NVIDIA Q3 Earnings + CC

[Geeforcer]

Point being, this wasn't a deal where ATI's management wanted to cut and run (I don't think these guys are particularly hard up!), nor does it look to be one where they have concealed whats going on in the market because thats not a wise strategy with your new boss.

First, ATI's management’s first and foremost responsibility was to their shareholders, and I think in that respect they have performed very well. Furthermore, I am not accusing them of concealing the numbers - at the time the agreement was reached the numbers were simply not there yet.

Let me ask you this fairly simple and to the point hypothetical question: If AMD and ATI are negotiating right now, what is the price tag we are looking at? Don't go gunshy on me now

 

[Dave Baumann]

I didn't say concealing the numbers, I said concealing what is going on in the market, which you will be able to gauge. At the moment I don't necessarily have any reason to see that the value has decreased relative to expectations.

 

[Geeforcer]

The perceived value of a company is a function of both the expectations and the current market cap.

Just to be sure, you think that if the deal is announced on Monday, the price is still $5.5 billion, right?

 

[DemoCoder]

You're got to hand it to NV, their execution recently is amazing:

1) yet another hardlaunch
2) keeping G80 secret and delivering totally new architecture, just in time for --
3) Vista RTM
4) also vastly increasing their video quality, just in time for first BluRay/HDDVD notebooks
5) and delivering the new 680i/680a at the same time

Seems a convergence of a bunch of factors in their favor.

 

[Arun]

Come on Dave, what happened to certainty and fearlessness once seen on TMF's 3dfx board, circa 1999?

Err, that kind of accusation is more than borderline... I know you probably didn't mean to be too offensive there, but I can see how Dave might feel bringing up that kind of stuff is quite uncalled for, to say the least, and it does nothing but bring some aggressivity and conflicts from times past, and from another board (I know, from 1999, but...), which isn't exactly warranted either - even if it was said partially in jest.

So I'm just asking you to cool down the discussion a bit and just talk about the discussion's subject, rather than bringing in mostly unrelated arguements, even if you could argue they set a precedent or whatever (which would be a rather... weird thing to claim). I don't want to look like I'm protecting Dave or ATI in particuliar here, so I wouldn't even consider a deletion or non-warning infraction (not that it'd be fully warranted either), but just consider yourself warned not to get too personal at the subject!

Anyway, if I may comment on what I think about this in the same post - I think it's certainly true that if the merger was announced today instead of in July, AMD wouldn't be paying so much. But here, you are assuming at ATI would even be interested for a lesser price. That's just the dynamics of mergers here, really. Both parties will try to sell or buy when they think the time is best, and might no longer be interested if their relative valuations change too much too fast, making the merger less of an appealing proposition.

I've seen an interesting article with some comments from AMD executives a while ago, although I can't seem to find it anymore. Anyway, it gave a good idea of the dynamics involved; in the beginning of the negociations, AMD's stock was relatively much higher than ATI's, but it dropped in during that timeframe. That's why they're paying in cash and not shares, you'd assume. These kinds of deals are always about both parties trying to buy and sell at the best times. After the fact, you can claim one got a better deal than the other, but as I said, you've got no proof the deal would have happened without that either.


Uttar

 

[overclocked_enthusiasm]

nor does it look to be one where they have concealed whats going on in the market because thats not a wise strategy with your new boss.

My biggest knock on Dave Orton, besides the long list of delays and late product launches, is his inability to accurately forcast the market. From PCIe adoption to quarterly revenue and gross margin expectations, Dave Orton hasn't been very good at forcasting...period. This has lead to the the multiple warnings and misses experienced over the past couple of years. He has always underestimated Nvidia's ability to put pricing on ATI's asps and gross margins because of underestimating Nvidia's ability to hit the market running with hard launches on new products that make ATI's launches look late and as a response to Nvidia.

