J.Gold Associates Breaking News - Commentary and Analysis

Breaking News -
Analysis

12 November 2009
     Intel/AMD: Moving on to More Important Threats

Today, Intel and AMD announced that they are dropping all existing litigation between them – AMD’s persistent attacks
on what it claims are Intel’s predatory sales practices and Intel’s counter claims of AMD’s unlawful appropriation of Intel
IP transferred to GlobalFoundries when AMD divested its fabs to this joint venture. The legal wrangling has been an
obsession for AMD and a diversion for Intel for several years now, and neither can afford to engage in such maneuvers
anymore. The settlement is a win-win for both, although it may not have much affect on Intel’s continuing
governmental anti-trust investigations around the world, and the win-win may be a little different than most analysis has
indicated.

Intel’s payment to AMD of $1.25B may be seen by some as an admission of guilt that it indeed was behaving badly as
AMD claimed. However, I see this another way, rather that Intel is offering AMD a badly needed cash infusion – a
lifeline to make sure it stays afloat. Strategically, Intel can not afford to let AMD go out of business. It needs the
competition – both to make sure it stays “paranoid” enough to design and manufacture industry leading chips (look
what happened to Intel last time AMD was not competitive), and also to avoid the reality of complete monopolization
of the PC market and all the additional scrutiny it would entail (yes, even more than Intel is already receiving). AMD
gets much needed cash with which it can complete its transition to a fabless semiconductor company and to complete
designs of its next generation processor and graphics chips to make it more competitive. So this is a Win-Win for both
companies.

This is also a big win for Intel because it now gets to focus on its real long term threat. No, it’s not AMD – its ARM
Holdings and all of the licensees of the ARM chip designs (e.g., Qualcomm, TI, Freescale, Nvidia, Samsung, Marvel).
While PC and server chips are its bread winner today, Intel rightly understands that the sheer number of personal and
consumer intelligent computing devices that will be built over the next several years will far outnumber the traditional
PC marketplace. These devices, smartphones, netbooks, Mobile Internet Devices, home entertainment, smart
appliances, personal entertainment, smart power devices, smart autos, and on and on infinitum, and all connected to
the Internet, are not currently the domain of Intel and its i86 architecture. There indeed are a variety of processor chips
employed in these markets, but by far the biggest share of smart phone and MID-class devices is being captured by the
ARM architecture. This poses a long term existential threat to Intel, just as the PC did to the Minicomputer and
mainframes of earlier times. So Intel MUST compete in this space to stay healthy long term. Hence why Atom and its
derivatives are so critical to its future.

Intel also wins by licensing its IP to the GlobalFoundries as it now constitutes another fab it can access should
production needs require it to do so (and TSMC can’t adequately provide for Intel’s requirements). While we don’t
expect immediate use by Intel of this channel, it does represent a needed “overflow capacity” should demand for Atom
suddenly exceed planned uptake, which could happen if the next generation of chips really do provide the
competitive position against ARM that the current Atom version can’t. So this is both a Win for Intel and a potential
Win for GlobalFoundries as well (which has been struggling to fill its fabs).

Bottom line; The settlement of this ongoing litigation is a win for Intel on a number of fronts, and a win for AMD as
well. Ultimately it will mean better and more intelligent devices and a new competitive environment that will help the
consumer and keep prices competitive. But it will also help Intel remain a dominant player in all aspects of the
computer chip marketplace in both current and future devices. Viewed in this way, the $1.25B payment to AMD from
Intel is an expense well spent.

6 October 2009
Battle of the Mobile Browser: And The Winner Is?

There’s a major battle brewing in the Mobile Browser wars (browsers on smartphones and MIDs). However the battle is
all but over. And it has ramifications beyond just the browser.

The major smartphone vendors are aligning behind their favorite web-engines which they will use not only to power
their web browsers, but also to enable applications and customized UI extensions. So who are the contenders? Mozilla
Gecko, WebKit, Microsoft’s Internet Explorer (Trident engine) and Opera Mini (Presto engine).

WebKit, like Gecko, is not really a browser – it is a rendering engine for web standards-based data (e.g., HTML,
JavaScript, CSS, DOM). Trident varies in the interpretation of the DOM, which is why IE has some slight rendering
differences from Mozilla-powered Firefox on web sites. Presto and Trident are both proprietary engines. WebKit was
created by Apple, while Gecko was created by NetScape. Both WebKit and Gecko are now opensource.

