Why Intel's NAND business still looks so bleak

Q) Why is Intel even in the NAND business?

A) To stick them onto processors and keep ASPs from falling -- the same reason they're in wifi and graphics. The same reason they're seeding wimax. Intel is in a single digit long-term growth market and the game for them is to keep margins up through faster products, innovation and attach sales as prices fall.

Q) Why isn't Intel seeing NAND improvement? Don't they see spot prices?

A) Intel exclusively participates in the solid state drive market in NAND. Solid state drives are still ludicrously expensive relative to hard disk drives. Performance doesn't improve much. NAND pricing has to deteriorate significantly for NAND to have material success in the drive market -- a mixed blessing if I've ever heard one. For now, growth will be restricted to the high end of the cell phone market and the high end of the PC market. Intel does not play in the raw NAND market at all and likely has a very limited customer set.

Q) Covello said Intel is going to get out of NAND in late 08, early 09. Huh? How?

A) Intel will probably buy themselves out of the business -- give someone a big cash outlay to buy the ops for an ownership stake. Numonyx seems like the most likely candidate for this kind of transaction. You might see a hard drive manufacturer step up and get involved in SSD -- they know its the future of the portable storage market. Micron has also been known to do transactions like this also if there's enough of a discount attached (they took Texan out of DRAM years back).