How many times???
ADVANCED MICRO DEVICES INC. (AMD) 25 3/16 +2 1/4. Once again this chip maker is moving higher on positive news for its K6 chip, up more than 9.25%. According to PC Week Online, Gateway Inc. (GTW 76 7/8 -3/8) is expected to start using AMD's K6-3 chip, the successor to the K6-2 chip, on its personal computers in late March or early April.
However, while this deal may appear appealing and could again ramp up the demand for the K6 chip, AMD has had plenty of opportunities before, only to waste them, due to its inability to meet production demands. Two years ago, AMD had a good opportunity to cease control of the low end microprocessor market through the sale of its K6 chips which was well positioned on performance and price to out-run Intel's Pentium and Celeron chips. Through the various chips iterations, however, AMD has proven that it has a bad habit of running into production yield problems. By the time it has been able to solve its problems, sales volumes have dried up. Accordingly, this has led to many earnings disappointments, uncertain outlook, and stock volatility. This time around, we're supposed to believe it is different.
However, burned more than once, investors must take a skeptical eye to this agreement, not so much because there is doubt about the contractual relationship, but because of AMD's history in meeting volume demand. It would be a major feat for this chip maker to again put pressure on Intel and force the chip leader to trim prices to maintain market share. But we've been down this road before with formidable customers like Digital Equipment and IBM on the AMD camp, only to be disappointed.
Before investors go hog-while over this latest development, some caution should be observed.
If you check real time quote, the ask size has been much larger than the bid size so far this morning indicates a net distribution of this stock. Someone has been selling AMD on strength...
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