Andrew, All
here is an interesting report with actual unit shipment split between chips.
Now you can adjust your assumptions Also interesting that tax and JV effect were not that strong
Regards
-Albert
01:11am EST 18-Jan-01 Robertson Stephens (Rothdeutsch, Eric) AMD
Upgrading to Buy on Solid Product Positioning and Rising Blend... (Part 1 of 2)
T E C H N O L O G Y /
S E M I C O N D U C T O R
R E S E A R C H
January 18, 2001
A D V A N C E D M I C R O D E V I C E S , I N C . (AMD/$18.56)
Upgrading to Buy Based on Expectations of Solid Product Positioning and Rising
Blended ASPs
Rating: Buy
Eric Rothdeutsch 415/693-3241 eric_rothdeutsch@rsco.com
Change In... Yes/No Was Is
Rating Yes LTA BUY
EPS F1999A No $(1.11)
EPS F2000A No $2.35
EPS F2001E Yes $1.75 $1.90
52-Week Range $48.50-13.56
FD Shares Outstanding 349.8 MM
Market Cap $6,492.3 MM
Avg Daily Volume (000) 8,078
Book Value/Share 12/00 $9.02
3-Yr Secular Gr Rate 12.00%
Dividend/Yield 0.0/ NONE
FY December F1999 A F2000 A F2001 E
EPS
1Q $(0.41) A $0.57 A $0.38 E
2Q $(0.55) A $0.61 A $0.40 E
3Q $(0.36) A $0.64 A $0.49 E
4Q $0.21 A $0.53 A $0.63 E
Year $(1.11) $2.35 $1.90
P/E: NM NM 9.8x
Rev (MM) F1999 A F2000 A F2001 E
1Q $631.6 A $1,092.0 A $1,130.0 E
2Q $595.1 A $1,170.4 A $1,163.9 E
3Q $662.2 A $1,206.5 A $1,303.6 E
4Q $968.7 A $1,175.2 A $1,531.7 E
Year $2,857.6 $4,644.2 $5,129.2
Eqty Mkt Val/Rev: NM NM 1.3x
Key Points
* AMD reported 4Q00 revenues of $1.18 billion, down 2.6% QoQ, and below both
our $1.2 billion estimate and the company s revised guidance. EPS was
$0.53, $0.02 below both our and the consensus estimates. When factoring in
higher-than-expected joint venture income and a lower-than-expected tax
rate, the company would have fallen $0.04 short of the consensus estimate.
* In spite of a very difficult Christmas selling season for PCs, AMD managed
to grow processor units from 2.3% QoQ, to 7.0 million units, a clear
indication to us that the company is gaining market share. Both units and
revenues for Athlon and Duron processors were up sequentially, although the
blended average selling price (ASP) dropped approximately 14% QoQ, to $81,
due primarily to sharply lower pricing for K6-2 processors.
* Given the company s flawless execution in ramping Athlons on 0.18 micron
copper-interconnect technology, the strong demand for Athlons at speeds 1GHz
and higher, and the recent availability of the KM133 integrated graphics
chipset from Via that should spur sharp growth in Duron sales, we believe
the company is particularly well positioned to continue its market gains
over the coming quarters.
* Additionally, we look for a shifting product mix to drive blended ASPs
higher given what we believe is strong demand for higher-ASP Athlons,
excellent processor yields, the end of life of the K6-2, and the
introduction of new mobile processors in the 1H:C01.
* As a result, we are upgrading AMD to a Buy from an LTA rating. We are
lowering our 12-month price target from $27 to $24 to reflect the recent
weakness seen in the PC environment. Trading at only 9.8 times our revised
F2001 EPS estimate of $1.90, we feel AMD s current valuation provides a
particularly attractive entry point for investors in light of its historical
NTM P/E estimates.
4Q00: Strong Relative Performance
AMD reported 4Q00 revenues of $1.18 billion, down 2.6% QoQ, and below both our
$1.2 billion estimate and the company s revised guidance. EPS was $0.53, $0.02
below both our and the consensus estimates. When factoring in higher-than-
expected joint venture income and a lower-than-expected tax rate, the company
would have fallen $0.04 short of the consensus estimate. Gross margins for the
quarter were 44.1%, down 300 basis points QoQ, due to lower-than-expected
revenues and lower ASPs on K6-2 processors.
