Microsoft: Wrong Strategy, Right Implementation

Last fall, then Microsoft CEO Steve Ballmer announced the company’s new strategy as the “devices and services” company. I choked on this and remained silent because after all, Ballmer was on the way to retirement and the company was clearly on a road to change. I’m not a heckler.

However, let’s look at the strategy on the surface. First, Microsoft is not “the devices company”. They get credit for the xBox game consoles, mass-market mice and keyboards, and …. nothing more. The Microsoft-developed tablets and phones over the years have made hardly a dent in their respective markets. The assets and knowledge base of the Nokia acquisition aren’t likely to move the dial much either. My fellow analysts all agree on this state of reality.

Likewise, Microsoft’s overall impact on IT services is minuscule in the case of enterprise IT, and approximately non-existent in the case of consumers. You don’t need a focus group to determine that Microsoft is not top-of-mind for computer services. Therefore, I conclude the Microsoft as the “devices and services company” is a failure waiting to happen. The reality does not match the words.

Nevertheless, I applaud what Microsoft has been doing of late in making its familiar technology available on the real devices people own and use. A couple of weeks ago, the Office Suite became free apps for the Apple iPad. This morning, I loaded Word into Google Chrome on my Mac — and later I’ll put it on a Chromebook. In the devices space, Google (Android) and Apple (iPad and iPhone) are Microsoft’s arch enemies.

Enemies or not, I am paying nothing for the Microsoft apps on Chrome. I’m also paying nothing to store my documents on Microsoft’s OneDrive cloud storage. Free lunch on the Internet is good. Of course there’s a caveat, which is that my docs can only be stored in Microsoft’s OneDrive cloud. But that’s a free-market tradeoff that I and many consumers will be willing to make.

If Microsoft keeps implementing an “any device” strategy like the iPad/Chrome offer described above, they’ll do well and buff some tarnish off the brand. And if the company gets around to describing its strategy as “we are the best applications for everyday use by business and consumers on any device”, they might get more applause — and attention. Follow me on Twitter @PeterSKastner

Word for Chrome


IT Industry Hopes for Q4 Holiday Magic

I am floored by how it has come to pass that almost all of the 2013 new tech products get to market in the fourth quarter of 2013. For the most part, the other three quarters of the year were not wasted so much as not used to smooth supply and demand. What is to be done?

2013 products arrive in Q4
Here are some of the data points I used to conclude that 2013 is one backend-loaded product year:

  • Data Center: Xeon E3-1200 v3 single-socket chips based on the Haswell architecture started shipping this month. Servers follow next quarter. Xeon E5 dual-socket chips based on Ivy Bridge announced and anticipated in shipping servers in Q4. New Avoton and Rangely Atom chips for micro-servers and storage/comms are announced and anticipated in product in Q4.
  • PCs: my channel checks show 2013 Gen 4 Core (Haswell) chips in about 10% of SKUs at retail, mostly quad-core. Dual-core chips are now arriving and we’ll see lower-end Haswell notebooks and desktops arriving imminently. Apple, for instance, launched its Haswell-based 2013 iMac all-in-ones September 24th. But note the 2013 Mac Pro announced in June has not shipped and the new MacBooks are missing in action.
  • Tablets: Intel’s Bay Trail Atom chips announced in June are now shipping. They’ll be married to Android or Windows 8.1, which ships in late October. Apple’s 2013 iPad products have not been announced. Android tabs this year have mostly seen software updates, not significant hardware changes.
  • Phones: Apple’s new phones started selling this week. The 5C is last year’s product with a cost-reduced plastic case. The iPhone 5S is the hot product. Unless you stood all day in line last weekend, you’ll be getting your ordered phone …. in Q4. Intel’s Merrifield Atom chips for smartphones, announced in June have yet to be launched. I’m thinking Merrifield gets the spotlight at the early January ’14 CES show.

How did we get so backend loaded?
I don’t think an economics degree is needed to explain what has happened. The phenomenal unit growth over the past decade in personal computers, including mobility, have squarely placed the industry under the forces of global macro-economics. The recession in Europe, pull-back in emerging countries led by China, and slow growth in the USA all contribute to a sub-par macro-economic global economy. Unit volume growth rates have fallen.

The IT industry has reacted with slowed new product introductions in order to sell more of the existing products, which reduces the cost-per-unit of R&D and overhead of existing products. And increases profits.