This last quarter is yet another example of how Orton would have been wrong...AGAIN...on his previous quarterly forcast. Excluding the loss of the Intel chipset business, Nvidia clearly gained enourmous SEQUENTIAL share from ATI in desktop and more importantly notebook. ATI's internal forcasts haven't been right in a very long time concerning gross margins, HDTV sales, handheld, launch dates or other key metrics. It is no surprise to me that ATI forcast incorrectly, sold the forcast to AMD, and have fallen short as evidenced by NVDA's numbers. NVDA didn't get to 40% + gross margins, huge sequential market share gains and become the leader in notebook GPUs for the first time in the company's history at the expense of Intel. This happened at ATI's expense...AGAIN.

In sum, had the deal not closed as quickly as it did, this continued market share loss would have been more evident to AMD. I am of the opinion that ATI's market share loss had finally reached a tipping point last quarter and started to accelerate...again not anticipated by Orton. This is the second major product launch cycle that ATI is 2-4 months behind. This will further depress margins, market share, revenue and ASPs as ATI tries to move "last generation" high end product against Nvidia's "current DX10 Vista blah blah balh" products. ATI has no pricing power, no flagship product in the lead and is simply trying to sell their stack against a superior stack from Nvidia. As a result of this decling market share, which I believe is accelerating, AMD overpaid by about 25% or $1.3 billion for ATI IMHO...maybe more.

When R600 does finally come to market, it will be up against a mature G80 that has had months of uncontested pricing power and months of yield tweaking that should give Nvidia the option of pushing prices down or allowing them to tweak G80 to repond in time to any R600 surprises. Again, ATI lacks the initiative and simply won't have any pricing power against G80. In addition, the rest of the G80 stack will begin to appear when R600 launches and the problem for ATI moves from just the high end down further into the stack. ATI will have 1-3 SKUs against Nvidias 4-7 SKUs in the February/March time frame. Will ATI be able to sell all that old product against Nvidia's newer stack? Will ATI be forced to do a big write off again?

If AMD did realize all this BEFORE the deal gained terminal velocity I would be VERY surprised. I think ATI got lucky and AMD simply overpaid for a company they could have picked up for at least 25% less once this last quarter saw the light of day. If R600 is some leapfrog technology that gives ATI an R3xx type of advantage of 6 months or more, I will be the first to say I was wrong. The odds of that are slim as G80 seems to have exceeded everyone's expectations...again. Nvidia simply has the killer instinct that ATI lacks and they understand the stakes of a zero sum game.

 

[schtuga]

From having followed this for awhile,as an average guy who only knows what he reads and investigates,this is how an average guy sees it.


Orton announces great things to come

stocks rise

Orton sells millions in shares(so of course he's doing all right)

Orton then announces inventory/stock problems and that they must cut margins to move stock

Orton announces 520 delays

stocks plummet,accusations lawsuits

520 comes,great tech,but late another "lower than expected quarter"

there is no problem on the tech side,but the management is a joke,which was confirmed after reading ATI's 3rd Q statement.

And now after having the 1st unified graphics chip(xbox 360)which should have given them the jump,they are late again and losing more ground.

Of course the shareholders were all for it,they were sick of seeing the management run things into the ground,hopefully,AMD doesn't let Orton make anymore statements or decisions

 

[kemosabe]

Orton announces great things to come

stocks rise

Orton sells millions in shares(so of course he's doing all right)

I don't pity Orton one bit, but ATI stock never rose to any lofty levels that would smell of insider manipulation like that - in fact Orton sold over 1 million shares at prices significantly lower than what AMD ultimately offered shareholders.

That said, I completely agree that as a CEO, he repeatedly failed in meeting product delivery schedules and achieving the financial objectives that his management team laid out for the company. Now we get to see whether ATI's hardware engineering prowess flourishes under more competent leadership.

 

[Geo]

We don't have enough threads on AMD/ATI? Go kvetch in one of those, people. Thanks.

