Sun Rises on January Tech Fun
January has proven to be quite the busy month. We went from the Consumer Electronics Show, to Macworld, and then right into earnings season.
And while there have been few tech surprises so far, this week promises to be filled with major headlines.
On Monday, I fully expect Sun Microsystems to announce a new supply deal with Intel Corp. and the company's Xeon server chips. The news comes a few days after Intel's earnings news, and a day ahead of financials from Sun and Intel-rival Advanced Micro Devices .
I bring up AMD since Sun Microsystems uses its Opteron chips exclusively, at the expense of Intel.
Up until now.
And in the same way we all made such a big deal out of Dell making the switch from Intel-exclusive microprocessors on both servers and PCs, this pending announcement from Sun to use Xeon is on the same par but in the other direction.
It's a big deal for Intel and a big slap for AMD. Intel needs this customer. Even if industry and investors question Sun's relevance as an industry innovator, the symbolism is clear: Intel continues to sign new customers (like Apple Computer) and AMD continues to have trouble competing.
Intel's CFO Andy Bryant tells me he was surprised by AMD's quarterly warning a week and a half ago. He and everyone else on the Street. But the concern then was because of softness in the PC industry, which Bryant himself confirmed when Intel released its earnings. What no one anticipated was that AMD would see weakness for its Opteron chips and servers too. And if Sun is ready to add Intel as a supplier, this doesn't bode well for the other side of AMD's revenue base.
Sumit Dhanda of Banc of America Securities writes in a research note that Sun's decision is a "big endorsement" of Intel's new server chips, especially since Intel lost ground in the higher margin server business to AMD in 2006.
Sun has scheduled a San Francisco press conference Monday morning with CEO Jonathan Schwartz.
Should be very interesting to see how the shares of Intel, Sun, AMD, HP and Dell react to all of this. Remember, both Sun and AMD report earnings the very next day, and guidance from both will be watched extremely carefully.
Not that AMD or Intel make for compelling investments. Both are mired in a brutal pricing war that's taking its toll on gross margins. Michael McConnell, the chip analyst at Pacific Crest Securities rates them both "sector performs" and sees nothing terribly exciting from either, especially as desktop computing moves away from numbers crunching and microprocessor performance to graphically intensive software, especially Vista from Microsoft. AMD already made its move in this space when it bought ATI Technologies last year. The pressure may now be on Intel once again to take a hard look at nVidia.
But I digress.
After the news tomorrow, and earnings on Tuesday, attention will quickly shift to the internet: Yahoo reports Tuesday, eBay Wednesday, Microsoft Thursday and Google on January 31.
I wish "funner" was a word. Because each day left in January only gets funner and funner!
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