The Business of Tech: Rough Times All Around For The GPU Crew
by Ryan Smith on July 10, 2008 10:00 PM EST- Posted in
- Ryan's Ramblings
For barely 2 weeks in to July, it has been a surprisingly rough time for the GPU sector. Amid the already weak global and national economies, both companies have been feeling a great deal of pain on the business and financial sides of things. It's been an interesting month to say the least, so we'll waste no time and jump right in to the middle of things.
AMD:
AMD has had the better month so far, as their sole immediate problem is only that their stock has hit a 5-year low as of today. When you hear concerns about the liquidity of AMD, this has a lot to do with it. The company is struggling to keep its market capitalization above what amounts to a "quaint" 3 billion dollars; which for the sake of comparison is only a bit more than half of the 5.4 billion dollar price tag on ATI when they purchased them in 2006. And while this isn't an immediate problem for the company, it doesn't give them much leverage for raising further capital to combat their ongoing losses or much to work with in terms of employee stock-based compensation.
AMD's Q2 earnings are due out on the 17th, although AMD may wish this was not the case. It will be yet another losing quarter, it's only a question of how much. AMD is expected to lose around 200 million dollars, but with the brisk sales of the latest Radeon 4850 and 4870 parts there's a good chance that it could be better as long as there aren't additional unexpected CPU-side losses. Surprisingly, this would still be AMD's best quarter in the last couple of years. We'll have more on this next week once their earnings are out.
For those of you who have been following AMD's situation this doesn't amount to much in the way of new news, but it does highlight the fact that the company is running out cash and stock price to bleed. Should the company manage to hit rock bottom, not a lot of good can come from it.
NVIDIA:
Believe it or not, AMD may have the more enviable situation at the moment. NVIDIA's stock price is nowhere near their own record lows, but that hasn't stopped the company's stock from experimenting with the laws of gravity. The price has dropped by over 33% in a single day this month, illustrating just how bad things are for NVIDIA at the moment. Right now NVIDIA is dealing with these specific issues:
1) Q2 revenue is now expected to come in well below earlier estimates, prompting the company to issue an earnings warning that was the result of the steep drop in stock price. What should have been another profitable quarter for the company may now be their first loss in the last few years.
2) The source of #1 has a lot to do with their current product situation: The new GTX 2xx series is not selling as well or for as much as anyone predicted. The reviews and subsequent price drops tell the tale: NVIDIA's most expensive GPU yet simply doesn't perform well enough compared to AMD's latest parts to justify the price NVIDIA was targeting. What will be AMD's boon is NVIDIA's loss, a great deal of GPU profit.
3) Another black hole for revenue this quarter will be defective products. NVIDIA is expecting to lose some 200 million dollars on replacing defective products above and beyond the usual failure rates. They have not specified what exactly is broken and in need of replacement, but the best theory we've heard so far is that there's a substrate problem with some of their mobile GPUs, resulting in the chips breaking their own substrate at temperatures they should be able to handle. 200 million dollars buys a lot of chips, so this doesn't appear to be a small problem. The bigger loss however will be the loss of faith in the company from OEMs who will be repairing laptops using these defective chips.
4) Finally, just to add insult to injury, Rambus is suing NVIDIA. We've talked about the saga of Rambus before, and this is just the continuation of it. The courts have upheld their patents in spite of their underhanded scheming with the JEDEC, so now they're free to go after anyone and everyone involved with memory. NVIDIA is being sued for infringement due to their memory controllers on their GPUs and motherboard chipsets, stretching from their early SDR controllers to their latest GDDR3 controllers. Rambus is playing hard and fast, on top of monetary damages they're looking for an injunction against NVIDIA to keep them from shipping further infringing products, most likely to encourage the company to settle out of court rather than risk a crippling injunction. In either case the situation is an expensive one for NVIDIA, they'll have to spend a great deal of cash on defending themselves, and should they settle Rambus will undoubtedly ask for a great deal of cash too (along with a percentage of all GPU and chipset sales).
In the long term NVIDIA is still in a better position than AMD since they're not continually losing money hand over fist, but it doesn't mean that these problems won't have ramifications in the future. NVIDIA wouldn't be the first company to shift around its product lines or slow down their R&D efforts in order to make a quarter or two look better, although for obvious reasons we hope it does not come to that. This much bad news at once is certainly unprecedented for NVIDIA.
