli reckons the market for DRAM chips was worth about $6 billion in the fourth quarter of 2011, down by 11 percent from the prior quarter, and it’s only heading further south. The worst, Howard says, is apparently yet to come.

If the economy turns upward, or even is perceived to be on the mend, the glut can work its way down pretty quickly. In 2009 the stockpile dropped by more than half over three quarters.

And if it seems obvious that these chip companies should just stop making DRAM and let demand catch up with supply, it’s actually not that easy. Chip factories, or fabs, contain billions of dollars worth of manufacturing equipment running processes that are difficult to stop and start. Also, it’s more expensive to have them sitting there doing nothing but depreciating than turning out a product that brings in revenue, even if it’s running at break-even or a slight loss.

Global sales of semiconductors were $25.1 billion in November, representing a decrease of 2.4 percent from October. On a year-to-date basis, global chip sales were up by 0.8 percent versus the same time in 2010.

Last month, Intel slashed its sales outlook by $1 billion on concerns that effects of floods in Thailand would impact demand for PCs, and thus for its microprocessors. The flooding has caused what’s being described as the most significant supply chain disruption to the PC and server industry in a generation.

SIA President Brian Toohey described the disruption as a near-term problem. “Supply chain disruptions resulting from the floods in Thailand have impacted semiconductor sales in the near term, however OEMs” — PC and other electronics manufacturers — “are expected to recover production losses over the course of the next few months,” he said in a statement.

“November sales were additionally affected by the continuing European financial crisis which is having a broad impact on other economies and global demand,” he said. The impact from Europe is especially clear in the 11.5 percent drop in sales to that region, which you can see in the chart below, a screen-grab from the SIA’s press release.

(Image credit: iStockphoto | V777999)

U.S. District Judge Leonard Stark on Friday canceled a Feb. 14 trial in the high-profile case filed by New York’s attorney general, who charged Intel with monopolistic tactics in the market for microprocessor chips.

The order followed a letter to the judge from Attorney General Eric Schneiderman, who proposed dropping the federal case in view of recent developments that reduced the amount of damages that New York could seek. Mr. Schneiderman said his office would instead pursue damages in New York state court to address “Intel’s egregious and illegal conduct.”

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So what happened? A few things, as Oracle execs tried to explain on a conference call.

• The currency effect: As President and CFO Safra Catz explained, what had been a 1 percent tailwind for currency effects turned into a 2 percent headwind. With all the violent swings in the value of currencies around the world as compared to the U.S. dollar, Oracle suffered a negative effect that pinched revenue.

• Deals didn’t close during the quarter: Catz said that in the final days and weeks of the quarter, some customers added an extra layer of executive approval to close deals to buy Oracle stuff. That meant that some deals Oracle had expected to close before the quarter’s end moved into the next quarter. Catz said that Oracle has taken steps to better manage deal flow to take this into account. It is consistent, however, with recent statements from other enterprise IT vendors, like IBM and NetApp.
• Transitions: Oracle’s SPARC server business just switched to a new chip called the T4, which was unveiled late in the quarter. The machines require a total upgrade, and that means a lot of testing with existing applications, which can slow down deals for the new machines, while at the same time sapping demand for the prior generation of products. That had a lot to do with hardware sales dropping by 14 percent year over year to $953 million. As Catz put it: “We saw good early demand for the new SPARC SuperCluster, but only released the product for general availability at the very end of the quarter, allowing us to ship only a couple.”

Catz also predicted that hardware sales will decline as much as 14 percent this quarter, although CEO Larry Ellison was bullish on its growth prospects later this year. New software license revenue, a key metric gauging software sales, is expected to grow in a range of 2 percent to 12 percent. Total sales are expected to grow in the range of 3 percent to 7 percent, and per-share earnings are expected to come in between 56 and 59 cents, which is in line with the consensus of analysts.

There were a few things that went right. Ellison did what he usually does on a conference call, and crowed about examples where Oracle is beating a competitor. This time, the targets were IBM, Cisco Systems and SAP, but not his usual punching bag, Hewlett-Packard. Oracle won several competitive deals from Big Blue and Cisco, as well, with customers as varied as Australia’s University of Melbourne, the U.S. Food and Drug Administration and the Hyundai Kia Motor Company.

