Why AMD did not warn today?
Folks, we have just passed a very significant day today -- commencement of Q2's “Quiet Period”, without a warning from AMD.
These latest law suits should put AMD is such situation that they would have warned today if they had to warn in the last confessional opportunity presented by the start of the “quiet period” today.
Consider the following reported facts, a warning on Q2's disastrous financials seemed unavoidable.
(1) Break-even point to be 850 millions -- Fran Barton, CFO of AMD, said in Q1's CC
(2) ASP to be below 78 -- Scott Allen, AMD's principal PR guy, said to ZD news.
(3) NatSemi's dumping of MII, coulped with Celeron's ever aggressiveness in low end and seasonally flatfish PC environment.
Addtionally, the latest bank amendment requires that the loss in Q2 to be less than 45 millions and that translates roughly around a loss of -0.32. Incidently, Yahoo's Consensus Estimates of Q2 loss for AMD as of today for q2 is -0.32 as well.
Under the standard reasoning for no warning when “quiet period” starts, that suggests AMD has made the number - sales for Q2 will be at or over 805 millions - highest in AMD history and the loss to be at or below, or in worst case, slightly above the projected loss of -0.32.
During the quarter, we have heared that non-cpg group has been up, led by flash. The growth in this group has been said anyware between 10% to 20% and some have pointed out that the max for non-cpg could not exceed 350 millions in sales. Under this line of reasoning, CPG needs to make at least 455 millions in sales in order to make the number work.
How could possiblly AMD made the numbers?
1. Chuck R theory -- K7 saved the quarter. Mosesmann said that K7 for Q2 could be 40K and Chuck has been alluding that the actual units of K7 shiped in Q2 may very well exceed our wildest expectation.
2. The X speculation -- K6x saved the quarter. We know that 99 goal of unit shipment is 22 to 25 millions. let's take 4.3 million for Q1 out and that leaves 18 millions unfilled. we also know that unit volume may decrease in the following quarters when AMD allocates more wafers to K7. So there is an incentive for AMD to pump out more K6x in Q2 to compensate the declining unit output in Q3 and 4 in order to make the annual unit shipment intact. We also heared the “vastly imroved” yield confirmation from AMD spokesperson and “vastly improved” could mean a 30%, 40% or even more unit growth over Q1. How many K6x they could do in order to save the quarter, my wild guess is somewhere between 6 to 7 millions units.
3. Or maybe a combination of both 1 and 2 work in sync to make the number work.
Off course, there are 2 other possibilities that may lead to:
(A) A later warning: Due to the unsold inventory, which AMD is still despertely looking to unload and only until the uninventory sold, the status of Q2 financials can be clear to AMD management, thus a later warn. Yet, an excellen and insight analysis by “Investor A” :) posted at JC's site yesterday evening seemed to strongly indicate that there is no substantial unsold inventory.
(B) Cut down the break-even number by tricking RD numnber down. Jerry has done this in Q3 98, so he might do it again in order to safisfy the banks and make the number if both 1 and 2 are not materialized.
Nevertheless, no warning on the start of “quiet period” does increase the hope that the quarter will not perform as badly as Mosesmann advertised last Friday.
“We will return to profitability a lot sooner than you image.”
Jerry Sanders
@99 shareholders meeting in NY |
