ShadowRAM: November 15, 2004

Wall Street types are suggesting Advanced Micro Devices may have hit a wall in its manufacturing capacity. They point to a deal between AMD and IBM as one way to resolve that. AMD has nowhere near the manufacturing capacity on 90nanometer chips that rival Intel does. Meanwhile, it's believed that IBM has excess manufacturing capacity to burn—along with a pretty good track record when it comes to pumping out high-end chips.

Speaking of AMD, word is the chip maker seeing much broader adoption of its lower-priced Sempron processors than anticipated. That's good from a unit-sales perspective but could be hard on margins.

Jupiter Research's Michael Gartenberg, on his blog, shot down the conspiracy theory that Apple doesn't offer a video iPod because CEO Steve Jobs also owns a stake in Pixar and, well, doesn't want his movies ripped. Ripping DVD content to a hard drive is illegal, Gartenberg notes, adding: "There's no market for the video iPod for Apple's customers at the moment. No evil schemes. No Machiavellian thoughts behind it. It's just not a good move for Apple without the sources of content they need. They will be there, and we will get a video iPod one day."

Elsewhere in blogland, Sun's Jonathan Schwartz is juiced about his company's Java Desktop System for mobile phones. He wrote last week, "I was just reading an internal analysis that says we'll have racked up 579 million (five hundred and seventy-five million!) Java-enabled phones by the end of this year. We're on the road to a billion—the fastest-growing computing platform the world has ever seen and, by far, the largest community Sun's ever built. You want volume? We got volume."

The phones' target demographic, Schwartz acknowledges, is 15-year-old kids. To Schwartz, it's the old "razor blade/razor handle" theory: You practically give away one for free and make up the margin on the other.

"Does AmEx make money from 'free' payment cards? Cingular from free handsets?" he asked. "Of course they do. But they don't measure that return on card sale revenue or handsets—they'd be negative margin businesses."

And at this point, that's not exactly what Sun needs.