Ellison also hinted that Apple is a big Oracle customer. He mentioned a “a very large American smartphone manufacturer” that had bought more than 30 Oracle Exadata systems as it built out its cloud. Unless I’m missing something, there’s really only one company that fits that description, and that’s Apple. Its use of Oracle gear within the mix at its North Carolina data centers has been speculated about before, but never confirmed by Apple directly. (Big surprise, that.)

Given that Apple and Samsung have been working together for years — the first iPhone chips were Samsung made, after all — I’m not entirely sure why anyone is surprised that this Samsung fab was expanded to accommodate, among other customers, Apple.

Maybe the cybernetic voice of the iPhone’s marquee feature, the personal assistant Siri, should sport a Texan twang, rather than a non-specific accent. There’s a lot more inside the iPhone that comes from Texas than just the A5.

For one thing, the chip itself, or some significant portion of it, was probably designed in Texas to begin with. Remember Intrinsity? That’s the boutique chip design company that Apple acquired in 2010. Yes, that’s the one. Where was it based again? You guessed it: Austin, Texas.

There’s more. This is the very same factory that Samsung announced it was going to expand last year with a $3.6 billion investment. Indeed, yours truly even covered the announcement for Bloomberg News.

The previous fabs have been turning out Flash memory chips since the late 1990s. And since Samsung is the world’s largest supplier of Flash memory, and Apple is the world’s largest consumer of Flash memory, there’s a pretty good chance that the iPhone you’re carrying right now contains flash chips built in Texas. However, Apple buys flash memory from other companies too, including Toshiba and Hynix.

Then there are lots of other smaller components that come from Texas. Texas Instruments supplies the chip that drives the touch screen. As its name implies, TI is based in Dallas and has six fabs in Richardson, Texas (and many others around the world), one of which may turn out the touch screen controllers that iSuppli found in the iPhone. (TI wouldn’t confirm one way or the other if it’s made in Texas, but there’s a pretty good chance!)

And then there’s the audio codec chip from Cirrus Logic, found by market research firm iSuppli in its teardown analysis. It’s another company based in Texas, and so while the chip itself was probably manufactured in Asia, it was designed at Cirrus HQ in Austin.

And finally, don’t forget that Apple itself maintains a huge presence in Austin. The Austin American Statesman reported last year that the company was nearing a deal to lease 55,000 square feet of office space for the Intrinsity team, and is thought to employ about 2,500 people in and around Austin, most of them based at a 400,000 square foot campus.

So for all of Apple’s California good vibes, there’s a lot of Texas in every iPhone it makes.

Today, on its Web site, the Korean electronics company unveiled the Series 5 Ultra, a 14-inch, 20.9mm aluminum laptop that’s large enough to accomodate an optical disc drive. It offers up to a terabyte of hard disk space, as well as solid-state drive storage options, reports The Verge.

It’s not the most lightweight of ultrabooks, though, in an emerging category of laptops known for thinness and portability: It weighs 1.8 kg, compared to the standard 1.5 kg. But the Series 5 Ultra comes equipped with both HDMI and Ethernet ports, as well as an option for a Radeon HD 7550M GPU.

The 14-inch model costs $1,345; Samsung is also offering a 13-inch Series 5 Ultra, just 14.9mm thick, for $1,300. The laptops are launching first in Korea, and are expected to ship in late December. No word on when these will become available in the U.S., but with the annual Consumer Electronics Show coming up in January, more info can’t be far behind.

The expected filing is Oracle’s amended cross-complaint, wherein the company will lay out the basis of its legal argument explaining why its March 23 decision to stop building software that runs on servers using Intel’s Itanium chip was not only justified but doesn’t violate an agreement struck last year between Oracle and HP.