Smartphone vendors lining up on the WebKit open source side are Apple (Safari), RIM (migrating its current browser
through its acquisition of Torch Mobile), Google Chrome, Android (from HTC, Motorola, etc.), Palm Pre (WebOS), and
most of Nokia’s smartphone products. However Nokia is of two minds – S60 powered smartphones running Symbian use
WebKit while Linux-based Maemo on Nokia’s tablets uses Mozilla Gecko (derived from Maemo's Debian Linux roots), as
does the Moblin OS.

Ultimately, WebKit will win the battle. Within 2 years, WebKit will be the engine of choice for 75%-85% of smartphone
devices. Mobile Internet Explorer will be a minor portion of the market (as a result of Windows Mobile’s falling market
share) and Opera, although a capable mobile browser, will be relegated to niche status. Mozilla will remain popular
with many Linux users since it powers Firefox, and so will have a major appeal to MID and Netbook users. However,
although the share of Linux (and derivatives) powering smartphones will increase, Mozilla will have a minor share of
that market, far behind WebKit powered devices.

WebKit, Gecko, et al are not just browser engines, but also enable a customizable UI access point to the core system as
well as an app delivery platform, especially for the increasingly available cloud-based SaaS applications now being
deployed. The challenge for device vendors will be making WebKit secure, as it has access to many of the core
resources of the device and can therefore create OS instability and security risks, especially if used to power
applications. Expect to see some sophisticated attacks coming in the next year as these browsers proliferate, as well as
frequent SW updates.

The bottom line is that application developers as well as web site developers increasingly concentrating on mobile
device access must be careful to be WebKit compatible. That does not mean that designing for WebKit and Internet
standards will be all that is required, as some of the “features” added-on by individual implementations could break
certain user and/or display conventions. But WebKit will clearly be the core of all things smartphone where the Internet
is concerned. Companies should standardize on this technology for all future deployments. Although Mozilla, Microsoft
and Opera will all implement to industry standards, which should account for good compatibility, it will likely not result
in 100% compatibility, much as is the case today on the Web. However, MIDs and Netbooks will still be IE and/or
Gecko/Firefox centric (depending on the installed OS), much like the current PC world.

5 October 2009
  PCs to Carry Side-ARMs
The ongoing battle between Intel and AMD over supplying the brains of your PC continues unabated. While Intel
clearly has the upper hand in client processors and AMD is playing catch-up, there is another battle brewing for PC
processors, particularly in notebooks. This battle for the “secondary” processor will not pit Intel against AMD, but rather
x86 architecture against ARM. And its not looking good for x86.

Dell recently announced Latitude ON, a feature first made available on its new Z notebook and on select E-series, but
to be made available on most Latitude’s going forward. Its primary mission is to allow “instant on” access to email,
calendar and web without requiring full boot-up of the machine. This is similar to Microsoft’s Windows SideShow first
made available in Vista but which never went anywhere. But the features of ON take it well beyond SideShow’s, which
required not only a peripheral processor but also a secondary LCD screen. ON runs a peripheral processor, in this case
an ARM based chip from TI, with a Linux OS kernel and a Citrix Receiver client for application enablement, while also
allowing administrators to securely access the machine resources. It runs a version of the Firefox browser for web
surfing, and provides direct connection to Exchange, Groupwise or IMAP/POP3 email systems through direct memory
access. Also included is a dedicated document viewer for Word, Excel, PowerPoint and PDF files, dedicated WiFi, and
a VPN for secure connectivity. In essence, what Dell has done with ON is provide an embedded “smartphone-lite”
device that uses the main screen, keyboard, power and memory systems.

ON provides an interesting example of what can be added to machines to extend user convenience for relatively small
cost. It’s included on Z, and a $199 option on E4200 and E4300, but we estimate the additional cost to Dell to be $50
- $70. However, this capability is not new. Lenovo has offered a similar ARM-based co-processor system for about 6
months, albeit as an add-on Express Card compared to Dell’s built onto the motherboard approach. Lenovo’s Constant
Connect function is similar to ON but uses a connection via Bluetooth to a BlackBerry for email, and Constant Protect
is a security related enhancement that adds Yoggie System’s firewall and anti-malware/intrusion protection capabilities
to monitor all incoming and outgoing traffic.

What makes the Dell and Lenovo approach interesting is that: first, they utilize low cost, low power ARM-based chips
adapted from the smartphone industry; second, they provide dedicated-function processing; and third, each subsystem
is capable of being functionally extended, possibly even by third parties through a future API, to include additional
convenience and protection capabilities. It is safe to assume that other manufacturers will follow suit and provide co-
processor sub-system in business and higher end consumer machines, particularly as prices for ARM chips continue to
fall. It is also highly likely that additional functionality will be added over time. Finally, it is apparent that neither
Windows nor X86 will be the preferred platforms utilized by these co-processor subsystems, at least until x86 can match
the low cost and low power of ARM (potentially with future Atom chips).

