Thread,
I'm seriously thinking about liquidating 1/2 to all of my AMD position on Monday, at a very substantial loss, based on what appears to be a pretty dismal short-term picture, and a questionable long-term one. My reasons to believe that the short-term has a lot more potential downside than upside include these:
1. Recent warning: the extent, nature, and lateness of the call probably blew away a lot of the trust and goodwill that the street was finally beginning to give AMD. I could be wrong: I was surprised to see so many analysts reiterate a 'buy' rating at lowered targets. But such clumsy surprises don't help with raising trust and respect, which are invaluable commodities.
2. As commented on this thread, Jerry's strategy seems to be to preserve and expand market share at all costs - including profitability. That may be a good long-term strategy. But if the 3rd quarter shows a loss, why won't the share price be in for further slaughter, with many interpreting it as the beginning of the end for AMD, and not hanging around for the final act. Furthermore, I unfortunately tend to agree with the view expressed on the thread that AMD has great technology and mediocre management - if my view is clear that means that the past is the best predictor of the future in terms of management execution, and they won't get better.
3. Future prospects for high-margin product hasn't been worse in a while: The Compaq announcement seals the deal that if there is corporate penetration, it will start small and need to build over a very long period of time, without a major partner or champion. The Dell rumour, which could've been a major stock-price boost for AMD, appears to be dead for the forseeable future. And lastly, Intel appears to be moving up the release of higher-speed parts while AMD's roadmap slippage becomes more and more painful. Hammer, once it appears, might blow away Intel's offerings. But we won't know whether it's a 'home run' or a 'ground out' until we actually see some product. The uncertainty about when we'll see it and what we'll see is very unsettling. In the meantime, what we're left with that we can really count on is a competitiveness in the low to mid-range retail space - not exactly the most profitable picture - and the 'market-share' pricing strategy makes profits even harder to maintain. The only bright spot would appear to be penetration in the laptop market, which is high margin, but how much will that help?
4. If Intel warns or disappoints in this q's earnings, AMD is likely to get smacked down further in sympathy.
The possible bright spots that would mitigate this gloomy view:
A sooner-than-expected upturn in the economy, coupled with a strong back-to-school buying in the pc sector, which could brighten q3 prospects considerably. It just seems unlikely at this point, as the market sentiment seems to have turned in the last week towards a longer journey to the bottom than had previously been anticipated. If this coming week's earnings from tech companies just add to the bad news, I'd think that it will be interpreted as this drawn-out-nightmare scenarios coming true, whether that is the reality or not, and the market will head lower. The other potential bright spot is if laptop sales are really showing some penetration - but I don't have a line on the likelihood of that - my guess is the 3-to-5 cent/share prediction doesn't help support that idea.
As this is a major painful financial decision, I'm very interested and welcoming of discussion or opinions these points, by whomever would care to engage it in a thoughtful and honest manner (er, Paul, that's ok, you're on ignore anyway).
TIA
jamok |