Oracle has made several colorful claims in court. Last month, for example, it compared an arrangement between HP and Intel to continue to produce and evolve the Itanium chip to a remake of the film “Weekend at Bernie’s.” And in August it argued that HP engaged in fraud by not telling Oracle that it was about to hire Léo Apotheker as its CEO and Ray Lane as its chairman when it was negotiating a settlement to a 2010 lawsuit over Oracle’s hiring of former HP CEO Mark Hurd.

But the real issue is a simple one, say people familiar with HP’s thinking in the case. Did Oracle agree to a contract with HP to continue to support Itanium — as it has been doing for years — or not?

The year 2010 was a weird one for executive moves among tech companies. Hurd resigned as CEO of HP, and took a job as president of Oracle just as Oracle was in the process of acquiring Sun Microsystems. HP sued Hurd and Oracle, and soon they settled. HP says that a clause in that settlement included a provision that Oracle would continue to port its database software to HP servers running the Itanium chip. Oracle has argued that this clause is not part of the final agreement. The settlement document itself remains confidential, but its details will likely emerge in the trial. Expect lots of arguing over different versions of the agreement.

One key part of Oracle’s argument has been that HP has been paying Intel to keep the Itanium chip alive in the face of its failure to gain traction in the mainstream server market over the last decade. This is something that HP readily concedes, since it and Intel developed the chip together in the early 1990s, and regularly renew their agreements — in 2004, 2007 and again in 2010 — to commit resources to build it and to design new generations of the chip every few years. The latest agreement calls for Intel to build two new generations of the chip.

Another argument Oracle has made concerns HP’s management during the last year. When the 2010 agreement ending the Hurd lawsuit was struck, HP was nearing the end of its search to replace Hurd. CFO Cathie Lesjak was interim CEO at the time. Ten days later, HP announced that Apotheker would become CEO. In a filing in August, Oracle argued that it never would have agreed to the Itanium partnership had it known that Apotheker, a onetime co-CEO of SAP and a figure in a contentious Oracle-SAP lawsuit, was about to become HP’s CEO. Ditto Ray Lane, a former Oracle president who was named HP’s chairman earlier this year.

People familiar with the case say that Oracle seemed unconcerned about HP’s ongoing search for a CEO, and didn’t raise any questions about it during settlement negotiations for the Hurd case. These people say that HP wasn’t deceptive, but that even if it had been it will be difficult for Oracle to argue that it’s not bound by the terms of the settlement. The language is clear and unambiguous enough that Oracle would have to argue that the Itanium clause in the agreement means nothing, these people say.

One thing is certain: The damage that HP is suffering from the ongoing uncertainty in the marketplace over its Itanium-based servers is starting to sting. HP calls these machines its “business critical” servers, and they are industrial-strength computers that aren’t sold in large numbers. Indeed, HP is the only vendor of note that even buys the Itanium chip.

But it’s a historically profitable business — HP won’t say exactly how profitable — on which HP charges its customers large service and support fees. In 2010, HP reported revenue of $2.3 billion from its business-critical operation, amounting to less than 2 percent of its $126 billion in sales that year. In 2011, HP reported that sales in its business-critical unit dropped 23 percent in the fourth quarter over the same period a year ago; sales for the year fell to just above $2 billion.

HP has argued that Oracle’s motivation is to steer HP customers toward its Sun hardware. If that was the strategy, sources briefed on the case say, it isn’t quite working out that way. One lucky party benefiting from the fight, they say, is IBM, who is winning business from some former HP customers. It’s one reason that HP is arguing for a speedy trial.

The vast majority of servers — including those from H-P — use the chips sold by Intel and AMD that are based on a technology called x86. But HP, which jointly developed Itanium with Intel in the 1990s, continues to use that chip for three lines of large systems used for heavy-duty computing jobs.

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The document is a routine filing concerning the timing of the trial and the discovery process. In it, Oracle says that what documents it has received from HP confirms what Oracle has been arguing since this whole thing started: That HP and Intel plan to let the Itanium processor die once it has released two more generations, something HP and Intel have both denied. “HP and Intel have a contractual commitment that Itanium will continue through the next two generations of microprocessors …”

Worse, Oracle alleges that the only reason the chip is still available at all is that “HP is paying Intel to keep it going.” It goes on: “HP has secretly contracted with Intel to keep churning out Itaniums so that HP can maintain the appearance that a dead microprocessor is still alive. The whole thing is a remake of Weekend at Bernie’s.”

