Robertson Stephenson puts AMD at $31.
AMD Advanced Micro Devices (BUY- $25.81 Cap Eric Rothdeutsch, 415-693-3241
$9.0B)
Lowering Estimates on Flash Exposure; Compelling New Notebook Design Wins
*Intela (INTC $33-1/4) last night in its pre-announcement conference call
indicated that the slowdown seen over the last few quarters in the PC market
now has spread to its non-PC related businesses namely, server, cell phone,
and networking products across all sectors and geographies. (It is worth
noting that Intel said had it not been for server, cell phone and networking
weakness, Intel would not have pre-announced, i.e., it did not see a worsening
in sales of its desktop and notebook PC products).
*As a result of AMD s large exposure to flash memory (39% in 4Q00)
predominantly used in cell phones, we are cutting our revenue and EPS
estimates to reflect slowing end-market demand and accelerating price declines
for flash. Our F2001 estimates are going from $5.13 billion and $1.90 to
$4.81 billion and $1.50, respectively. For F2002, our estimates are going
from $6.15 billion and $2.15 to $5.75 billion and $1.90.
*However, we would like to note that the bulk of our estimate revisions are due
to AMD s flash exposure and not due to lower expectations of processor units
sold. In fact, we believe that AMD is only accelerating the rate at which it
is gaining market share from Intel and remains on allocation for its Athlon
processors running at speeds 1GHz and faster while we think Durons continue to
see solid demand.
*Additionally, we believe that AMD has increased its roster of both commercial
and consumer notebook designs wins for its soon-to-be-released Palomino
product. Palomino, incorporating a new Athlon core, pushes both the
performance and the low power envelope of mobile processor design,
demonstrating what we believe is dramatically superior price/performance to
alternative mobile processors offered by both Intel and Transmeta.
*Given the superior price/performance of its processors, what we believe are
compelling notebook design wins with its Palomino processor, the flawless ramp
of 0.18 micron copper-interconnect technology at its Dresden facility, and low
valuation at only 13.7 times our new F2002 EPS of $1.90, we are maintaining
our Buy rating on AMD and 12-month price target of $31.
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