Bottom Line: With the potential of one or more co-processors per PC, ARM has a lucrative path in which to infiltrate
the PC market – a market it has never impacted. While its unlikely that ARM will displace X86 for the core processor
anytime soon, it nevertheless gives ARM a large potential market of many millions of units – a fact not lost on ARM
licensees (e.g., TI, Freescale, Qualcomm, Samsung). However, the co-processing sub-systems potentially offer another
point of machine failure and/or instability, especially in corporate settings where consistency, security and device
management is critical. Companies should be careful when and how to deploy these co-processor enabled systems
until they prove their worth.

24 August 2009
         Nokia Goes PC
Today Nokia announced it was expanding beyond its traditional phone marketplace and released a small Windows-
powered netbook built around an Intel Atom chip. With this act, Nokia has moved from its reliance on the “Internet on a
phone” model into larger and more compute intensive appliances. But has it really “changed its stripes” and decided to
compete with the likes of HP, Dell, Acer, Lenovo, Asus and others in the broader PC space? No.

The Nokia Booklet 3G is on a direct evolutionary chain from Nokia’s smart phones and Linux-powered tablets. Nokia is
not trying to move into the extremely competitive market for PCs in general, even though it describes the Booklet 3G as
a mini-laptop. What it is doing is moving to protect its key markets. Indeed, netbooks are increasingly being sold as
mobile device alternatives (or supplements) to smartphones. Many have 3G radios included, can make voice calls (via
VoIP) and are increasingly being sold and subsidized by traditional wireless carriers. Therefore, it is logical to see
Nokia make this move. Nokia has close and long term relationships with virtually all the important carriers worldwide. In
this regard, it is logical for them to provide devices to these carriers beyond just phones. Indeed, Nokia has an
advantage in this emerging market, as most of the netbook providers have no where near the level of relationship with
carriers that Nokia enjoys. Competitively, Nokia can offer a full product mix from low end to smartphones and now
Netbooks. This is something HP or Asus can not compete with.

Few of Nokia’s traditional smartphone competitors (e.g., Motorola, Palm, RIM, SonyEricsson) have the wherewithal to
compete in the netbook market and be successful. Even Apple would have a difficult time competing in this space at it
does not enjoy the distribution breath of Nokia, nor is it good at being a low cost producer. However, Nokia’s emerging
competitors from the Far East (e.g., Asus, Huawei, HTC, ZTE) have also targeted this space for growth in both home
markets and abroad. Nokia needed to move up to netbooks in order to remain competitive and limit the impact these
up and coming suppliers have on Nokia’s overall business, including its traditional smartphone business which several
of these companies are also targeting.

We think that this is smart move by Nokia, and is a direct offshoot of the recent Nokia-Intel relationship announced in
June. It further underscores Nokia’s need to expand its market and to offer new and compelling services. It is offering
Ovi, its store for music, apps, etc. as an installed component on the Booklet 3G. While to date Ovi has “underwhelmed”,
it does have the potential to generate significant revenues for Nokia, especially in many emerging markets where Nokia
is a very well recognized brand. And by choosing Microsoft’s Windows platform instead of Linux, Nokia has a potentially
huge basket of applications it can resell to its users.

Bottom Line: Certainly, whether Nokia is successful or not with the Booklet 3G will depend on the quality of the
product. But Nokia has now ventured beyond its traditional focus on phones and into the emerging market for netbooks
and other Internet-centric wireless devices. Its announced relationship with Intel and Microsoft will continue to allow it
to expand its portfolio and to take advantage of its compelling advantage in carrier relationships. And the expansion of
Ovi should help Nokia overall. We expect Nokia to be a force in the wireless device market across all platforms and not
just smartphones.

12 August 2009
Microsoft and Nokia: A Marriage Made in Waterloo?
Today, Microsoft and Nokia announced a far reaching alliance to integrate Microsoft’s Office and collaboration
applications onto Nokia Smartphones. Although Microsoft and Nokia have had a partnership for some time, with Nokia
licensing ActiveSync and allowing its users on the E-Series business-class devices to sync with Exchange, this
partnership goes well beyond what currently exists. It could eventually span the entire range of Microsoft Office
personal productivity and collaboration products (e.g. Live, Sharepoint), and even include manageability functions
that allow Nokia phones to be managed within the Microsoft Systems Center product that is prevalent in many
businesses. The relationship will start with Nokia offering Live Communicator on its E-Series devices next year, and
then expand to offer the Office 2010 mobile components when they become available. Nokia will start with the E-class
where most sales are to large and medium business users. But eventually the products will likely be available on lower
end smartphones as well. In the future, Microsoft and Nokia will also collaborate on specific capabilities both deem
necessary to support their users, especially business users.