Why all the trouble over so obscure a chip? Oracle says it’s all about the support fees that Intel charges. HP makes a lot of money, Oracle says, charging for service and support of its HP UX operating system, which runs on the Itanium chip; it loses money when customers move to systems running more conventional x86-based chips. As Oracle puts it in the filing: “HP achieves a far lower “attach rate” (meaning it gets few service contracts) on the operating systems like Linux that are prevalent on servers running x86 microprocessors. Thus when customers migrate to new platforms, HP loses the service contract. This is a multi-billion dollar problem for HP.” It also helps HP remain competitive with IBM and Oracle’s Sun Microsystems business, Oracle argues in a redacted passage.

“These factors led HP to craft a top-secret plan to create a false perception that Itanium still had a future,” Oracle says in the filing. “HP understands that the future prospects of IT products drive customer purchasing decisions. A buyer who knew that Intel saw no future for Itanium, and was only continuing to invest in the line pursuant to a contractual obligation, would devalue the future prospects of Itanium servers and be less inclined to buy.”

“Oracle Sun has been a victim of this, and according to HP’s documents an intended victim. So why is Oracle the defendant in this case? We now understand it is because Oracle’s decision to stop making new versions of its software for the Itanium system was devastating to HP because it undermined the rationale for paying Intel [redacted] to sustain the illusion of a long-term future for Itanium. Oracle had told too much of the truth.”

HP, whose PR team is working equally late, just sent this emailed statement:

Oracle’s latest filing is nothing more than a desperate delay tactic designed to extend the paralyzing uncertainty in the marketplace created when Oracle announced in March 2011 — in a clear breach of contract — that it would no longer support HP’s Itanium platform. The fact remains that Oracle’s decision to cut off support for Itanium was an illicit business strategy it conjured to try to force Itanium customers into buying Sun servers, and destroy choice in the marketplace. This filing is just the latest in its ongoing campaign to shore up its failing Sun server business and starve thousands of existing Itanium customers who rely on their Itanium processors for mission-critical activities.

As Oracle well knows, HP and Intel have a contractual commitment to continue to sell mission-critical Itanium processers to our customers through the next two generations of microprocessors, thus ensuring the availability of Itanium through at least the end of the decade. HP is resolved to enforcing Oracle’s commitments to HP and our shared customers and will continue to take actions to protect its customers’ best interests. It is time for Oracle to quit pursuing baseless accusations and honor its commitments to HP and to our shared customers in a timely manner.

Intel spokesman Chuck Mulloy had no comment, saying Intel is not a party to the lawsuit, and doesn’t comment on confidential agreements it may or may not have with other companies. Intel CEO Paul Otellini has said in the past the Intel has a long-term roadmap for Itanium that goes beyond the next two generations already disclosed.

Since this whole episode first erupted in March, and escalated into a lawsuit in May, I’ve called it a very public fight about a very obscure chip. Oracle, perhaps looking for something new to fight with HP about, said it would cease developing software created for systems using Intel’s Itanium chip, arguing that it looked like it was going to be retired in the near-ish future. HP, which is the only server vendor worth mentioning that sells Itanium-based systems, was horrified, as was Intel, if for no other reason than they spent a decade or two developing it in hopes it would be the superchip of the future.

Then the future arrived, and it didn’t quite turn out that way. Intel rival Advanced Micro Devices found a way to do 64-bit computing that the marketplace liked better, Intel ultimately embraced the same method for mainstream server chips, and Itanium went on to be a specialized niche product. However, those who use it are a vocal bunch. Some of them petitioned Oracle to change its mind. It hasn’t budged.

So now you know the background. The original filing is embedded below, via Scribd. The best parts are in the first several pages. Happy reading.

