Thanks, steve, for sharing your knowledge of AMD and advice. This is from The Motley Fool today:
AMD Looks Ahead
Jerry Sanders is not having a good day today. Although things are certainly looking up over the next few months for ADVANCED MICRO
DEVICES (NYSE: AMD), the semiconductor manufacturer Sanders
founded after leaving Fairchild in the 1970s, the profits are not flowing in as fast as previously anticipated. AMD slumped $3 to $35 7/8 after announcing that it anticipates reporting a slight loss in the third quarter.
Roughly twenty different analysts had been looking for an average of a $0.31 EPS. AMD produced one million K6 MMX-enhanced central processing units (CPUs) in its third quarter, roughly three times the 350,000
units it sold last quarter. Unfortunately, this level of output is on the low-end of what the company had expected and does not give it enough volume to overcome the fixed costs in producing the microprocessor.
The reason the company's shares are not being completely wiped out by
today's disappointment is because of the forward-looking information
contained in today's press release. AMD's current weekly output is 150,000 K6 units a week, which should allow the company to produce two million of the pikers in the fourth quarter. If the company is only going to produce a slight loss with one million units, many investors are probably speculating that this means that the company is close to covering its fixed costs and that the next million units could contain a lot of gravy that will flow down to the company's bottom line. With 18.9 microprocessors sold last quarter in the PC market alone, not counting the close to two million servers and 300,000 workstations that use multiple CPUs, AMD is producing only two to three percent of the total market, possibly heading to five to six percent in the next few quarters.
The only downside is that many of AMD's customers are losing market
share to companies that do not currently buy from AMD. The second-tier
PC manufacturers that have licensed the K6 include Acer, Digital, Fujitsu, Peacock, Siemens-Nixdorf, Trigem, and Vobis. According to industry reports, it is exactly these mid-tier manufacturers that have been losing market share in the worldwide computer market. This certainly all makes sense as these would naturally be the manufacturers that are price conscious enough to opt for AMD. Although IBM has also licensed the K6 from AMD, it is currently only using it for the lower priced, stripped-down Aptiva model, a product targeted at low-end consumers, not the higher-end products that it is selling to businesses. Even at two million units in low-end PCs, the K6-MMX could mean a lot for AMD's results, but all the noise about being an "Intel killer" will be just that -- noise -- until the company convincing breaks into higher-margin PCs targeted for corporations and market share is measured in more than single digits. |
