from Osha at Merrill Lynch, nice read
operating income of $1 bn which is operating income of $6.5 per share. No investment income garbage here
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Momentum continues through 2000
Based on yesterday's virtual visit with the management of AMD, we believe that the company's momentum from the strong 2Q will continue into 3Q. We believe AMD is well on-track to deliver a strong year, with record sales of $5 bn and operating income of $1 bn.
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Further push of the Athlon line
The company has indicated that its processor business is on target with its expectations to deliver 28mm units in 2000. Aside from the seasonal factors, which will inevitably boost its consumer market, we believe that the releases of Windows 2000 should boost MPU sales in the corporate market in 2H00.
As we had started to see in 2Q, production of AMD's new K7 lines continues to go well. For the rest of the year, we expect to see an almost complete K7 processor product mix; by the end of the year 80-90% of the processor units shipped will be from the new Athlon lines. And while we do see strong demand for the high-end Thunderbird, demand for the low-end Duron is even more robust.
AMD's success with transitioning its customers to the new Athlons is attributable to well-executed and timely capacity planning. MPU production has rolled over completely from the older version of K7 to the newer version of Athlon with on-chip L2 cache. At its Dresden Fab 30, AMD is currently at 20% of capacity or 1,000 wafers a week; this figure should increase to 50% by the end of the year and 100% or 5,000 wafers a week by the end of 2001. Interestingly, AMD has indicated to us that it is seeing yields at Dresden comparable to conventional CMOS yields at Austin's Fab 25.
We also see further room for AMD to gain MPU market share with its Athlon offerings in the mobile PC and server/workstation markets. By the end of the year, we can expect to see K7 core products code-named Palamino and Morgan in the high-end and value mobile space, respectively, and a Mustang product for the server/workstation market. AMD is also aggressively staying in the speed race against Intel, with plans to ramp speeds to 1.5 GHz by the start of next year.
No slowdown for flash - at least through 2001
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