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Technology Stocks : Advanced Micro Devices - Moderated (AMD)
AMD 214.11+3.9%Nov 26 3:59 PM EST
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To: Sarmad Y. Hermiz who wrote (200553)6/6/2006 7:31:24 AM
From: pgerassiRead Replies (2) of 275872
 
Dear Sarmad:

They will not sell $15 worth of non NGA inventory before NGA becomes dominant. Their stupid pre release benchmarks have done that. They have a 25-30 million unit overhang right now and about 100 million more units they have to sell between now and then. They are not going to get $150 ASP for them. They are not going to get even $100 ASP, so how are they going to get $15 billion for them? Answer is they are not going to get anywhere near that much. Before NGA sells due to their pre release of benchmarks, the price will be 2/3rds of the normal ASP. After, it will be between 1/3 and 1/2 ASP.

You see it now with 21% less units sold and 34% lower ASP for 52% of normal revenue of $6.5 billion. Thats a fall to $3.38 billion in Q2. This is why a mere $1 billion in restructuring savings has become a 16K headcount reduction saving about $2 billion a year plus the sale or closure of money losing operations. They need to get below $100 ASP breakevens of a duopoly market. I believe that there are further reductions ahead when they realize that the unit marketshare will drop to 65/35 to 50/50. They have either too much capacity or too low yields. They are going to have to live with $3-5 billion in revenue per quarter instead of $8-10 billion. And boy is that going to be an adjustment.

Pete
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