Oracle Itanium Filing: “Weekend At Bernie’ss

Yesterday, I published a story about the teardown analysis by IHS iSuppli of Amazon’s Kindle Fire tablet. And, as you may remember, the story related how, in the opinion of its analysts, it cost Amazon $201.70 to buy the parts and build the Fire — a sum which is only slightly above the $199 retail price of the device.

The other big news was how dominant the chipmaker Texas Instruments is among the suppliers. Its applications processor chip, wireless chips, and audio and power management chips add up to about $25, approximately 12 percent of the bill of materials (BOM), which is the aggregate cost of all the components. It’s a pretty solid victory for TI in the competitive tablet field, where, outside of Apple’s iPad, success has been rare.

Naturally, I asked Texas Instruments for a comment about this, and expected none. I’ve been writing teardown stories for six years (here’s the first I ever did); never once has the manufacturer of the device in question, nor any of its suppliers, given anything more than a “no comment.”

Manufacturers tend to hate teardowns because they’re invasive. Take a product apart and you find out who a company is working with — and you learn a lot about how they see things. With the Kindle Fire, for example, we learned that Amazon deliberately took a “less is more” approach to keep costs down, minimize its loss and pave the way to eventually selling the device at a profit.

Suppliers hate teardowns, too. There is nothing more secret — or more interesting to know — than what company is supplying a manufacturer with a key component. Companies can rise or fall on a strategic relationship with someone like Apple or HP — or Amazon. The first iPod, for example, put an otherwise unknown company named PortalPlayer on the map — until Apple replaced its chips with something else. Now that company is part of Nvidia.

Usually these suppliers are unwilling to rock the boat, and usually they’re covered by nondisclosure agreements. So when I do the typical reporter thing and call them for a comment, after a teardown clearly shows their chip or display or other component inside the product, the supplier always — 100 percent of the time, without exception — says, “No comment.” Probably they’d like nothing more than to brag about how their chip makes this or that product do amazing things, but usually they just can’t, won’t and just don’t say a word.

Until today. Today, in response to my questions of yesterday, I got a comment from Texas Instruments. And that meant I just had to share it. Here it is, courtesy of a company spokeswoman:

“We can confirm that TI’s OMAP4430 processor and WiLink 6.0 connectivity combo solution are inside of the Kindle Fire. … TI is thrilled to be a part of the Amazon Kindle Fire, which boasts powerful performance and engaging consumer experiences that are sure to make it a coveted device this holiday season.”

Not exactly riveting. But rare!

Rambus had sought $4 billion in direct damages for the harm it allegedly suffered in the case, an amount that can be instantly tripled under California law. It also asked for punitive damages.

Rambus, a Silicon Valley designer of technology used in memory chips, accused Micron and Hynix of violating antitrust laws by conspiring to prevent Rambus technology from gaining traction in the market and fixing the price of memory chips.

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And while it was Fujitsu, using SPARC chips, that made the top of the list, you couldn’t help noticing how many machines used chips from Intel. Of the 500 supercomputers on the list, 384 of them use chips from the semiconductor giant.

At the SC11 Supercomputing conference in Seattle today, Intel is making some important disclosures about what it is doing to maintain its role as the chip vendor of choice, and also offering its competitive response to a potential threat from the graphics chip specialist Nvidia.

As I’ve explained a few times before, the graphics chips, or GPUs, that Nvidia makes are starting to make some inroads into supercomputing and high-performance computing environments, thanks to their ability to handle floating point computations at a high rate of speed. Sometime next year, at the Oak Ridge National Laboratory in Tennessee, a machine called Titan, using a combination of chips from Advanced Micro Devices and Nvidia, is expected to break the 20 petaflop barrier when it begins operation.

The narrative that has emerged recently is that GPUs are generally better at the floating point operations that are increasingly used in supercomputing — better in many cases than traditional x86 chips from Intel and AMD. Even so, if you add up the number of systems on the Top 500 list using Intel and AMD chips, you’d hit a percentage that’s just shy of 90.

