If I were an AMD investor what would concern me is not INTC's price slashing but its new chips coming out later this year where AMD has nothing with which to compete. That is how INTC gets AMD every time. AMD comes out with an advance, very attractive product......starts to pull ahead from INTC and then INTC comes in and trumps them. And once again, AMD becomes an also ran.
AMD Deflated by Doubt
By Alexei Oreskovic
TheStreet.com Staff Reporter
4/13/2006 12:37 PM EDT
Advanced Micro Devices (AMD:NYSE - news - research - Cramer's Take) delivered a solid first-quarter report Wednesday, but for investors fretting about the chipmaker's future prospects, the big profit upside wasn't enough.
With competition from Intel (INTC:Nasdaq - news - research - Cramer's Take) expected to grow more fierce in coming quarters, AMD's lackluster guidance stoked fears that the chipmaker's salad days are coming to an end.
AMD's shares tumbled more than 8.5%, or $3, to $32.40 in midday trading Thursday.
"We knew at some point Intel would come back. It's just a question of how much longer AMD has and it looks like maybe their easiest quarters are behind them," says Romeo Dator, co-manager of U.S. Global Investor's All-American Equity Fund, which holds AMD shares.
Intel shares meanwhile, which closed at a 52-week low on Wednesday, were recently up nearly 2%, or 37 cents, to $19.49.
AMD's $1.33 billion in first-quarter revenue was in line with its guidance, which called for flat to slightly down sequentially, in keeping with the seasonally slow start the year.
But that guidance was set before Intel delivered its midquarter revenue warning in March, saying sales in the first quarter could be short by as much as $500 million.
In other words, AMD didn't get any extra pop from Intel's shortfall.
"Is that a sign of slowing PC market or just pricing pressure? It's hard to say. I think maybe a combination of the two," says Dator.
Neither scenario, of course, is good news for AMD.
AMD increased its server sales by more than 100% year over year in the first quarter, while notebook and desktop sales were down sequentially. Overall, AMD continued to make strides in increasing its mix of higher-end products -- the average selling price across AMD's product line-up increased 7% from the fourth quarter.
"AMD clearly gained revenue share in the MPU segment in the quarter, but may not have gained unit share," Deutsche Bank analyst Ben Lynch wrote in a note to investors, maintaining his sell rating on AMD. Deutsche Bank makes a market in AMD securities and has provided non-investment banking services to AMD in the past 12 months.
AMD set a new margin record in the first quarter, logging 58.5% gross margins, up from 57.3% in the fourth quarter.
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And AMD's acknowledgement that its processor's forthcoming DDR2 memory support would not provide a significant performance boost didn't help matters. Intel is slated to release a trio of new microprocessors in the second half of the year, featuring a new microarchitecture, which some analysts believe could allow Intel to reclaim the performance crown.
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