Unfortunately, products are typically built to a forecast. The forecast for 2012-2013 was higher than reality. More product was built than planned or sold. There are warehouses full of last year’s technology.

The best laugh I’ve gotten in the past year from industry executives is to suggest that “I know a guy who knows a guy in New Jersey who could maybe arrange a warehouse fire.” After about a second of mental arithmetic, I usually get a broad smile back and a response like “Hypothetically, that would certainly be very helpful.” (Industry execs must think I routinely wear a wire.)

So, with warehouses full of product which will depreciate dramatically upon new technology announcements, the industry has said “Give us more time to unload the warehouses.”

Meanwhile, getting the new base technology out the door on schedule is harder, not easier. Semiconductor fabrication, new OS releases, new sensors and drivers, etc. all contribute to friction in the product development schedule. But flaws are unacceptable because of the replacement costs. For example, if a computing flaw is found in Apple’s new iOS 7, which shipped five days ago, Apple will have to fix the install on over 100 million devices and climbing — and deal with class action lawsuits and reputation damage; costs over $1 billion are the starting point.

In short, the industry has slowed its cadence over the past several years to the point where all the sizzle in the market with this year’s products happens at the year-end holidays. (Glad I’m not a Wall Street analyst.)

What happens next?
The warehouses will still be stuffed entering 2014. But there will be less 2012 tech on those shelves, now replaced by 2013 tech.

Marching soldiers are taught that when they get out of step, they skip once and get back in cadence.

The ideal consumer cadence for the IT industry has products shipping in Q2 and fully ramped by mid-Q3; that’s in time for the back-to-school major selling season, second only to the holidays. The data center cadence is more centered on a two-year cycle, while enterprise PC buying prefers predictability.

Consumer tech in 2014 broadly moves to a smaller process node and doubles up to quad-cores. Competitively, Intel is muscling its way into tablets and smartphones. The A7 processor in the new Apple iPhone 5S is Apple’s first shot in response. Intel will come back with 14nm Atoms in 2014, and Apple will have an A8.

Notebooks will see a full generation of innovation as Intel delivers 14nm chips that are on an efficiency path towards thresh-hold voltages — as low as possible — that deliver outstanding battery life. A variation on the same tech gets to Atom by 2014 holidays.

The biggest visible product changes will be in form-factors, as two-in-one notebooks in many designs compete with tablets in many sizes. The risk-averse product manufacturers (who own that product in the warehouses) have to innovate or die, macro-economic conditions be damned. Dell comes to mind.

On the software side, Apple’s IOS 7 looks and acts a lot more like Android than ever before. Who would have guessed that? Microsoft tries again with Windows version 8.1.

Consumer buyers will be information-hosed with more changes than they have seen in years, making decision-making harder.

Intel has been very cagy about what 2014 brings to desktops; another year with Haswell refreshers before a 2015 new architecture is entirely possible. Otherwise, traditional beige boxes are being replaced with all-in-ones and innovative small form-factor machines.

The data center is in step and a skip is unnecessary. The 2014 market battle will answer the question: what place do micro-servers have in the data center? However, there is too much server-supplier capacity chasing a more commodity datacenter. Reports have IBM selling off its server business, and Dell is going private to focus long-term.

The bright spot is that tech products of all classes seems to wear out after about 4-5 years, demanding replacement. Anyone still have an iPhone 3G?

The industry is likely to continue to dawdle its cycles until global macro-economic conditions improve and demand catches up with more of the supply. But moving the availability of products back even two months in the calendar would improve new-product flow-through by catching the back-to-school season.

Catch me on Twitter @peterskastner



Google As “The Cross-Platform Apps Company”

A beta version of Google’s Chrome Browser now supports Chrome App Launcher. This opens up the Chrome Store apps to Windows, Linux, and Mac OS desktops plus Google Android and Apple iOS mobile phones and tablets. Not to mention Google’s Chrome OS. Cross-platform is good, users say, because they increasingly recognize the utility of apps and their data across the devices in their lives.

Google's Chrome App Launcher

Google’s Chrome App Launcher

Common apps running on a familiar user interface and operating system across a wide variety of hardware platforms is an idea that crops up frequently in the history of the computer industry. Unix and Windows NT come immediately to mind. Google is apparently bringing the cross-platform idea back into play.