Gaining ground with high-performance processors
Processor shipments were 7 million units, relatively flat QoQ, with
approximately 3.4 million Durons, 2.2 million Athlons, and 1.4 million K6-2s.
During the quarter, AMD reduced all K6 inventories and discontinued its wafer
start in preparation to phase out this product line in lieu of Duron processors
that offer higher performance and a better cost structure. The blended ASP
during the quarter was $81, down 14% QoQ, which included the lower-priced K6
processors. Moving forward, we look for gross margins to improve given a
shifting product mix to Athlon and Duron processors, stronger sales of higher-
ASP Athlons running at 1GHz speeds and faster, and the elimination of the drag
of the K6-2 on ASPs given the cease in new wafer starts.
Geographically, retail sales in the U.S. and Europe turned in the weakest
performance during 4Q00, while Asia/Pacific, Latin America, and Japan were
appeared to be in better shape, particularly entering 1Q01. In fact, the
company sees evidence this quarter that sales are solid, and believe there are
relatively low inventories of AMD processors in the channel.
The spigot for Durons to be turned on
Sales of Durons were limited by the lack of integrated-graphics core logic
chipset during 4Q00. We believe that Via s KM133 the new integrated graphics
core logic chipsets that mates with Duron should accelerate the demand for
Durons, particularly higher speed versions, as the device ramps into production
this quarter. Demand for processors remained solid overall, with Athlons sold
out during the quarter. By the end of 1Q01, all Athlon processors that ship
should be 1GHz speeds or faster, an indication of excellent yields on the
company s 0.18 micron copper process, in our opinion.
In 1Q01, the company plans to introduce a new mobile Athlon processor, named
Palomino, targeted at performance notebooks, while we believe a new mobile
Duron process, named Morgan, targeting the value notebook segment, should be
introduced in 2Q01. These new mobile products should serve to drive ASPs and
gross margins higher given what should be their attractive performance and low-
power characteristics.
Flash Memory on Fire
Sales of flash memory grew 9.6% QoQ, with continue solid demand seen in all
market segments. Flash unit shipments were up QoQ and set a record in terms of
units, average bit density and ASPs were up, while the cost per bit was down.
Strong Balance Sheet
AMD's balance sheet finished with $1.29 billion in cash and investments, up
$59.7 million QoQ. Days-of-inventory-on-hand increased 6 days from 41 days in
3Q00 to 47 days for 4Q00. Inventories were up 53.1 million QoQ. Capital
expenditures for F2001 are planned to be $1 billion, up 24% YoY.
The Company
Advanced Micro Devices (AMD) is one of the largest manufacturers of digital
integrated circuits (ICs). The three principal types of digital ICs used in
most electronic systems are (i) memory circuits, (ii) logic circuits, and (iii)
microprocessors. AMD's diversified product portfolio addresses two of the
three markets for ICs--memory and microprocessors. AMD is currently the second
largest manufacturer of flash memory and microprocessors next to Intel.
Investment Thesis
AMD is poised to benefit from the unfolding of what appears to be a highly
successful product cycle that may stimulate earnings growth while winning
significant market share from rival Intel. AMD s Athlon and Duron product
families, addressing the performance and value segments of the market
respectively, are performance competitive products that are gaining solid
marketplace acceptance versus Intel products. AMD is also well positioned in
the flash memory market with a diversified product line addressing the fast
growing mobile phone, set top box, internet infrastructure and mobile internet
access markets.
Investment Risks
Among the risks are AMD's ability to convert large OEMs to its new
microprocessor while simultaneously ramping new process technology in a timely
manner. In addition, while we believe that that the K7 product roadmap could
prove potent in the long run, significant risks remain with respect to building
market share while developing new products to address the ever-changing
processor market and related form factors that are now being dominated by
Intel-based designs. AMD also remains vulnerable to further price pressure in
all product lines and faces as its principal competitor the most formidable
semiconductor company in the world, Intel. |
