 Welcome to News Desk on SiliconANGLE TV for Tuesday, October 9th, 2012. I'm Kristen Folletti. The Wall Street Journal says Silicon Valley is in a stock funk with employees at Facebook, Groupon, Zynga, and Pandora losing 9 billion between them since they went public. Also, AMD and CalZeta have made announcements that could be making Intel nervous. Joining us to give his a breaking analysis on these stories is Wikibon chief analyst Dave Vellante. Welcome, Dave. Thank you, Kristen. So, it's not like these companies are unknown, Facebook, Zynga, Groupon. Most of us have daily interaction with them. You're from the East Coast, but you travel to the valley all the time. What's the Boston perspective on the valley's recent failures? Well, I think, first of all, I want to say it's really bifurcated. I mean, there are still some really good examples of successes and we'll talk about them considering things like Facebook and Zynga, quote unquote, failure, sort of tongue in cheek. But the fact is that they've not performed as well as people had hoped. And I think that the East Coast perspective is that, frankly, Facebook got greedy. And what happened was it overpriced its IPO. We feel as though that Facebook could have provided a big lift for all technology companies and public stocks. And what happened was it really did overpriced the IPO, and that, I think, left a bad taste in a lot of investors' mouths. On the flip side of that, you've got companies like LinkedIn, and to me, that's a big data play. LinkedIn is doing very well. It's growing nicely, and you can contrast that with a lot of the guys struggling to monetize social media, in particular Facebook and even Twitter, trying to figure out ways in which it can leverage its massive user base. One, on the other hand, was very patient and is now using big data, things like LinkedIn Skills driving its subscription model. So there are still some examples, some very good examples of successes. And I think, in general, they relate to the data. So Facebook's failure versus LinkedIn's success. Is there anything Facebook and Zynga and the others can do to turn it around? Yeah, again, I think it comes back to we are in the early innings of the big data era. LinkedIn understands this very well. Now, companies like Zynga and Facebook certainly have a number of data scientists. I think they're clearly looking at how to get leverage out of that data. But the user experience is different from LinkedIn. I mean, LinkedIn has got a very clear pipeline to people that want the data and are willing to pay for it via subscriptions. It's certainly driving its advertising model. So it's got, I think, a more diversified portfolio right now. And as I said earlier, the expectations on LinkedIn were lower. So I think the combination of lowering expectations and providing a more diversified offering for its user base are really what companies like Facebook and Zynga need to do. On the server side of things in Silicon Valley, AMD announced a record-breaking performance using AMD-based HP ProLiant Gen 8 servers. Dave, tell us about this and why it's such a milestone for AMD. So HP is the leading server manufacturer. And so anytime that AMD can link up and superglue itself to a leader like HP, that's a win. HP with Gen 8 is really attacking the management problems. What Gen 8 does is it automates a lot of the mundane tasks around maintenance. If you look at the data, around two thirds of the spending in the server market goes toward people. And so HP is attacking that with Gen 8 very high degrees of automation. What AMD is doing is providing a very high performance solution. This is an arms race. It's a game of leapfrog between Intel and AMD. And HP will certainly endorse whichever company is going to give it the leading performance. It just happens to be Intel or AMD right now in the benchmark game. Intel will certainly catch up and when it makes an announcement, I'm sure HP will support that. So HP will dual source its microprocessors for Gen 8 as will most companies. And so right now AMD is flexing its muscles and using its marketing to put forth the fact that they have top gun performance. And I think that's a very positive thing for consumers. You've got second source, you've got competition and prices go down. Tell us about the power of Gen 8 and why they're called self-sufficient servers. So as I said earlier, the big problem with servers right now is labor costs. We live in a very intensive, a labor intensive IT environment, which is ironic because computers are supposed to automate manual tasks, but still things like figuring out what maintenance contracts are where in the cycle and who has the right to maintenance and how old the servers are. All this mundane data that one has to previously manually collect. What HP has done with Gen 8 is it's automated that really to try to attack that IT labor problem. I think it's an innovative approach to server management and it really does attack the heart of the problem, which is labor management. And basically by doing this, it allows organizations to redeploy people assets to do more strategic activities. So I think Gen 8 is a great future. Is Gen 8 that amazing of a product that