The Chrome browser runs on Android, Windows, Linux, and Mac OS and has more recently appeared on iOS. Bookmarks, tabs, settings are synchronized in Google’s cloud including Drive storage, and available to any device at any time. Chrome apps add much more than typical browser extensions. They are real apps, albeit with cloud and local data. Docs, Sheets, and Slides are the functional equivalent of Word, Excel, and Powerpoint in the Microsoft universe, and Pages, Numbers, and Keynote in the Apple Universe.

Chrome apps plus the already cross-platform Chrome browser give Google a wider breadth of platforms than the competition. As more data and usage is moved to the cloud (e.g., Office365), the benefits will become more apparent to cloud-migration users.

Perhaps my personal journey is illustrative. Like many professional users, I’ve followed Microsoft’s Office apps for generations. But over the past decade — Vista comes to mind — I started using a Mac. And I still have PCs. However, I never invested heavily in the Apple iWork office suite, using it for mostly Microsoft-compatible import and export or, lately, to make cross-platform .pdfs of finished documents or presentations. I have expertise and a software investment in Microsoft PC office apps and have no foreseeable intention to move to Microsoft Office 365.

Since more of my consumption and production is happening on tablets and even smartphones, I’m a good candidate to drop Apple iWork and move to Google apps. These appear on the Mac desktop and launch just like Mac apps. Or Windows apps.

Moreover, the mobile apps I use from the Chrome Store are all there too: WorkFlowy, TweetDeck, QuickBooks, and Evernote. It’s not just cloud office.

Let’s leave aside the issue of whether your data is secure in the cloud. That applies to all apps everywhere, and is worth pondering another day.

Being able to run a familiar, common set of apps across all the major hardware and OS platforms and time is a valuable competitive advantage.

I don’t see the technology industry yet recognizing that Google is quietly setting up to be the only supplier that can run the same apps on any broadly used platform.

Follow me on Twitter @peterskastner. Your comments are invited.

Apple’s Q2-2013: Q4 Anticipation

I’m on the road but wanted to update you on Apple’s second quarter.  Revenue was flat and profits were down compared to last year, while iPhone sales were up, and iPad and Mac sales were down. I expect the current third quarter to be constrained by anticipation of expected product announcements in September. Then, product supply issues will be unable to fully meet Q4 holiday demand for iPhone and iPad.

It sure looks like Apple has managed to compress a year’s worth of  opportunities into three or four months. Think how much smoother things might be if product came forth across the entire twelve months of the year.

The text below was supplied by Apple PR. While I cannot vouch for its accuracy, I have no reason at all to dispute it. It’s a useful condensation of the numbers.

This afternoon Apple announced third quarter results, including record June quarter iPhone sales and our highest ever Education revenue. You can find our earnings press release here and a replay of the call with Tim Cook and Peter Oppenheimer is available here
– Apple reported quarterly revenue of $35.3 billion and net profit of $6.9 billion, compared to $35 billion and $8.8 billion, respectively, a year ago
– Gross margin was 36.9%, compared with 42.8% in the year-ago quarter
– International sales accounted for 57% of total quarterly revenue
– Apple generated $7.8 billion in cash and has returned $18.8 billion in cash to shareholders through dividends and share repurchases
– Apple sold 31.2 million iPhones, up from 26 million in the year-ago quarter
– iPhone leads in customer satisfaction and loyalty, according to numerous third-party research firms, including J.D. Power & Associates, ChangeWave and Kantar
– Apple reduced iPhone inventory by 600,000 units in the quarter
– iPhone remains strong in the enterprise, and has captured 62.5% of the US commercial market, according to IDC
– Apple sold 14.6 million iPads in the quarter, compared with 17 million in the year-ago quarter
– iPad faced a tough June comparison, as the first iPad with a Retina display was launched in the year-ago quarter and we ramped up inventory
– iPad channel inventory was reduced by 700,000 units, making sell-through down just 3% year-over-year
– iPad usage share remains incredibly high, and grew to 84.3% last month, according to Chitika
– Apple sold 3.8 million Macs, down from 4 million in the year-ago quarter
– The updated MacBook Air line was launched at WWDC in June, making it available for just three weeks of the quarter.
– The Mac was though down 7% but again outperformed the market, which contracted 11%, according to IDC
– We look forward to the launch OS X Mavericks this fall and of the all new Mac Pro later this year
– iTunes, software and services together generated $4 billion in quarterly revenue
– We now have more than 320 million iCloud accounts and 240 million Game Center accounts
– There are more than 900,000 apps in the App Store, with more than 375,000 designed specifically for iPad
– Customers have downloaded more than 50 billion apps
– Apple has paid more than $11 billion to developers, half of which was earned in the last four quarters
– Our education division experienced its highest ever quarterly revenue
– 1.1 million iPads were sold in education, and the Mac experienced strong sales as well
– Maine’s statewide education technology program saw 94% of the state’s elementary and high schools choosing Apple products
– The first phase of Los Angeles Unified School District’s plan to provide 660,000 students with a tablet was approved, resulting in an initial $30 million iPad sale
– Apple retail stores generated $4.1 billion in revenue, about equal to a year ago
– iPhone saw strong growth in sales of our own retail stores
– MacBook Air had its most successful Retail launch to date
– We opened six new stores across five countries and now have 408 stores, 156 outside the US
Apple iPads

