Found this post by Joe Arena on the Intel board at AOL about AMD. When Joe speaks I listen. Read em and weep boys.
The options junkie( Intel options, that is)
Subject: Re: Lots of Old Names
Date: Sat, 28 August 1999 10:20 AM EDT
From: JArena3773
Message-id: <19990828102037.11333.00000847@ng-bd1.aol.com>
>Still own a little Intel, stock, and no AMD--yet.
Hi Les, nice to see you again on the board, you are quite welcome on the TXN recommendation, hope you bought it at 48 where I originally recommended it.
Regarding AMD, no one should even consider owning this stock....ever. Specifically, AMD has never been able to execute in terms of their ability to bring a product to market. This not only speaks to their tremendous cost disadvantage versus INTC, but also to the ineptitude of their management. Jerry Sanders is arguably the biggest snake oil salesman in the industry. He has made a myriad of promises in the past, and failed to deliver each time.
If you believe in the cockroach theory (which I do), there is no reason to believe AMD's execution relative to Athlon will be any different this time.
In addition, look at what is happening at AMD's Dresden fab. Bottom line here is that they will not even have enough volume to operate it at full capacity. As a result of competing against INTC, AMD has always faced a vicious circle. They can't get their costs down because they don't have the volume. They can't get the volume because they don't have the customers. The can't get the customers because they can't deliver in volume. (not to
mention that they have very little credibility) In attempting to get customers, they price their products at or below cost, which kills their margins and profitability. Also, because they are not doing the volume, their yields are atrocious, which further impacts margins. Then along comes INTC who leverages their tremendous economies of scale and cuts their prices every quarter. Thus, another products cycle in which AMD cannot make money. The
industry then moves on to the next generation of chips, and this cycle begins all over again.
The biggest mistake an investor can make is to fall into the trap of thinking "it's different this time". Until a company demonstrates a proven ability to grow their earnings consistently over a minimum of five years, there is no reason to own their stock.
Always buy the leader, they got there for a reason.
Side Note: Hold onto TXN, it is going a lot higher over the next 5 years. Also, I still maintain that if you want to own only one chip stock, TXN is it. For investors desiring a more diversified portfolio, INTC must remain a long term core holding as well.
Joe Arena |
