I just got off the phone talking to Investor Relations about many things. I ended up speaking with John Greenagle instead of Toni Beckham because she was on vacation.
He said at this point AMD is not seeing any slowdown in demand. I asked many pointed questions about inventory and inventory build-up and they are saying pretty much they have "work in process" inventory that is normal.
I pointed out that previously Jerry indicated "with the availability of more motherboards, more Athlons could have been sold". With that opportunity to comment, he pointed out no inventory overhang is being observed.
I asked about the fairly high quantities of straight Athlons in the channel (observed on pricewatch). AMD indicated: "at this point, we are shipping Thunderbird and Duron chips only", and that "it takes 13 weeks to get the a chip through manufacturing".
I also pointed out that there was a large quantity of Duron processors in the channel and he didn't comment much about that but agreed to the assessment that Duron isn't shipping to the large customers yet, but will be soon, as planned.
I asked: "Why is AMD discounting so heavily?" He pointed out that those are the prices that are demanded by our customers. I then asked him what the slowest Duron speed grade shipping. He wasn't sure but later got back to me and it is 650 MHz. He pointed out that "prices essentially moved down one speed grade". I stated that "it was a little more aggressive than that". The highest speed grade dropped $150 dollars absolutely as well.
I asked: if the one time charges related to the debt retirement would be reported as one time charges separately from earnings. He said that was his understanding.
I asked about the charges and interest expenses: he claimed ignorance about those things (would have to talk to someone in finance about these things).
I asked why they rolled out the Mustang server chip before the mobile Athlon/Duron chips and he indicated that AMD is expecting the need to overcome a lot of inertia "to break into the server segment". I guess I have to agree, but I did point out that shortages to selected suppliers for XEON chips has probably made that job easier.
I pointed out that one of the reasons that the stock is hurting now is that every Analyst is showing slow growth in earnings in 2001. He gave me the line, "AMD does not tell Analysts what earnings to expect. The Analysts must draw their own conclusions."
I countered, that "universally poor earnings growth expectation by the Analysts dramatically affect the stock price. With capacity going from 6 million chips to 9 million chips in the fourth quarter and additional Flash capacity coming on line in the second half of 2001, the average selling price would have to crater for the earnings to remain flat." He responded that if additional guidance is given it would be at the Analyst meeting in November.
He also pointed to the guidance of ASP to increase to "greater than 100 in Q4" and I pointed out that Q2 had an ASP in the mid 90's, with Q3 reducing the K6's and Athlons doubling, its a lock for the ASP to be above 100 in 3Q. He responded:"that would be good if we achieve that".
Overall, he spent a good half hour on the phone he was patient, polite and disclosed what he could.
Here are some important dates to keep in mind:
1) October 9th (Microprocessor Forum) - I think
2) October 11th Earnings announcement,
3) November 9th - AMD sponsored Analyst meeting
Bob
P.S. I will update my earnings model based on this conversation soon and ship it to the people who requested in earlier. |
