Here's a very sincere and honest opinion change by a typically strong AMD fan from TMF. Have to copy and paste because they're now PPV:
Author: Sharps97 Number: of 96400
Subject: I'm downgrading AMD =( Date: 3/29/02 2:48 PM
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Downgrading AMD to Market Under Perform.
Sorry, Sharps thinks its time to really analyze AMD's position in the market place. As such, I'm 'downgrading' AMD personally to a market under perform.
Background
The Athlon launch has given AMD investors much to cheer about. It all started out with solid execution, production excellence, and seemingly a strong battle plan going forward. AMD promised 500 MHz for launch. A few weeks after launch, AMD hit 650 MHz, and through various tweaks and a process shrink, hit 1 GHz in the blink of an eye. AMD was getting record prices for its chips, they were seeing record volume selling out, and they were even seeing record net income that could be used to pay off a lot of debt. Flash was strong, and AMD's earnings were balanced nicely between Flash and CPUs.
What happened?
We've done the industry wide downturn enough, so let's look at some of the things that went wrong inside AMD. During the course of the Athlon's history, there was a major product cancellation, Mustang. A large cache version of AMD's newest product. It is highly unlikely that AMD would have significant production problems making such a chip; AMD was simply refused wholesale by any and every customer. They didn't want AMD's product, and AMD was not able to convince them otherwise.
AMD recklessly disregarded shareholder value by incompetently handling their Flash division during the market down turn. Given AMD's experience in the industry, it is not possible to accept that AMD did not see this coming. If they didn't, it's an inexcusable oversight that they didn't properly prepare for.
AMD had material and adverse problems making the transition to Palomino, which they never disclosed. AMD was stranded for an entire quarter at 1.4 GHz, as Intel introduce the Willamette version of the Pentium 4 processor. IPC vs. clock speed is irrelevant in this argument. AMD was well aware of Intel's launch plans through publicly disclosed documentation, and AMD should have been able to forecast where the Thunderbird chip could scale as Intel introduced the Pentium 4. In any event, Palomino was late on the desktop and it destroyed AMD's profitability in the third quarter, compounded by a completely unacceptable handling of deteriorating Flash conditions.
AMD's big miss with Palomino should have sent up larger warning signs about critical problems that needed to be addressed. AMD planned another die shrink for the Athlon, this time to .13 microns. AMD repeated stated that .13 microns would be shipped for revenue in the quarter just concluded, with desktop parts shortly to follow. At this point in time, AMD is significantly behind Intel in converting to .13 micron technology, and I believe it will have a material adverse impact on them.
What's coming?
AMD appears to have hit a brick wall with the Athlon and may not be able to compete against Intel through 2002. Intel has repeatedly hit its roadmaps and forecasts for the Pentium 4, while AMD has been lagging behind significantly as far as anything Athlon XP is concerned.
Intel has aggressively reduced the die size of the 2.4 GHz Northwood by 10%, resulting in a significant savings for the company. Intel has accelerated the launch of their 533 MHz FSB parts by over a week, which will give them a strong competitive edge over AMD's entire product lineup that AMD has no answer for. It is clear that Intel is aggressively preparing to answer AMD's forthcoming Hammer architecture, and they are starting today.
According to the following link, AMD's Sledgehammer part appears as though it will fail to achieve any traction in the original target market. Without any demand, AMD will either have to cancel the part, or qualify it for a lower priced market (i.e. Sledgehammer becomes the mainstream desktop part with Clawhammer becoming the next Duron). theinquirer.net
Despite the success of AMD in the corporate market, they have failed to convince customers to demand the Sledgehammer product. A major component of AMD's future plans, this will have a materially devastating impact on AMD's future plans and profitability.
Intel's Prescott will likely be a major redesign of the entire Pentium 4 core. It will likely contain at least 1 MB of L2 cache, AMD's x86-64, and other performance enhancing features. I believe that not only will Prescott match the performance of Clawhammer, but that it could also match the Sledgehammer. This would also force AMD to move the Sledgehammer into a lower price range. Prescott will make use of Intel's state of the art new SRAM technology, as well as their new .09 process technology, resulting in a die size competitive product with both Clawhammer and Sledgehammer. Intel will beat AMD to .09 process technology by at least 6 months, which will materially and adversely affect the company.
It has been said that AMD will launch the Clawhammer in October. I do not believe this will happen. Given AMD's recent history of product slips, it is very likely that Clawhammer will slip into Q1 03. AMD has indicated that it will launch with a 3400+ product. By that time, it is likely that the Northwood will be around 3.2 GHz. AMD's advantage with X86-64 is jeopardized with Prescott, with a likely launch date of early Q3 03, giving AMD a scant 6 months with which to capitalize.
Conclusion
I believe that AMD has significantly underestimated Intel and has placed themselves into a situation to which they will simply be unable to respond. They are clearly having production issues as well as marketing issues which will materially and adversely affect the company for the foreseeable future. If AMD doesn't turn things around soon, it is likely that I would downgrade them to Sell.
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