In an Avalanche of Good News, AMD's Edge Over Intel Continues
By Jim Seymour
Special to TheStreet.com
4/19/01 10:07 AM ET
I had a great email message Wednesday afternoon from a RealMoney.com subscriber. "Boy," William F. wrote, "days like this must make your job a lot easier!"
Not so much easier, William, but certainly more fun. It's always nice to write about days when the market closes up hundreds of points, and when we have a whole string of positive to very good earnings reports. Especially when that comes after such a painful dry spell.
Item 1: Wednesday we heard from Apple (AAPL:Nasdaq - news - boards) that it earned 11 cents a share in its second quarter, markedly better than analysts' widely varying estimates of a loss of 7 cents to a gain of 8 cents. The First Call/Thomson estimate was a 1-cent gain.
Sales in the second quarter totaled $1.43 billion, a big decline from the year-ago quarter's $1.9 billion. But analysts had predicted Apple would earn $1.38 billion, so that was a nice topper, too.
Apple shares were up about 12% at the close, and several dollars more in after-hours trading.
Item 2: IBM (IBM:NYSE - news - boards) merely met the estimates, but still had a bang-up quarter, with earnings of 98 cents a share, up from 83 cents a share in the year-ago quarter. Revenue was $21 billion, up from $19.3 billion a year ago.
IBM closed up about 7% at $106.50, and in after-hours trading topped $112.
Item 3: Advanced Micro Devices (AMD:NYSE - news - boards) reported quarterly earnings of 37 cents a share, 4 cents over the consensus of 33 cents, with revenue of $1.19 billion, up from $1.09 billion last year and nicely over the consensus of $1.1 billion.
AMD closed the day up almost $5, about 20%, at $27.85, and gained another couple of bucks after hours.
And then there was this little Fed action Wednesday ...
Of all these results, I think AMD's report was the most interesting, especially given Intel's (INTC:Nasdaq - news - boards) slight edge over the forecasts in its report Tuesday evening. Analysts have been saying AMD couldn't keep it up, that its recent performance was a fluke.
Maybe, but look at both companies' stock prices since mid-2000.
AMD Holds Gains Over Intel
Note that ever since AMD's recovery pushed past Intel's sagging price early this year, AMD has been not only holding onto that edge, but actually opening the delta. Both companies had nice kick-ups this week, but AMD's as far ahead as it's been all year.
Intel told us Tuesday that it thought the CPU chip business would stabilize -- maybe, has stabilized -- but that its communications chips are a worry. AMD, meanwhile, Wednesday night said that while, yes, overall sales were down from the year-ago quarter, in the period ended April 1, it shipped 7.3 million PC CPUs. And its total PC CPU sales increased 17% over the year-ago quarter.
Put plainly, AMD's sucking market share away from Intel. Mercury Research says AMD's share of the PC CPU market has grown from 17% to 21.5%, quarter-to-quarter, while Intel's share has dropped during that time from 81.5% to 77.3%.
Intel has made it clear it's going to try to put the hurt on AMD in the months ahead with dramatic chip price cuts. As I said here earlier this week, some Intel Pentiums will by the end of this month cost just half last week's prices.
But while Intel can hurt AMD's margins -- AMD Chairman and CEO Jerry Sanders admitted as much Wednesday -- it can't stop the erosion of its market share to the superior price-to-performance-ratio AMD chips. AMD's chips still beat Intel's on both counts, and its lower price line, the Durons, beats Intel like a drum on performance.
With the market-focus shift to $1,000 PCs over the past year (often advertised for $699 or so, with the bogus "rebates" being offered for signing up for dial-up Net access services), the performance of the Duron becomes even more important to AMD's continuing prosperity.
In other words, Intel's launching a price war in which it can win some battles, but not the war it has started.
Even though PC sales are still stagnant, and both companies depend on PC CPU sales for the great majority of their revenues, I think both will do fairly well through the rest of the year. But AMD's still the more interesting play.
--------------------------------------------------------------------------------
Jim Seymour is president of Seymour Group, an information-strategies consulting firm working with corporate clients in the U.S., Europe and Asia, and a longtime columnist for PC Magazine. |
