Friday, February 17, 2006

My take on some PC hardware companies

I was thinking to buy a new desktop a month ago to play video games. Nowadays, 3D games developers like Electronic Art(NASDAQ:ERTS) and Activision(NASDAQ:ATVI) are putting more and more efforts to make fancier visual and sound effects. As a result, latest 3D games require better CPUs, bigger hard disks, larger memories, and more powerful video cards.

Although ERTS and ATVI stocks have been performing poorly, these two companies' efforts to build better 3D games has helped and will continue to spur growth in demand for a few categories of computer hardware:

Want to play a 3D game and your machine can not run it? Buy a new machine. Here was my story. A month ago I was attracted by Microsoft's new 3D game 'Age of Empire III', I was seriously thinking to buy a new powerful PC to play the game. I did a lot of research on minimum hardware requirements for the game, such as 1.8 G HZ CPU, 515MB RAM, 128MB Video card memory,etc. Then I looked online to see where I can get a new machine. First I thought of DELL, which claimed for lower costs for same product. To my dismay, after I played with their hardware configuration, I did not see an apparent discount versus those PCs from other vendors. Plus, since I have been using a DELL laptop for years, I had a very negative impression with them. My laptop experienced touch pad problem only 3 months after I purchased, the battery did not work well after a year. After two years the monitor did not look to work quite well. I also witnessed many other technical problems experienced by my friends who were DELL users. Of course you can always call their customer service to get it repaired, but wait a second, they ask you to ship the machine back! One girl I know bought a DELL desktop two years ago, the machine sometimes fails and shuts down for no reason. Customer service guys asked her to ship the machine back to take a look, but sadly the girl was not strong enough to carry that 40 pound box and 30 pound monitor to the post office! Not to mention the shipping costs. Given all these bad memories, I decided to give DELL a pass, did not want to buy anything from them again.

Then I looked at Hewlett-Packard's site. I liked what I saw. You know what, the so called DELL low cost supply chain model is not rocket science, Hewlett-Packard did pretty well in borrowing it. Their website is well built, easy to browse various products, and lets me choose different combinations of hardware as well. In the end, I configured a machine at a lower cost than similar product from DELL. It is not only a matter of price, but also reliability, I did not see much failures on HP products.

It was from that point on, I started to believe it may be a good idea for people to sell DELL stock and switch to Hewlett-Packard. Now I still believe so.

Back to the topic of video game, I think it also helped a few other companies:

NVIDIA(NASDAQ:NVDA). If you are a hard core video game player, you probably have to seriously look through those video cards from NVIDIA. Because their cards are best of breed, there are very few other companies who could match up their quality and variety. This company just reported Q405 earnings yesterday, it was very good. In the long term, I think it will continue to be a good story.

AMD: Faster CPUs are every video game player's dream. Although players can choose between Intel and AMD processors, AMD has been stealing market share from Intel. In the past a few years, AMD processors have been selling at a discount to Intel CPUs, given it is a less fancy brand, people generally perceived that AMD CPUs were sold cheaper because their performance was not as good as those from Intel. It could be true a few years ago (I happened to buy a AMD CPU back in 2000 to save some money though I know Intel CPU performed slightly better), but not any more after AMD released its breakthrough dual core 64 digit processor last year. Intel did come up with a similar product, but based on some seriously technical surveys I read online, each excels in different area( such as video, audio, scientific calculation ,etc.), it was hard to say which is obviously better than the other. So far, AMD has about 20% share of overall CPU market, I am not surprised if AMD continues to take share from Intel.

So far, I do not have any holdings in the companies mentioned above, but going forward I may jump into those ships that I favor when opportunity comes. And if you are curious about what happened to my video game machine, I am sorry to tell you finally I did not pull the trigger to spend 1300 bucks to buy the machine, not only because I got two machines at home already, it is also because I tried to keep myself from getting addicted to video games ( I love them, I could play day and night). The June CFA level III exam is coming, I did not read a page yet.


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2:18 PM  

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