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Politics : Formerly About Advanced Micro Devices
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To: Kevin K. Spurway who wrote (30665)3/31/1998 8:07:00 PM
From: Maverick  Read Replies (1) of 1582904
 
ADVANCED MICRO DEVICES INC. (AMD) 29 1/16 +2 1/2. Shares of chip maker are posting
a nice advanced this morning after the company received positive press from PC World and
analyst Dan Niles of BA Robertson Stephens issued a favorable report on the company. While
AMD is not out of the woods yet, with a projected loss expected to occur in Q1 (the First Call
estimate is for a loss of $0.25 vs year-ago profit of $0.09 a share), the company's sub-$1,000
chip does not appear to be in danger of being replaced by Intel's Celeron chip as the performance
of the Celeron chip did not measure up to the AMD chip. At the same time, Mr. Niles thinks that
AMD could soon start to turn the corner and begin to record a profit as early as Q2/Q3. This
compares with Mr. Niles' initial estimate of profitability by Q4. The more constructive outlook is
based on "discussions with several sources in the industry" that suggest that the production
problems that AMD has experienced in past quarters have been addressed, allowing AMD to
improve its production drastically. According to Mr. Niles, "the yields on 0.35u have increased
from 50 to 100 good die per wafer with early 0.25u wafers yielding 200 die out of a possible 350."
These improved production yields are likely to allow AMD to produce 13 to 15 million units in
1998, well above Mr. Niles earlier estimate of 11 million units. This higher production yield
projection has prompted Mr. Niles to raise his rating on the stock from "market perform" to "buy"
as "the stock could trade in the low $30s based purely on production improvements." The stock
is also benefiting from a Prudential Securities ratings upgrade from "hold" to "buy" on the view
that possibly IBM could make an equity investment in AMD. While this latter development is
more of a stab in the dark, the company does appear to have made strides in correcting its
production problems, something that is more tangible and likely to add to sales and bottom line
results given the increased demand for sub-$1,000 computers.
By Briefing.com
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