But the question arises, was this strategy determined in Redmond, in Espoo, or in Waterloo? It is clear that both
Microsoft and Nokia see RIM and its popular BlackBerry devices as the key threat in the business marketplace, where a
vast majority of businesses have implemented the BlackBerry Enterprise Server and other BlackBerry infrastructure
components. Even Apple’s popular iPhone and Google’s Android currently do not come close to being as big a threat
in the all important business market. Indeed, Nokia has been losing market share to RIM, and Microsoft’s Windows
Mobile device market share has taken a turn for the worse lately (see our research report “Survival of the Fittest: Will
Windows Mobile Become Extinct?”). But what are the underlying dynamics driving this collaboration?

For Nokia, it’s about openness. It has been divesting control over Symbian for some time. It understands it must be more
open to collaborations and it must be seen as less proprietary if it wants to succeed. Indeed, although it has a
commanding lead in smartphones worldwide, its lead has been shrinking in the business sector, especially in mature
markets where many businesses have not found the Nokia devices compelling. By divesting of Symbian, it gives Nokia
an opportunity to explore more partnerships, and ultimately even explore new OSes for its devices, including
partnering with Intel (see our recent research report on “Intel Finnishing It Connections: Or that’s Nokia with an IA”).
With its desire to move upscale into higher end devices beyond smartphones (e.g., Mobile Internet Devices, tablets,
netbooks), Nokia is clearly looking at a variety of other OSes, especially Linux (e.g., its Maemo implementations). Nokia’
s business users have told it for some time that it needs to have a compelling connection to Exchange which it did not
have previously (and a key reason it jettisoned its Intellisync technology). Further, its devices have to play well in the
Microsoft Office centric world of business. And finally, its devices need better manageability (another short coming of
the Intellisync products). All of these areas are done very well by BlackBerry and have gotten many businesses’
attention.

Microsoft, for its part, has not had the success it needed with Windows Mobile, which is currently relegated to third or
fourth place in the market and slipping. However, despite its protestations that it is completely committed to Windows
Mobile, Windows Mobile represents a very small part of Microsoft’s revenue stream (perhaps 1%-2%), while its Office
and Exchange product lines represents a huge portion of its revenue stream. Microsoft knows it must protect these
revenues by expanding the operation and connectivity of its key products, that until recently were primarily enabled on
Windows Mobile and less functional or not available on competing platforms. Microsoft must offer complete
functionality on a variety of platforms for its Office, Exchange, Live, and Systems Center products if it is to stay relevant
in an increasingly mobile world and to repel some of the gains being made by BlackBerry in its prime corporate market
space. We therefore think this partnership is both an admission by Microsoft that its previous strategy of favoring only
Windows Mobile is flawed, and that moving forward it knows it must be much more universal and supportive of a
majority of platforms to keep its user base from defecting to competing web-based platforms (e.g. Google’s cloud
initiatives). We believe Microsoft can really help both the market and its business customers by restructuring its
ActiveSync and Systems Center products to offer a standardized approach for interconnectivity, security and
management, which is currently in a very fragmented state across the various vendors. Making a variety of devices
manageable and secure will be a great boon to organizations worldwide. And reduced dependence on its own mobile
OS will be an aid to expanding its markets.

This partnership is also very good news for the end user. It will provide a window of opportunity for those companies
who are increasingly opening up the process of selecting mobile devices from “one-size-fits-all” approach to a more
universalist “end-user-selected” device approach. That means support for a variety of device types and OSes on
enterprise systems, many of which are powered by Microsoft technology. Microsoft’s new found openness will help both
IT cope with the variety of devices, and could ultimately help users fit in to the corporate environment better than in
the past, making their device of choice a full corporate citizen. And if Microsoft can implement standards around
connectivity and management, that would clearly help the primary problem many enterprises currently have with many
of the available mobile devices which are insecure and unmanageable..

Bottom Line: The partnership between Microsoft and Nokia is a milestone event that will change the smartphone
market. It has advantages for Microsoft and Nokia, as well as the end user. It may ultimately blunt some of the market
advantage that BlackBerry has in the enterprise, and may also thwart some of the up and comers (e.g., iPhone,
Android, Pre). However, it will be incumbent on both Microsoft and Nokia to implement a sound extension to these
preliminary steps if this partnership is to fulfill its potential. And Microsoft will need to establish itself as an
interconnectivity and management technology leader across all platforms to be successful.

More Commentary and Analysis...