From Albert: ML on AMD
12:28pm EDT 14-Jun-00 Merrill Lynch (J.Osha (1) 212 449-0930) AMD
ADVANCED MICRO:AMD on Track to Meet Expectations
ML++ML++ML Merrill Lynch Global Securities Research ML++ML++ML
ADVANCED MICRO DEVICES (AMD/NYSE)
AMD on Track to Meet Expectations
Joseph Osha (1) 212 449-0930
ACCUMULATE*
Long Term
BUY
Reason for Report: Company Update
*Intermediate term opinion last changed on 05-Apr-2000.
**The views expressed are those of the macro department and do not necessarily
coincide with those of the Fundamental analyst.
For full investment opinion definitions, see footnotes.
Investment Highlights:
o Our checks indicate that AMD is still on track to deliver sequential
pretax earnings growth in the second quarter.
o Our current (untaxed) earnings estimates stand at $1.18 for the quarter
and $5.75 for the whole year, on revenue of $1.15 billion for the quarter and
$4.93 billion for the year.
o We are highly confident that AMD will meet or exceed these estimates.
Fundamental Highlights:
o We believe that concerns regarding the ability of the company's Taiwanese
suppliers to adequately ramp core logic and motherboard supply are unfounded.
o Also, our checks indicate that the transition to the new versions of
Athlon is going well.
o Finally, AMD will be taking a provision for income taxes beginning this
quarter, which is not reflected in current estimates. We're not changing our
numbers for now. The changed tax outlook is due to the better than expected
results that AMD has been posting - we don't think that there should be any
impact on the stock price.
AMD On Track For The Quarter
Our checks indicate that AMD is still on track to deliver sequential pretax
earnings growth in the second quarter. Our current (untaxed) earnings
estimates stand at $1.18 for the quarter and $5.75 for the whole year, on
revenue of $1.146 billion for the quarter and $4.93 billion for the year. We
are highly confident that AMD will at a minimum meet our estimates.
We believe that concerns regarding the ability of the company's Taiwanese
suppliers to adequately ramp core logic and motherboard supply are unfounded.
Smooth transition for new Althon products
We also believe that the transition to the new versions of Athlon (Duron at the
lower end, and Thunderbird at the performance end) is going well. We expect
AMD to top our 1.8 million unit K7 estimate for the quarter, and we also think
that estimates of 3.1 million units for Q3 and 5.5 million units for Q4 are
beatable as well. We expect to shortly see AMD beginning to utilize the
performance headroom offered by the updated Athlon with on-chip L2 cache.
Although initial versions of the product were only announced at speeds of up to
1 gigahertz, AMD should be exceeding that mark with Thunderbird early in the
third quarter. Those products should be available in quantity, increasing
pressure on Intel to roll Willamette in order to maintain its place in the
clock speed war with AMD.
Tax provision should have little impact on the stock
Finally, it is important to note that AMD will be taking a provision for income
taxes beginning this quarter, which is not reflected in current estimates.
We're not changing our numbers for now, but if we apply a tax rate of 15% to
the remaining three quarters, up from the 0% estimate we're using now, earnings
per share declines to $1.01 for the current quarter and $5.08 for the year.
The changed tax outlook is due to the better than expected results that AMD has
been posting - we don't think that there should be any impact on the stock
price. |
