From AMDZONE...
================================================
The AMD Thunderbolt
Fayad Abbasi
Jun 2 2000
For the course of this calendar year, I?ve been a
card-carrying member of the anti-AMD [AMD] club. With
the upcoming release of the company?s Thunderbird
processor, though, I?m beginning to see the light. I?m
handing in my card and recommending shares of AMD.
So what?s so great about the Thunderbird that it?s
prompted this sudden change of heart? AMD?s latest
processor is the next evolution of its immensely popular
Athlon chip. With some product improvements, including
256K onboard cache (vs. 512K off-chip cache) and
copper circuitry, we think the market demand for the
Thunderbird will be strong. Also, given the chip design
the cost of manufacturing, the new processor should be
cheaper than Athlon and so contribute more to
margins.
AMD will also begin production of the copper version of
Thunderbird in its new Dresden, Germany, manufacturing
facility. Because of rival Intel?s [INTC] failure to meet
microprocessor demands, we think the new facility will
ramp up extremely quickly. For the past two
quarters, AMD has delivered positive earnings
surprises, and with this new plant online, the possibility
of another quarter of upside earnings is pretty
strong.
Another initiative that could help AMD is increased
penetration into the corporate market. With Gateway
[GTW] increasing its commitment to the company, the
consumer market is taken care of. However, it?s the
corporate market where the juicy profit margins reside.
Any success in that market will contribute to improved
margins for the company.
From a valuation perspective, the company is trading at
a deep discount to its peers. While AMD may never
command Intel-like ratios, continued execution should
close some of the gap. The combination of improved
fundamentals and increased premiums still leaves room
for significant upside potential.
======================================================
Another converted infidel....
Al |