Apple iPads

Peak Technology or Technology Peak?

The theory of peak oil — the point at which the Earth’s oil supply begins to dwindle — was a hot and debatable topic last decade. There are lots of signs that we are at a technology demand peak. Is this permanent, or how will we get past this peak?

The last-decade argument that oil production had permanently peaked proved to be laughably incorrect. Hydraulic fracturing  (“fracking”) technology developed in the United States changed the slope of the oil production curve upwards. This analyst has no intention becoming a laughing stock by suggesting that digital technology innovation has peaked. Far from it. However, few things in nature are a straight line; it certainly appears that digital technology adoption — demand — has slowed. We are in a trough and can’t foresee the other side.

One good place to look for demand forecasts is the stock market.

Smart Phones and Tablets
Last month, both gadget profit-leaders Samsung and Apple both took hits based on slower growth forecasts. “Pretty much everyone who can afford a smartphone or tablet has one, so where does the profit growth come from?” was the story line. Good question.

This month, AT&T and T-Mobile announced they would lease customers smartphones instead of selling them outright with a carrier discount. The phones and tablets coming off lease will be re-sold into the burgeoning used gadget market. It’s now too easy to get new-enough gadget technology in the used market. After all, your last-year’s hardware can still run this year’s free, new software upgrade.

On the surface, it appears that the global market for $600 smartphones and tablets is at or close to saturation — a peak.

Desktop and Notebook PCs
The stock market is not treating traditional technology makers very well. H-P is coming back from a near-death experience. Its stock is half what it was two years ago. Dell wants to go private so it can restructure and deal with market forces that are crushing margins and profits. Even staid and predictable IBM has lost its mojo over the past five quarters. Microsoft missed.

These technology makers are dealing with PCs, the data center, and services. They are not major players in the smartphone/gadget market. Their focus is on doing what they used to do more efficiently. That strategy is not working.

The desktop and notebook PC markets are almost all replacement units in developed countries. Macro-economics has dramatically slowed emerging market growth in formerly hot places like Brazil, Russia, India, and China (BRIC). The new customers are being added more slowly and at higher costs, and existing customers have increasingly voted to not upgrade as frequently. My 2008 Apple MacBook Air, cutting edge and quite expensive at the time, is still adequate for road trips. My Sandy Bridge Generation-1 Ultrabook has adequate battery life. There’s no compelling reason, most buyers tell us, to accelerate the PC replacement cycle.

Well, one temporary accelerator is the support demise next year for Windows XP. With auditors and consultants screaming about liability issues, non-profits and government are rolling in new PCs to replace their ten-year old kit. Thank goodness. But seriously, ten-year old PCs have been getting the job done, as defined by user management.

Note also that a new PC likely means a user-training upgrade to Windows 8. Both consumers and businesses are avoiding this upgrade more or less like the plague. There is no swell of press optimism that Windows 8.1 this fall will be the trick. PC replacement is a pain already, so few want to jump on an OS generation change as well.

