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ncreasing Talk Barcelona Server Chip Will Be Delayed
Last update: 6/5/2007 12:37:38 PM
By Donna Fuscaldo
Of DOW JONES NEWSWIRES
Speculation is mounting that Advanced Micro Devices Inc.'s (AMD) much awaited Barcelona server chip will be delayed until the fall, which could pressure margins and weigh on its waning competitive position.
On Monday supercomputer maker Cray Inc. (CRAY) issued a revenue warning for the year, citing a delay in the availability of a component, which analysts said is likely the Barcelona server chip. Meanwhile, on Tuesday Citigroup analyst Glen Yeung said in a research report out of Taiwan's Computex Trade show, that "several sources," including server vendors, distributors and motherboard makers, confirmed Barcelona will be delayed to September/October from June/July.
Officials at AMD weren't immediately available to comment.
Barcelona is viewed by many on Wall Street as a saving grace for AMD, which has been pummeled by a fierce price war that's weighed severely on its gross margins. Barcelona is seen as a way for AMD, Sunnyvale, Calif., to boost its gross margins and make further inroads into the corporate server market, where it doesn't have that strong of a position.
A delay, even for a few months, could hurt AMD's bruised reputation with corporate customers and open the door for Intel Corp. (INTC) to steal more market share.
"If you look at all the important product introductions AMD has done in the past 12 months, it missed every single one," said Hans Mosesmann, an analyst at Nollenberger Capital Partners, who has a sell rating on AMD. A delay in Barcelona would be a "significant" miss and could push out the financial benefit until 2008, the analyst said.
Mosesmann suspects the bigger problem for AMD isn't a delay in the timing of the chip's roll out, but that the chip may not be up to snuff.
"AMD's graphic processor was delayed a couple of times...and it was significantly below Nvidia's class of product in terms of performance power," said Mosesmann. "Being late is bad. Being late with potentially a lousy product could be a disaster."
In its research report Tuesday, Citigroup's Yeung said AMD is showing a sample at Computex, but that yield problems is the likely reason for the delay in the chip going into volume production. According to Yeung, the delay could hurt gross margins and gives Intel more opportunity to gain share.
"Barcelona is generally viewed to be AMD's best opportunity to stem server share loss to Intel," said Yeung in the research report. "While AMD's recent notebook win at Toshiba may balance any negative revenue implications to our current model. Barcelona's delay has negative implications for AMD's gross margin."
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And continued
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Meanwhile, on Tuesday Citigroup analyst Glen Yeung said in a research report out of Taiwan's Computex Trade show, that "several sources," including server vendors, distributors and motherboard makers, confirmed Barcelona will be delayed to September/October from June/July.
And the piece de resistance ( Citigroup report ) :
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Computex 2007: Day 1 Implications for Semiconductors; Lowering Estimates for AMD
Barcelona Delayed — While much speculated in the press, several sources (server vendors, distributors, and board makers) have confirmed that Barcelona, AMD’s much-awaited new server processor, has been delayed. From an original launch in June/July, Barcelona is now not expected until September/October (although we did see a sample device at the show). Yield problems for the estimated 286mm2 die was most frequently cited as the source of the delay.
Negative AMD Margin Implications— Barcelona is generally viewed to be AMD’s best opportunity to stem server share loss to Intel. While AMD’s recent notebook win at Toshiba may balance any negative revenue implications to our current model, Barcelona’s delay has negative implications for AMD’s gross margin. We note that server processors carry as much as 1500bps-2000bps greater gross margin than do notebook or desktop processors. We currently model a gross margin recovery of 1250bps in 4Q07 from 1Q07 levels. We tweak our AMD estimates lower to reflect risk to this assumption. Our 2007 EPS is revised to $(2.59) from $(2.48), no change to 2008.
Door Opens Wider for Intel Server MPU’s — Meanwhile, Barcelona’s delay opens the door wider for Intel to consolidate its share gain, particularly as it prepares to launch 45nm server processors in 4Q07. Intel currently expects its 45nm Harpertown quad-core processor to comprise ~8% of its sales in 4Q07. ....
Holy cow!! That's better than I expected!
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Door Opens Wider for Intel Server MPU’s (cont). Interestingly, one boardmaker we met with suggested that their tests indicated that AMD’s 65nm Barcelona only bridges the gap between Intel’s 65nm Clovertown. The release of 45nm Harpertown is expected to re-establish the lead for Intel, emphasizing the importance of any delay by AMD. Moreover, we remind investors that Intel will lower prices of its 65nm Clovertown server processors on July 7th to drive further penetration of quad-core processors ahead of AMD’s Barcelona launch.
Ouch! Rumour has it that Barcelona IPC on typical tasks is at the same level as a 2MB C2D.On server tasks it is expected to fare better , but anyway Opteron is strong there even now.