In a presentation today (on what just happens to be the 40th birthday of the Intel microprocessor — hence the two people I saw today outside the “Today” show at Rockefeller Center on my way to work), Rajeeb Hazra, Intel’s general manager of Technical Computing, detailed Intel’s response. First off, Intel is supporting a new technology, called PCI Express 3.0, that will speed up the ability of chips inside a supercomputer to share data. In systems this big, and working on such large amounts of data at once, the processors spend a lot of time tapping their feet and waiting for data to work on. Engineers call this latency, and the point of the new interconnect technology is to cut latency by doubling the bandwidth available. The result is an improvement in the raw FLOPS (floating point operations) available by 2.1 times in lab tests, and a 70 percent improvement in real-world workload tests. In supercomputing terms, that’s real progress, and it effectively means getting answers to big questions faster.

Another advance that Intel talked about today is a chip bearing the codename “Knight’s Corner.” It’s a coprocessor, meaning it’s an additional chip that would be added to a computer to boost its performance. Intel says it can do a full teraflop — a trillion floating point operations a second — and that’s just the result of demonstrations from the first silicon. When in full production, it will probably do even better.

And not only will it do a teraflop on a single chip, it will perform those calculations to what engineers call “double precision,” which is a fancy way of saying the result of each operation will be accurate to a higher level of granularity. As John Hengeveld, Intel’s director of technical computer marketing, told me last week, the rule of thumb in these matters says that moving from single to double precision boosts the amount of time you have to wait by four times.

Why is that important, when an off-the-shelf GPU from Nvidia can do 2 teraflops — though only at the single-point precision? Programming. If you’re a scientist who 10 years ago wrote a program to simulate weather patterns or nuclear explosions or some other classic supercomputing problem to run on systems running Intel chips, there’s nothing new to learn in terms of programming. While the GPUs are great, there are new programming rules to learn.

Finally, Intel is reiterating its plan to keep working on the exascale problem, which is the next great summit in supercomputing. Right now the world’s top supercomputer maxes out at 10.51 petaflops, and a candidate to top the list next year will go north of 20 petaflops, or quadrillions of floating point operations. Sometime this decade — say, about 2018 or so — the hope is that supercomputers will break the exaflop barrier, where machines will run quintillions of FLOPs.

The fundamental problem there isn’t the computing so much as it is power, as in electrical power. Already some of these machines consume as much power as a small city. Getting to exascale will require chips and other components that can run full out at speeds we can as yet only imagine, but doing it consuming a lot less power than they would otherwise be expected to. Think in terms of a Prius that could win the Indy 500 — and not just by a hair, but by a long mile — and do it day after day without really using much more gas than the other cars. It’s kind of like that.

Anyhow, Intel has said that it plans to enable exascale supercomputing that will require only a doubling of the power needed, rather than, say, 10 times as much. To that end, it said today it will open its fourth research lab in Europe. This one is in Barcelona and joins one in Paris; another in Juelich, Germany; and a third in Lueven, Belgium. They’ll all have a lot of work to do between now and 2018.

First today, he disclosed in an extended interview with CNBC that he had just become IBM’s largest shareholder. Now, according to new filings from his company, Berkshire Hathaway, he’s also just acquired a stake in the chipmaker Intel.

The 13-F filing, which hit the SEC Web site just a few minutes ago, shows that Berkshire has acquired 9.3 million shares in Intel, worth about $200 million. It’s not a sizable stake, amounting to about one-fifth of one percent of the 5.1 billion shares that Intel has outstanding.

At that figure, Buffett’s firm would have paid an average price per share of $21.34. With Intel shares currently trading at $24.63 a share, the stake is now worth about $230 million.

While his IBM stake, which amounts to about 5.5 percent of the shares outstanding, appears to eclipse that of State Street, the investment house, Buffett’s position in Intel doesn’t even come close to that of the company’s institutional investors. State Street is again the biggest Intel shareholder of record, holding about 4 percent of the company’s outstanding shares, followed by Vanguard and Blackrock. But Buffett has more skin in the game than does Intel CEO Paul Otellini, who as of the end of October had 397,000 shares worth an estimated $9.8 million.

I talked about Buffett’s investment in IBM today on The Wall Street Journal’s daily afternoon tech show, Digits. It’s below.