Data Center
The data center market shows some points of light. Public cloud data centers by the big boys like Apple, Google, Facebook, and Amazon are growing like gangbusters. High Performance Computing, where ever more complex models consume as many teraflops as one can afford to throw at the problem. Recent press reports suggest that “national security” is a growing technology consumer. [understatement]

However, enterprise data centers, driven by cautious corporate management, are growing more slowly than five years ago; this market outsizes the points of light. Moreover, the latest generation of server technology really does support more users and apps than the gear being replaced. With headcount down and fewer new enterprise apps, fewer racks are now getting the computing workload done. (Storage, of course, is growing logarithmically). We also expect a growing trend towards “open computing” servers, a trend that will suck hardware margin and services revenue from the big server-technology makers.

Navigating From the Trough
So, mobile gadgets, traditional PCs, and the data center — the three legs of the digital technology stool — are all growing more slowly than in the recent past. This is the “technology demand peak” as we see it. We are presently past the peak and into the trough.

How deep is the trough and how long will it last? LOL. If we knew that, we could comfortably retire! Really, there are roughly a couple of trillion dollars in market cap at stake here. If the digital tech market growth remains anemic beyond another twelve months, then there will be too many tech players and too few chairs when the music stops. Any market observer can see that.

Our own view is that it will take a number of technology innovations that will propel replacement demand and drive new markets. The solution is new tech, not better-faster-smaller old tech. Where’s the digital equivalent of fracking? (Actually, fracking would not be possible without a lot of newly invented, computer-based technology.)

First, the global macro-economic slowdown is likely to resolve itself positively, perhaps soon. We don’t buy the global depression arguments. There are billions of potential middle-class new computer consumers and the data center backend to support them.

Next, mobile gadgets and PCs are on the verge of exciting new user interfaces. Things like holographic 3D displays — you are in the picture, and keyboards projected on any flat surface. Conference-room projection capabilities in every smartphone. New users interfaces, shared with PCs and notebooks, that are based on perceptual computing, the (wo)man-machine interface that recognizes voice, gestures, and eye movement, for starters.

Big data and the cloud are data-center conversation pieces. But these technologies are really toddlers, at best. Data-sifting technologies like the grandson of Hadoop will enable more real-time enterprise intelligence and wisdom. HPC has limits only of money available to invest. Traditional data centers will re-plumb with faster I/O, distributed computing, and the scale-up and scale-down capacity of an electric utility — while needing less from the electrical utility.

We don’t have all the answers, but are convinced it will take an industry kick in the pants to get us towards the next peak. More of the same is not a recipe for a solution. We are in a temporary downturn, not just past peak technology.

Your thoughts and comments are welcome.

Photo Credit: Eugene Richards

Photo Credit: Eugene Richards

Silvermont: Atom Steps Into the Spotlight

Intel unveiled its Silvermont architecture for Atom 22nm and 14nm chips yesterday. The billboard numbers are 5x lower power consumption and 3x more performance than the current Atom chips, which use the Saltwell architecture at 32nm. The first chips based on the Silvermont architecture, codenamed Baytrail for tablets and Merrifield for smartphones, should start shipping by the end of 2013.

Highlight: Performance and Power Excellence vs. ARM

Intel projects the architecture will deliver significantly better performance, at lower power draw, than its ARM-based competition. Let’s get right to the fisticuffs.

Silvermont Performance/Power

Silvermont Performance/Power

In the chart above, Intel claims Silvermont-based Atom systems-on-a-chip (SoCs) will deliver more performance at lower battery draw in both dual-core (e.g., smartphone) and quad core (e.g., tablet) uses — at the time of product launch later this year. Moreover, Intel confidently predicts the dual-core Atom will beat quadcore ARM chips in performance and power usage. The gloves just came off.

Note though in the fine print that these are projected CPU performance based on architectural simulations. We’ll have to wait for the product launch for the real benchmark comparisons.

Is Intel just bluffing about wiping the floor with ARM on performance and power? We are strongly convinced that Intel is not bluffing; the launch videoconference was hosted at, Intel’s investor relations portal where SEC-material announcements are made. Who in their right minds would want to bring the SEC and the class-action bar down on their heads with unwarranted and unsupportable benchmarketing claims?

