November 01, 2004
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Please note that contributed articles, blog entries, and comments posted on EDACafe.com are the views and opinion of the author and do not necessarily represent the views and opinions of the management and staff of Internet Business Systems and its subsidiary web-sites.
Jack Horgan - Contributing Editor


by Jack Horgan - Contributing Editor
Posted anew every four weeks or so, the EDA WEEKLY delivers to its readers information concerning the latest happenings in the EDA industry, covering vendors, products, finances and new developments. Frequently, feature articles on selected public or private EDA companies are presented. Brought to you by EDACafe.com. If we miss a story or subject that you feel deserves to be included, or you just want to suggest a future topic, please contact us! Questions? Feedback? Click here. Thank you!


Table 1 Geographic Breakdown of Intel Revenue

In the last quarter Americas accounted for 21% of total revenue, AP 47%, Europe 22% and Japan 9%. Since the same period a year ago the Americas percentage of total revenue has dropped around 7%, while AP's percentage has grown by roughly the same amount.


Table 2 Intel Revenue by Business Segment

The Intel Architecture operating segment's products include microprocessors and related chipsets and motherboards. Beginning in 2004, the company combined its communications-related businesses into a single organization, the Intel Communications Group (ICG). ICG's products include flash memory; wired Ethernet and wireless connectivity products; communications infrastructure components such as network and embedded processors and optical components; microcontrollers; application and cellular processors used in cellular handsets and handheld computing devices; and cellular baseband chipsets.


The architect business segment accounted for 84% of total revenue and in turn microprocessors accounted for 83% of that revenue. The ICG business unit accounted for 16% of total revenue. Flash memory accounted for almost half of this revenue.


“Intel delivered growth in both of its major businesses in the third quarter driven by record server and mobile microprocessor shipments and market segment share gains in flash memory," said Intel CEO Craig R. Barrett. "Growth was not as high as we originally anticipated due to inventory adjustments at some of our major customers and lower than expected overall demand for PCs.”


"Intel crossed over to 90nm technology in microprocessor shipments to the computing market segment for the quarter and built 65nm memory chips containing more than half a billion transistors each, reflecting the company's long-term strategy of investing in leading-edge process technology. We also returned more cash to our stockholders with a $2.5-billion share re-purchase, our largest ever."


In recent months, Intel has made a number of changes in its product plans. In June a manufacturing glitch forced a small recall of chip sets, which handle communications between the processor and the rest of the system. Then, in July, the company said design problems would delay the release of mobile computer chip set dubbed Alviso until next year. The firm also said better-than-expected performance in manufacturing of Pentium 4s resulted in an inventory buildup. In August Intel indefinitely postponed the launch of a video display chip for rear-projection televisions, deciding to improve picture quality before sending the chip to market. On October 22nd Intel announced that it had
cancelled plans for a Pentium 4 processor at 4GHz and said it would refocus those resources on other chip enhancements. The cancellation is the most recent in a series of moves that underscore the company's shift from its traditional focus-- increasing clock speed-- to enhancing other aspects of the chip design.


On October 24th Intel Corp. announced that it canceled a project to develop a chip for projection TVs and said it planned to focus its resources in other areas. The company's plans to develop a liquid on crystal silicon chip, or LCoS, were first unveiled in January during the Consumer Electronics Show in Las Vegas. In August, Intel said it would not be released by the end of the year, as originally announced. LCoS competes against other new display technologies that have already invigorated the rear-projection TV market, most notably the digital light processing (DLP) chip pioneered by Texas Instruments Inc. Intel had claimed that this chip would help cut the cost of big-screen
high-definition television sets to less than $2,000 by 2005.


These are challenging times for Craig Barrett, Intel CEO since 1998. The former Associate Professor of Material Science and Engineering at Stanford has reached Intel's mandatory retirement age and will leave his office in May 2005. In July he wrote an open letter to the company's 80,000 employees which stated that he had spoken "bluntly and directly" with senior managers about the need to improve performance.


