Earnings preview from Osha @ Merrill
The good (YOY rev up)
The Great (Advantageous position to Intel during this downturn)
The Ugly! (Flash attack leads to downward eps revision)
Advanced Micro Devices (AMD, C-3-1-9, $20.74)
We are expecting AMD to deliver $1.1 billion in revenues
this quarter, up 2% YoY and declining 5% sequentially.
Our EPS estimates stand at $0.37 for the quarter; we see no
upside to our current earnings estimates for the March
quarter. The microprocessor division, which will comprise
51% of total revenues or $570 million, should grow only 1%
YoY. Relative to its main competitor, Intel, we expect
AMD’s MPU business to better withstand the weak PC
demand environment.
We see several factors behind the company’s advantageous
positioning over Intel. For one, AMD’s geographic
exposure is more diversified between Asian and European
markets, while Intel is more dependent on the corporate U.S.
market, current the weakest geography. We do note that
since no geography is isolated from a slowdown, this
advantage could diminish quickly in the coming quarters.
More importantly, AMD has assumed a more competitive
stance in the value market, which is one of the fastest
growing segments of the PC market. Our checks indicate
that both the Thunderbird and Duron lines are well being
received in the consumer markets. And with the upcoming
releases of the Palamino and Morgan lines in desktop and
mobile form factors this year, we can expect AMD to
continue gaining market share over Intel.
As the slowdown in the flash market becomes clearer, we
expect AMD to see weak flash revenues. In fact, with
overcapacity and lighter demand driving down flash pricing,
we are forecasting a revenue decline of 15% YoY in the
flash segment, which comprises about 30% of total sales.(ouch)
Consequently, we have lowered our CY01 estimate to $1.55
from $1.72. |