Architecture Highlights

Our readers don’t want the full computer science firehouse on how the architecture works. A good review is AnandTech here. The important take-away points are:

  • Silvermont is a tour de force design that marries a custom version of Intel’s industry-leading, 22nm process with modern SoC design. It is optimized for low-power usage; new power-efficient design libraries were built and can be carried into other Intel architecture endeavors (i.e., Core).
  • Supports 2-8 cores in pairs. Each core has out-of-order execution (an Atom first), modern branch prediction, SIMD instructions, AES-NI security instructions, and Intel’s virtual technology (VT) for virtualization. Each pair of cores shares 1MB of level 2 cache. The design goal was low power consumption without sacrificing performance.
  • Like Atom’s big brother, Core, there is extensive on-chip digital power management including new power states. The SoC dynamically manages bursts of higher clock speeds, and looks  at first glance to be very sophisticated.
  • The overall dynamic power range is more efficient that ARM BIG:little approaches.

Where Will Silvermont Be Used?

The obvious places are in smartphones and tablets. Other than mentioning the market attractiveness of full Windows 8 on a tablet as well as the choice of Google’s Android — and maybe even a dual boot, let’s leave the smartphone and tablet war until another day when we compare real products. 

What we don’t hear today is talk about the likely growth for Silvermont-based Atom SoCs in markets other than phones and tablets. That’s a mistake because Intel surely has these markets in its sights:

  • Netbooks: Remember the 2008 low-cost Internet-consumption notebooks killed by ARM/Android by 2011? They’ll be back in spades. Lump Google Chromebooks in this category too.
  • Automotive: The abject failure of Ford’s My Ford Touch entertainment system using ARM and Microsoft Embedded Windows is the joke of the auto industry. Atom can play a role here as automobiles are today a processor-rich environment.
  • Retail Systems: Point-of-sale and checkout systems cry for low-power, small form-factor devices. Ditto ATMs.
  • Digital Signage: The market for personal ads on digital signage is just arriving. This will become a large market later in the decade.
  • Embedded Systems: Intel’s 2009 acquisition of Wind River Systems aimed to do more in real-time, embedded systems for healthcare, manufacturing, distributtion, automation,  and other activities. Silvermont-generation Atom chips are a big step forward for these markets.

Closing Thoughts

An architecture is not a testable or buyable product. Nevertheless, Silvermont looks to be the real deal for performance and power, and ought to be giving ARM licensees heartburn.

With the introduction of products based on the Silvermont architecture, Atom becomes a hero. Not a hero brand, but a hero family of chips that move out of the also-ran category to being in the spotlight as front-line performers in Intel’s many-chip continuum of computing strategy.

Silvermont is an important way-point in measuring Intel’s commitment and delivery of chips with: competitive power consumption, SoC maturity, and a new phone/tablet/embedded system workload target — without dropping the ball in the rest of the business. The proof of the architecture will be the Baytrail and Merrifield SoCs that start arriving by the holidays. And the Haswell announcement next month will clearly show Intel juggles multiple balls.

On balance, we are very pleased with the benchmark points that Intel promises to meet or exceed. That’s the proof of the pudding.

Is Intel’s Tick-Tock About to Stutter-Step?

A widely reported story at TechSpot that a flaw in the forthcoming 2013 generation of Core microprocessors for PCs and notebooks (codename Haswell) led to speculation that Intel would delay some but not all Haswell chips until a fix in silicon could be made subsequent to a June launch. Now all of this is unconfirmed by Intel, so take the following analysis in this blog post with a grain of salt.

The reason I’m writing anything is that Intel can ill afford a delay in its mainstream processor delivery schedule for clear business reasons that I’ll outline below. And waiting on another stepping of Haswell would clearly cross a dateline that leads to all sorts of follow-on inefficiencies ad infinitum. However, a stutter-step in production timing might get everything back on track in 2014.

The Ideal PC Annual Launch Schedule

The PC industry has a cadence which Intel has fine-tuned with its microprocessor launch and production schedule. My stylized version looks like this:

  • Year – 1: all the testing and sharing with partners for design purposes
  • Year – 1, December: begin shipping revenue units for partner’s early production and demo units. This looks good when reporting Q4 results to Wall Street in mid-January.
  • January: launch the years’s generation of technology at, say, the Consumer Electronics Show. This gets loads of press attention and helps to freeze technology purchases until the products ship. January automobile shows serve the same purpose.
  • February and March: partners begin shipping hero products aimed at enthusiasts and thought-leaders, but not in high volumes. Also, get evaluation units into the hands of IT departments. The chip fabs are ramping efficiency now.
  • April and May: IT departments select the year’s PC and notebook standards and begin an annual refresh cycle by July.
  • By June: mainstream chip launch and the partner’s fall product roll-out. Collect orders from retailers.
  • July and August: Asia makes volume PCs and notebooks and ships them into retail.
  • August – September: Back-to-school is a major consumer refresh period, where the new products are on display and students, in particular, look for retail new tech purchases.
  • October: Asia PC manufacturers gear up for the holiday selling season. By now, the Intel fabs are running like clock-work, at high yields. The third major chip product launch of the year, typically Xeons for servers (but it could be Atoms for mobile devices in the future) occurs now.
  • November – December: Holiday tech purchases is the largest volume selling period of the year. And repeat the revenue shipment for the next year’s products before January.