AMD would center an entire announcement around it? Well, it's amazing from the standpoint of HP as a leader and AMD is in a dogfight with Intel and the Enterprise. And so AMD is clutching on to any football that it can get. And as I said before, right now it's got top-gun performance. And so it's going to market that. And HP is more than happy to accommodate because HP gets the halo effect of people talking about Gen 8. And also again, anytime a core server product can run faster, the server vendor will take advantage of that. So when we're covering the HP Moonshot announcement, Calzada, ARM and AMD were present during the announcement and came on our broadcast that day, today's news seems to signal a strengthening of these ties. What does this mean when HP is moving away from Intel in their product suite? Well, I think there are two things going on here. As I said before, HP is the leader in servers. And it's attacking the two biggest problems that customers have with regard to costs. One we mentioned before, which is the labor cost. The second is power. So if you look at the total cost of servers over a three to four-year period, about 20% of that cost is going to be power and cooling and energy distribution, things unrelated to the IT equipment itself. It's powering the IT equipment and cooling the IT equipment, as you say, about 20%. So what HP is doing with Calzada is really trying to attack that problem for new and emerging applications, like big data, like serving up web pages. If you think about these applications, they don't need an Intel x86 big mother computing platform that's maybe water cooled. What it really needs is very low power. Five watts or less of distributed computing power. And if you think about the nature of big data, the data stays where it is in a distributed fashion and you bring code to the data. What that means is new types of processing are adequate and even desirable, especially when you look at how much power is consumed. So I think this is more HP being opportunistic in a new area, trying to maintain its lead in servers rather than going away from Intel. Now, of course, Intel has its own low power servers called Adam, but they're behind ARM and ARM is what Calzada uses and bases its system on top of. So Calzada has added some enterprise level capabilities and it's a leader in that space. And so HP is trying to demonstrate its innovation. So it's glomming on to this new trend, trying to really drive power down for some of these new emerging big data and web serving applications. There was another announcement today that Calzada has raised $55 million for ARM based servers. Calzada is the third company to switch to ARM based processors in server products, citing energy efficiency as the reason. HP was the first with Moonshot followed by Dell and now Calzada. Do you think this is a trend away from Intel in the industry? Well, I think it's definitely a trend away from x86. Kristen, it all comes down to volume. We've been talking for years about the consumerization of IT, meaning that the consumer market is really driving the innovation in the enterprise. 10, 15 years ago, it used to be the opposite where things would trickle down into the consumer market. Now it's all about smartphones and tablets. That's what's really driving innovation. If you look at the volumes of chips that are shipped, probably about three times as many chips are shipped to smartphones as there are PCs that are shipped. So the volume game is over. The low power mobile systems have won that game. And it's just going to get bigger and bigger from here. So I think from a volume standpoint, there's no question that low power processors are going to really dominate the volume game. And that ties to, again, some of these new applications that we're talking about. Mobile, certainly big data applications. What's innovative about Calzada and what HP is doing with Moonshot is they're bringing that to the enterprise. Again, it's a classic example of the consumerization of IT. What Calzada has done and Calzada's innovation is they've come up with software to be able to communicate across a sea of processors. And be able to manage that effectively. And Calzada is a leader there. You mentioned they've raised $55 million. They're up over $100 million in venture capital now, which is very interesting. Today we love to talk about capital efficient businesses, social media, and other big data applications that don't require a lot of capital equipment to get started. Semiconductors is exactly the opposite. It's a highly capital intensive business. And VCs will still invest in capital intensive businesses. But to win there, you really have to play the volume game. So I think that very clearly the market is shifting to these low power processors. The new applications that are merging really don't require the high single processor performance and the high energy that we've come to know of the x86 system. Well, Dave, thanks so much for your input today. We appreciate you joining us. Thanks for having me on, Kristen. Have a good day. Thank you. For all the latest in-depth coverage and breaking analysis on tech innovation, keep up to date with Newsdesk on SiliconANGLE.tv.