here is the report, if interested...
01:50am EST 3-Dec-01 Robertson Stephens (Rothdeutsch, Eric) AMD INTC AMD.N
Strong Demand Seen for Athlon XP; Reiterating Buy Rating (Part 1 of 2)
December 3, 2001
Technology Research
A d v a n c e d M i c r o D e v i c e s , I n c .
AMD: $13.60
Rating: Buy
Eric Rothdeutsch 415.693.3241
Tai Nguyen 415.248.4670
Change In... Yes/No Was Is
Rating: No BUY
EPS F2001E: No $(0.12)
EPS F2002E: No $(0.43)
Rev F2001E: No $3,705.8
Rev F2002E: No $3,153.0
12-Month Price Target: No $16.00
52-Week Range (NYSE) $34.65-7.69
FD Shares Outstanding 345.0 MM
Market Cap $4,692.0 MM
Avg Daily Volume (000) 8,078
Book Value/Share 9/01 $10.52
5yr Hist. EPS Growth Rate 47%
5yr Proj. EPS Growth Rate 15%
ROA 2001E: NA
Dividend/Yield 0.0/ NONE
Price/Book Value 9/01: 1.3x
Net Cash 9/01: $903.5 MM
Net Cash/Share 9/01: $2.62
FY December F2000 A F2001 E F2002 E
EPS:
1Q $0.57 $0.37 A $(0.22)
2Q $0.61 $0.05 A $(0.14)
3Q $0.64 $(0.28) A $(0.08)
4Q $0.53 $(0.26) E $0.01
Year $2.35 $(0.12) $(0.43)
P/E NM NM NM
Rev (MM): F2000 A F2001 E F2002 E
1Q $1,092.0 $1,188.7 A $727.6
2Q $1,170.4 $985.3 A $749.4
3Q $1,206.5 $765.9 A $786.9
4Q $1,175.2 $765.9 E $889.2
Year $4,644.2 $3,705.8 $3,153.0
Mkt Cap/Rev NM 1.3x 1.5x
Strong Demand Seen for Athlon XP; Reiterating Buy Rating
Investment Conclusion:
Our recent tour of Asia reaffirms our belief of solid demand for AMD s Athlon
XP processors given their superior price and performance over Intel sa (INTC
$32.66) Pentium 4, and we think the company is well on track with its 0.13
micron process development. We now believe there is upside to our 8 million
unit processor estimate for AMD s FQ4, while our flat processor ASP assumption
may prove to be conservative. We are reiterating our Buy rating and 12-month
price target of $16.
Key Points
* Company executing well on 0.13 micron development. Our checks indicate that
AMD continues to be solidly on track with its 0.13 micron process
development. Not only do our checks indicate that AMD is sampling 0.13 micron
Athlon 4 mobile products, but we think the company has seen working 0.13
micron silicon on Hammer, AMD s next generation processor. Hammer chipset
development also appears to be proceeding nicely, and we expect Via and SiS
to offer chipsets coincident with Hammer s introduction, eliminating AMD s
need to develop one internally.
* Athlon XP selling well... During our recent tour of Asia, we continued to
see strong demand for Athlon XP processors due to their superior
price/performance over comparable Pentium 4 processors from Intel, as well as
due to a spillover effect from Intel s inability to satisfy demand at the
faster speeds due to ramp issues with the Pentium 4.
* which could lead to unit upside and a higher blended processor ASP. Our
checks indicate that AMD is sold out on the Athlon XP 1500 & 1600 and is
seeing strong orders on the 1700, 1800, and 1900. We now believe there is
upside to our 8 million unit estimate for the quarter, while our current
assumption of a flat sequential blended ASP may prove to be conservative.
* Company should meet or beat our estimates. We feel comfortable that the
company will meet or beat our FQ4 revenue and EPS estimates $766 million and
a loss of $0.26 per share.
* Flash still weak. Sales of flash memory remain weak as pricing continues to
deteriorate, and we think that AMD is not as well positioned as Intel in
handsets and PDAs, two markets demonstrating seasonal strength. However, we
believe our $200 million flash estimate for FQ4 is still achievable.
*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
Although currently impacted by the economic downturn facing the entire
semiconductor industry, AMD continues to execute well in its processor strategy
and is seeing strong demand for its high-performance Athlon XP processor as
well as its Athlon 4 processor used in notebooks that should drive AMD to 50%
market share in the U.S. retail notebook market in 2001. We believe that at a
given clock speed, AMD clearly offers superior price/performance over Intel
that should lead to continued share gains moving forward. AMD also is well
positioned in the flash memory market with a diversified product line
addressing the fast growing mobile phone, set top box, and Internet
infrastructure markets.
Investment Risks
Among the risks are AMD's ability to convert large OEMs to its new
microprocessor while simultaneously ramping its new 0.13 micron process
technology in a timely manner. While we believe that that the K7 and K8
product roadmaps 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 that is dominated by significantly larger
and better funded Intel. AMD has a significant exposure to the highly
competitive flash memory market that is susceptible to large swings in pricing.
Approximately 30% of AMD's revenues are derived from flash and greater than 30%
of its profits. Continued weaknes in flash memory pricing could continue to
weigh on the company's financial performance. 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. |