"Our business is complex, and we have set high expectations for ourselves. Therefore, it is critical that everyone--beginning with senior management but extending to all of you--focus intensely on actions and attitudes that will continue Intel's strong track record of technology leadership leading to outstanding company performance and satisfied customers."


There are many reasons for these, but in the end, the reasons don't matter, because the result is less satisfied customers and a less successful Intel. I believe, as you do, that this is not the Intel we all know and that it is not acceptable.”


Although a much smaller (~15% the size) firm AMD (Advanced Micro Devices) is seen as an Intel competitor on the technology front. As recounted in earlier editorial AMD's chips offering high-performance, simultaneous x86-based 32- and 64-bit computing were seen as a case of one-upmanship. At the end of August AMD announced that it was demonstrating the industry's first x86 dual-core processor on 90nm process technology. HP, IBM and Sun Microsystems, among others, announced support for AMD's dual-core technology. Microsoft gave an assist by adopting AMD's recommendation when it announced that software licensed on a per-processor basis will continue to be licensed that way when
installed on hardware containing dual-core and multi-core processors. Now on the heels of Intel's announcement canceling plans for a Pentium 4 processor at 4GHz, AMD announced on October 19th the Athlon™ 64 FX-55 processor for performance-hungry enthusiasts and hard-core gamers and the Athlon 64 processor 4000+. AMD Athlon 64 processors are the first 32- and 64-bit desktop and mobile processors designed with Enhanced Virus Protection (EVP) capabilities.


Table 3 AMD Financial Performance

“Our third quarter net income improvement was largely driven by a 21 percent sequential increase in Computation Products Group (CPG) sales and improved gross margin in the Memory Group,” said Robert J. Rivet, AMD's chief financial officer. “AMD64 processor sales represented over one-third of our total CPG sales. Sales growth was driven by both higher average selling price (ASP) and increased unit volumes.


On October 28th to foster the rapid adoption of technology in high-growth markets throughout the world, AMD formally unveiled a business strategy with initial participants in India, Mexico and the Caribbean to enable 50 percent of the world's population with Internet connectivity and computing capabilities by 2015. As part of its 50x15 strategy, AMD is announcing the Personal Internet Communicator (PIC), an innovative consumer device that enables affordable, managed Internet connectivity and offers Microsoft Windows-based computing capabilities to help fulfill the communication, education and entertainment needs of people in high-growth markets.


The stock market's reaction to AMD and Intel is shown in the chart below.


Figure 1 Stock Performance during 2004 for Intel, AMD and NASDAQ index



Google Inc.


I had included some material in an earlier editorial on Google because of their unusual Dutch auction approach to an IPO and because I suspected most Edacafe readers use Google on a daily basis. Now it's time for an update following the firm's October 21st announcement of its results for the quarter ending September 30th. In its first post-IPO quarter Google reported record revenues of $805.9 million for the quarter ended Sept. 30, 2004, up 105% year over year. Revenue for the last nine months was $2.16 billion up 126% from $954 million. Income from operations, on a GAAP basis, was $11.1 million, or 1.4% of revenue compared to $66.6 million or 16.9% of revenue for
the prior year's quarter. Google-owned sites generated $412 million or 51% of total revenue. This represents an increase of 99%. Revenue generated on Google's partner sites, through the AdSense programs, contributed $384 million, or 48% percent of total revenue, a 120% increase. Income from operations includes the effects of a non-recurring, non-cash charge of $201.0 million related to the previously announced settlement of warrant and patent disputes with Yahoo! Inc. Without this non-recurring charge, Google would have realized income from operations of $212.1 million or 26.3% of revenues for the quarter. Net income
on a GAAP basis was $52.0 million. Net income before certain
non-recurring items was $125.0 million. Net income for nine months was $195 million up from $78.4 million. At the end of the quarter, Google had a cash, cash equivalents and short-term investments balance of $1.86 billion. Google employs 2,668 full time employees on a worldwide basis.


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-- Jack Horgan, EDACafe.com Contributing Editor.




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