 

[Maintank]

In sum, had the deal not closed as quickly as it did, this continued market share loss would have been more evident to AMD. I am of the opinion that ATI's market share loss had finally reached a tipping point last quarter and started to accelerate...again not anticipated by Orton. This is the second major product launch cycle that ATI is 2-4 months behind. This will further depress margins, market share, revenue and ASPs as ATI tries to move "last generation" high end product against Nvidia's "current DX10 Vista blah blah balh" products. ATI has no pricing power, no flagship product in the lead and is simply trying to sell their stack against a superior stack from Nvidia. As a result of this decling market share, which I believe is accelerating, AMD overpaid by about 25% or $1.3 billion for ATI IMHO...maybe more.

I have been saying this for years. I think ATI even botched the 9700 launch. They should have had an entire line from top to bottom of DX9 cards waiting in the wings. Instead they had the 9700 Pro which killed the competition then a neutered 9700 ala 9500 Pro to fight the 4600 in the mid range. Fine they figured out something until the scaled down 9600 pro showed up. But their margins took a hit due to sticking a high end die in a mid end product. Nvidia survived that intial assault fine until they handed ATI the silver platter with the NV3.x

Honestly the only launch ATI has won in the history of this competition was due to an Nvidia screwup. And even then ATI doesnt have the planning to really push Nvidia into a hole. 12 months after the NV3.x debacle Nvidia bruised but not out they come out with the NV4.x and are right back in it. What is ATI's response? Parts that take months to show up in the channel, arent much faster, and fail to hold people's interest. Nvidia has a top down approach from the 6800 down to the 6200. What is ATI's answer? X800s, 9800s and the thrice recycled R200?

The deathblow was the 7800GTX. It showed up fast, it showed up for sale, and people bought it in droves. The X1800XT had a manufacturering glitch that took what, 6 months to realize it was a software problem? Another fine example of poor management. The x1800XT shows up late, slow, and hot. It is replaced by the X1900XT 3 months later. A fine chip but their mindshare has fallen as Nvidia decides to simply be within ball park of that chip with a part that is half the die size. After playing with ATI for awhile they release the GX2 that single handily shoves ATI's margins trhough the floor on the top models. Not to mention another complete lackluster lineup of mid and low end cards.

Now this latest blow to ATI with the 8800GTX which is simply a nice GPU. ATI's response is silent, probably late, hot, and may beat this chip by a few % points. Unless Nvidia has a revised G80 waiting in the wings to steal their show. And chances are ATI wont have a full compliment of cards either.

I said when AMD signed the papers they should have had ATI's executive and upper management teams walking papers ready. AMD isnt exactly the best run company either, so they should take all precautions to keep the incompetence at a low.

 

[Geeforcer]

-Geeforce casts Raise Dead.

So, 13 months, Orton et al. exodus and impending impairment later, one school of thought regarding ATI purchase seems slightly "righer" than the other.

 

[Arun]

Hah, so you did bump it up! Anyway, reading this thread again reminds me of how badly their market share stumbled from Q2 to Q3. I looked at the seekingalpha transcripts, and Orton was definitely expecting to keep their traditional 75%+ share in the notebook discrete market.

So I can't help but wonder what the hell he based on that forecast on. Rick Bergman's presentation at AMD's recent Analyst Day indicated that they had a majority of design wins for the 2008 cycle, as those have already been decided by now. But wouldn't that same data have been available to Orton for the 2006 cycle back in 2005, let alone in early 2006 when he insisted they'd keep their share again and NVIDIA was just FUDing?

Rick Bergman's presentation (the audio part) also shocked me as he basically said 'We asked our customers why our industry was growing so fast' and then gave the exact same reasons NVIDIA has been pointing out for 1.5+ years... I'd tend to truly believe that AMD will have very competitive share numbers in the 2008 Notebook Cycle, but looking at this and ATI's historical forecasting ability doesn't give me a lot of confidence...

 

[Arun]

Closing this thread to reconsolidate the topic - there's a reason for the existence of the AMD Despair & Gloom thread, and that's to keep the discussion focused and keep overly negative comments about AMD out of the other threads.