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Technology Stocks : Advanced Micro Devices - Moderated (AMD)
AMD 213.50+6.2%Dec 19 3:59 PM EST
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To: TimF who wrote (2646)7/28/2000 12:30:22 PM
From: pgerassiRead Replies (3) of 275872
 
Dear Tim:

Re: Earnings Estimates of $7.00 to $10.00

I think you may be missing some factors as well:

1) Classic Athlons are going away in Q3 (selling out).
2) Slot A will be Tbirds only at end of Q3 as Classic wafers go away (none started this quarter. These have a higher profit margin as they have higher ASPs but lower production costs (No SRAM chips, less components) thus, more profitable.
3) The profitability of K6 is not high. Only laptop versions make more profit wise.
4) Dresden production is all Tbirds (incremental production coming more from Dresden than Austin, thus Duron percentage of overall production will fall.
5) Mustangs, Mobile Durons (Camaros), and Mobile Mustangs (Corvettes) will be introduced late Q3 or early Q4. These will cause ASPs to rise more. Some rise in Q3 ASPs but a lot larger in Q4.
6) SMP boards will cause higher demand for Mustangs and further increase ASPs meaning even more profit.
7) Communication division has lower gross margin than CPUs. Thus, loss of division will have far greater impact on revenues than profits. Thus, if revenue rises Q3, more profits will be created relatively since Gross Margins of remaining businesses are higher.
8) Revenue from flash will increase 10% or more QOQ but profits from them will increase much more (Demand -> higher Margins and ASPs).
9) Inventory from Q2 missing chipsets will be sold this quarter as the availability of motherboards are much increased (6 pages on Pricewatch (check search of "Motherboards with KT AMD" and remove those with CPUs)) at pure profit.

Taking all these factors in, doubling after tax profits for Q3 and Q4 not unreasonable as the tax rate will not change unless, profits exceed these estimates.

Pete
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