Petz,
<1. The flash memory "cycle" and the the CPU business "cycle" are unrelated. One year CPU's may be "hot" and flash NOT. The next year the reverse. Therefore there is less variation in earnings growth for a company which contains both parts. All else being equal, wall street will reward a company with consistent 20-30% YOY growth with a higher PE than one with growth that varies between 10% and 50%.>
There is no real "cycle" for CPUs. This is an extremely steady growth segment and will remain so for the next 5-10 years. Just think of it - most of the world hasn't used a PC yet. There are two or three companies who can do x86. With a strong product offering and focus, AMD can only gain market share.
Flash, on the other hand is closer to being a commodity and is more susceptible to cycles.
<2. Operationally, it is not too difficult in a combined company to move resources from one side to the other as one business grows more than the other. For example, using part of Fab 25 for flash would not be possible with two companies.>
Partly true but not enough to make a difference. Easier said than done.
<. The last time you wanted to split off flash it was because AMD's flash business was not being valued highly enough like the other "pure plays." If we had done it back then, when ATML was at 60, the "flash spinoff" would now be worth less than half of its spinoff price, just like the pure play, ATML, has dropped from 60 to 26.>
This is still true. AMD Flash business is undervalued compared to peers even today. Don't just look at the stock price. Atmel stock has mutliplied 7-fold in the last 2 years inspite of the beating it has been taking lately. ATML has split once in the last 6 months and is ready to split again.
<4. The day will come when PC sales are FLAT year over year. When that day comes, you'll be wishing you still had the flash business, because cell phones might still be growing 20% a year or more.>
The day will come when we will all die.
<5. To generalize the last point, the CPU business is extremely cyclically dependant on the PC business. The Flash business is more diversified, with cell phones making up perhaps half, internet infrastructure maybe 25% and consumer products (including cars) another 25%.>
I don't think so. I would challenge you to find any data that proves this point.
<6. The flash business has been performing well. One report said AMD flash business (just its part, not the partnership) was just 1% behind Intel in market share.>
I doubt the market share numbers but if true, it proves my point that it will be worth more as stand alone company.
Chuck |