We’re Not on the Ideal Launch Schedule

Haswell has not been launched yet, and probably won’t until June, not January 2013. How did this happen? That’s not the topic so I’ll spare you the drawn out details. The synopsis: Sandy Bridge in 2011 had a chip set flaw, which halted shipments in January and slowed that year’s roll-out by a quarter, so that in January 2012 the industry was not ready (e.g., had inventory and equipment to write off) for Ivy Bridge. In late 2012, a PC industry slow-down left everybody with inventory that they wanted to burn off before starting with new kit for Haswell, which requires a new motherboard not compatible with Sandy or Ivy Bridge. So that’s how we got here.

Refer back to the ideal launch schedule. By June 30th, the industry needs to have introduced all of its performance and mainstream products, taken orders, and contracted Asia to produce the tens of millions of units needed for a successful back-to-school and holiday selling period.

That’s not going to happen in 2013. A big bang of products and production by the PC industry starting in June to catch up with August back-to-school is too risky a business move to contemplate. The industry would not move as one. Problems and finger-pointing. On top of that scenario, throw on the blog lead with a possible Haswell chip flaw that, at minimum, Intel wants fixed but may not delay the Haswell launch for the fix.

So, what’s the second half outlook for the PC industry?

Status Quo or Stutter Step?

Here are the three scenarios I see for the second half:

1. Launch Haswell in June with a big bang.  Try to get the new products into retail by August in depth and in volume by compressing the introduction and production calendar. This is the least likely and highest risk scenario.

2. Launch Haswell in June. Pretend June is January on the ideal calendar, and ramp Haswell in the second half alongside refreshed Ivy Bridge (i.e., Third Generation Core) products. Creates consumer confusion with two generations on sale at retail at once, but that’s been the reality anyway. Leaves the merchandising problem to the retail channel. This scenario is the low-risk, low reward bet.

3. A Stutter Step in marching is a quick step or skip that gets an out-of-step marcher back in cadence. In this scenario, Intel would ramp Haswell in the second half alongside refreshed Ivy Bridge as in Scenario 2. Haswell is the Tick in Intel’s Tock-Tock cadence, with a tick being a new architecture and the tock a shrink of the architecture. The stutter-step in January 2014 would launch the 14 nm shrunk version of Haswell, code-name Broadwell:

  • Bringing on Broadwell in  January would get Intel and the industry back on the ideal schedule. The assumption is that Intel is ready for 14 nm, and I have heard nothing to dissuade me from that assumption.
  • The ideal schedule is the lowest annual risk and the highest profits for the industry.
  • The status quo is a time-bomb waiting for the next flaw. As discussed above, June is already a crap shoot for a big bang launch into the holiday season. Any future delay (and I think the complexity of today’s chips favors flaws and delays) would likely overlap the biggest selling season with the newest technology launch. Ouch, cognitive buyer’s dissonance.
  • Since Haswell and Broadwell are interchangeable at the motherboard level, risk is mitigated because a 14 nm fab hiccup could be remediated with Haswell chips.
  • Any move to speed up the annual cadence adds risks, and the stutter-step scenario cuts the economic life of Haswell to six months-plus, not twelve-plus. However, 14 nm in volume is double-digits percentage less expensive to manufacture, lowering chip costs and improving margins. Gentlemen, start your net-present-value spreadsheets.
  • Delaying 14 nm production until mid-2014 puts a huge crimp in Intel’s mobile strategy, which desperately needs to get ahead of the technology competition the sooner the better.
  • There are plenty of remaining uses for the idle 22 nm fab equipment, including Ivy Bridge, remainder Haswell, and 22 nm Xeon and Atom products yet to launch in 2013.

Send your comments to Twitter: @peterskastner