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RobertAlvarez - Sunday, July 13, 2008 - link
Sorry for posting this here, but you have not responded to the posts on the Linux thread. Are you going to do the Ubuntu review? Thanks.Kode - Sunday, July 13, 2008 - link
He answered that 1 day ago in this same topic:quote:I encountered some issues unrelated to Ubuntu. 2 weeks at the most, hopefully it will be much sooner.
yacoub - Sunday, July 13, 2008 - link
There really couldn't be a better time for the two major GPU manufacturers to start over from the ground up. Just take a year off to restart everything, from their pricing models to their product roadmaps, and just keep the current products in production in the meantime. It's not like gamers have a bunch of amazing new FPS games coming out any month now that will demand a new generation of GPUs (as compared with last Fall when that was essentially the case).Great time to start over, guys. Take advantage of it.
yacoub - Sunday, July 13, 2008 - link
"The source of #1 has a lot to do with their current product situation: The new GTX 2xx series is not selling as well or for as much as anyone predicted. "That and $400+ GPUs will always be the laughing stock of most consumers. If they really wanted to have another great quarter, all they had to do was release them at price points that would attract more buyers. NVidia are the only ones to blame when they set the prices so high it only attracts the fools and the people with too much money to spend.
Eri Hyva - Friday, July 11, 2008 - link
Is Bill paying your bills?Ryan Smith: "will have an article up in early May." 8) :(
http://www.anandtech.com/weblog/showpost.aspx?i=43...">http://www.anandtech.com/weblog/showpost.aspx?i=43...
Mr Roboto - Sunday, July 13, 2008 - link
Quit your fucking whining about the Linux article. Go to a website that focuses on Linux if that's what interests you or just shut up about it! You keep posting in a comments section that's completely different from that topic. Are you gonna start stalking and threatening the writers from Anand if they don't post your article?Here's a start, see how hard it was to type Linux on Google.com? To narrow down your search you could even try "Ubuntu Linux" in the search box and then you'll get something even closer to what you're looking for!
http://www.google.com/search?hl=en&q=+linux&am...">http://www.google.com/search?hl=en&q=+linux&am...
Ryan Smith - Friday, July 11, 2008 - link
I encountered some issues unrelated to Ubuntu. 2 weeks at the most, hopefully it will be much sooner.ElFindo - Friday, July 11, 2008 - link
Shhh. Or get a new slogan. "Yougotto review Ubuntu!"Watzman - Friday, July 11, 2008 - link
The whole business about Rambus and Jedec is a classic "big lie"The facts are that Rambus invented and patented it's core technology years before joining Jedec. While US patent APPLICATIONS were, at the time, secret, Rambus also applied for a European patent which was published by the EPO (and which was word-for-word identical to the US patent). Thirty major memory makers signed non-Disclosure and were TAUGHT about what Rambus had invented by Rambus. Internal documents from the memory makers show that they knew and understood the significance of Rambus' developments and that their products likely would infringe Rambus' patents. Rambus tried to present it's technology to Jedec for adoption as a Jedec standard and is the only member in the history of Jedec to be denied permission to make a presentation ... THREE TIMES. THERE WAS NO "DECEPTION" AT JEDEC.
The facts, if you dig down below the lies that far too many believe, are that Rambus invented (starting in 1989) inventions without which NO form of memory since SDRAM (1996) can be built. They have over 900 patents issued and/or applied for, that will cover all forms of semiconductor memory now known or contemplated through the year 2021. The FACT is the the major memory industry players (Including AT LEAST Infineon (now Quimonda), Micron, Samsung, Hynix) CONSPIRED to both steal Rambus' patents without paying for them AND to attempt to put Rambus out of business.
Again, I ask you, what choice does Rambus have other than to sue?
Yet, Rambus is NOT a "highly litigious" company, they have only filed 4 patent infringement lawsuits in their entire nearly 20-year existence (and one anti-trust lawsuit). Many of the cases now in court were filed not by Rambus but against Rambus (including the Hynix and Micron cases now in process).
But the simple fact is, to suggest that Rambus should not bring litigation is to suggest that someone who has been continuously robbed on a daily basis since 1996, and who is still, to this day, being robbed every single day, should do nothing and not use the courts or law enforcement to get the thieves to stop and, indeed, to pay for what they have already stolen.
When the facts are looked at in detail (which takes about a 4-week trial) ... as they have been on 4 different occasions by the Court of Appeals for the Federal Circuit, by Chief FTC Administrative Law Judge McGuire (in the longest trial in FTC history), by the Court of Appeals for the District of Columbia and by a jury in the Hynix case, it is always found that Rambus is simply not guilty of any wrong doing. Yes, a corrupt US Federal Judge and an out of control Federal Trade Commission motivated by politics rather than the law did find otherwise. Both were overturned on appeal to two different higher courts.
HotdogIT - Saturday, July 12, 2008 - link
Watzman+Rambus+Google=fun links.