Dan Niles report:
10:10am EDT 9-Aug-99 BancBoston Robertson Stephens (Niles, Daniel 415-693-324
AMD: Athlon: Better Performance, Higher Clock Speeds and 25-35% Cheaper ...
August 9, 1999
A D V A N C E D M I C R O D E V I C E S
Athlon: Better Performance, Higher Clock Speeds and 25-35%
Cheaper Than PIII; Upgrading to Buy with $23 Price Target
Daniel T. Niles (415) 693-3241 dan_niles@rsco.com
Arnab K. Chanda (415) 676-2865 arnab_chanda@rsco.com
BancBoston Robertson Stephens BancBoston Robertson Stephens
ADVANCED MICRO DEVICES AMD $17.38 8/9/99
Industry: Semiconductor Dan Niles 415-693-3241
Key Points:
** Not since the 386 has AMD had equal/better performance than Intel- until
now. Today, if everything happens according to plan, AMD will officially
launch the Athlon marketing campaign with PC based systems due out the week
of September 5th . Todays launch of the 650Mhz version leaves AMD at the
top of the megahertz pyramid by itself. Intel is not due out with its next
speed grade till October/November we believe.
** Athlon is faster than the PIII clock speed at 650 MHz with a significant
performance advantage on about any benchmark at an equivalent clock speed.
This is the first time since the 386 generation that AMD can claim this.
This is one of the main reasons that 9 of the 10 top PC OEMs are expected to
launch Athlon systems.
** We expect 300-400K units in Q3 with over 1M units in Q4. We estimate that
AMD in Q2 had a $67 ASP on K6 processors and Intel had a $211 processor ASP.
We believe that K7 will enable AMD to close a good portion of that gap even
at a 25-35% discount. The Athlon, which was designed by AMD for an AMD
process will have much less manufacturing issues than the K6 which was
originally designed for an IBM process. We are upgrading AMD to a Buy with
a $23 year end price target.
SUMMARY: BUY from LTA
Not since the 386 has AMD had equal/better performance than Intel- until now.
Today, if everything happens according to plan, AMD will officially launch the
Athlon marketing campaign with PC based systems due out the week of September
5th. Todays launch of the 650Mhz version leaves AMD at the top of the megahertz
pyramid by itself. We believe that Intel is not due out with its next speed
grade till late October/ early November. We expect a 700MHz Athlon in Q4 and
AMD is already yielding processors at that level already.
Athlon is faster than the PIII clock speed at 650 MHz with a significant
performance advantage on about any benchmark at an equivalent clock speed.
The performance is derived from: 1) a faster front-side bus, 2) a better branch
prediction unit, 2) a 3-way superscalar design, 3) fully integrated floating
point, 3D and MMX, 4) very efficient caching, and 5) deep and regular
pipelining. This is the first time since the 386 generation that AMD can claim
this type of performance relative to Intel. This is one of the main reasons
that 9 of the 10 top PC OEMs are expected to launch Athlon systems starting in
September. We expect many different PC magazines and bench marking
organizations to release their own performance tests today and expect AMD to
have a fairly clean sweep across the board. Intel's response will be to
essentially ignore this given there is nothing they can really say. In
addition, the Intel processors based on the Coppermine core continue to slip.
We expect 300-400K units of Athlon in Q3 with over 1M units in Q4. We estimate
that AMD in Q2 had a $67 ASP on K6 processors and Intel had a $211 processor
ASP. We believe that K7 will enable AMD to close a good portion of that gap
even at a 25-35% discount. The K7 which was designed by AMD for an AMD process
will have much less manufacturing issues than the K6 which was originally
designed for an IBM process. We believe that AMD should have the capacity to
ship over 1.5M units in Q4 assuming the demand is there. We believe that it
will be very hard for PC OEMs to ignore the Athlon given better performance at
a 25-35% discount versus an equivalent PIII.
Q3 should see slight q/q revenue growth driven by flash and initial K7
shipments. We believe that flash revenues could increase by another $40M from
$166M last quarter. We believe that chips shipped to Vantis could contribute
another $20M with communciations revenues up a few % q/q. We believe K6
revenues will decline by about $50M q/q to about $200M on 4M units at a $50
ASP. We believe K7 revenues will be close to $75M in Q3 on 300K units at a
$250 ASP.
We are upgrading the stock to a Buy with a $23 price target by year end. The
bottom line is that we believe the K7 is better performance for the same price
and that AMD will be able to effectively ramp the manufacturing. Given this,
we believe that PC OEMs are likely to want to use this product if for no other
reason than to have a club over Intel's head. Given the low investor
confidence in the stock we believe this is a good trade that can turn into an
even better investment.
+++++
Thanks, Albert! |
