Get Ready to Short NVDA

The Managing Director (remember him?) strolled into Rock’s office. Rock looked up from his desk, and instantly knew something dire was afoot. The only time the MD came to Rock’s office was because he didn’t want a recording of the conversation entered into the archives. Otherwise, Rock woulda been called on the carpet to the MD’s office.

“Rock,” said MD, “we want you to develop a set of platforms based on MIPS”. Rock’s eyes widened. MIPS was a very fast processor which runs a Reduced Instruction Set, not an Intel-compliant instruction set at all. And Rock’s company was an Intel shop (although there was some interest in AMD’s processors). “Here’s a brief list of the set we want.” MD handed over to Rock a napkin, which looked like it had blood and beer on it, and a number of platforms’ rough specs were in pencil—you know, those ½” diameter pencils with lead the size of your mouse’s cable.

Rock looked incredulous. “You know the Marketing Wish List has me buried till 2032 with all the Intel and AMD platforms,” replied Rock, “and we’re already bringing in catering every night and weekends for dinner,” said Rock, wishing he had chosen a job in the public sector. “I can’t possibly do that on my budget.” Rock knew that point was unarguable, and usually stopped MD or anyone else who wanted something extra done, because as we all know, development is an Overhead Expense item, and is best outsourced, so it doesn’t appear on the bottom line. Nobody wants to add to Development’s budget. Ever.

“No problem,” said MD, “you can back charge those 33 ohm chip resistors for $25 each to the other division who needs these platforms, and hire what you need. The IRS audit fell for it before, so there’s no problem doing it again. We simply told them there were special test and sorting requirements.” So Rock did it. He doubled his staff, assigned half the current staff onto the MIPS platforms, and got it all underway. Rock wanted to review the status, so he called a meeting to be led by Product Planning so managers from all departments could see what MD had wrought.

Everything was fine, until Integration and Test’s turn. They put up a plan around UNIX. The Director of Marketing hit the ceiling. “Whadda you mean, UNIX? You know we’re an Intel Windows shop! We have cross-marketing agreements with Everything Windows!!! I mean, we can’t even spell UNIX”. Rock picked up the phone and called his peer at another division and said “I need a port of Windows to run on MIPS yesterday!” A few calls to MD later, the details were worked out, and when the platforms hit I&T, the port was ready. The platforms were brought up, and working. Test programs were written and executed.

Time for another Project Evaluation and Review Meeting. Again, things went fine until I&T put up their test plan. There were no applications on it. Again, Marketing hit the ceiling. “Whadda you mean, there’s no apps that will run on this platform? I thought you told me it ran Windows!!!”. It did run the OS, because we had ported the OS into the language that MIPS understands.

But not one single company we talked to was willing to port their application to run a new instruction set, the MIPS instruction set. Nobody wanted to double their support and maintenance and release structure for an unknown market. Our production line was set to build boat anchors. And Rock had to face a layoff because of all the extra staff that had been hired for the MIPS program. It was a sad sad day. It took a whole lot of $25 chip resistors to pay for that one. But Rock’s bonus wasn’t affected.

Now, in the anecdote above, simply substitute “ARM” for MIPS. And you will see why shorting NVDA is a good idea. If you want, read
http://news.cnet.com/8301-13924_3-20028066-64.html
and very carefully read the last paragraph.

NVDA’s marketing has always been horizontal; they work real hard to make their chips run on Intel (AMD) platforms, and leverage the Intel marketing (and IBM and Microsoft and Dell and and and and… marketing). With an ARM, they will need to change to a vertical market because even though there will be a version of Windows running on ARM, there won’t be any compatible apps, Just like Rock’s case above, so the only thing left is a vertical market for them.

Changing a marketing and sales organization from a horizontal to a horizontal PLUS a vertical organization is beyond the capabilities of all but a handful of senior executives. And with the risk involved, it is doubtful those senior executives will take the chance that they can make it happen.

Plan to short NVDA. You know the drill. Upside-down W with lower highs.