Yousef, normally I would not respond to people like yourself, but lets analyze this little article you so proudly displayed on numerous boards last evening.
After spending years in Intel's (Nasdaq:INTC - news) shadow, Advanced Micro Devices (NYSE:AMD - news) finally seemed to have a fighting chance of getting a leg up on the microprocessor gorilla. AMD's K6-2 processor had some impressive performance specifications compared to Intel's Pentium II, and the chip was priced significantly cheaper. Would this be the time that AMD finally gained some ground in the microprocessor battle? <<yes, in hindsight this was an amazing year of growth for amd in marketshare, output, consumer and oem acceptance, and of course they drastically narrowed intc's mhz lead to one speed bin. All in all, I repeat yes.>>
Like so many times before, it was simply not to be. The first blow to investors came on January 15 after the company announced its fourth quarter results. Blaming manufacturing glitches and lower production than expected <<I don't quite remember this to be true, as i recall 5.5 mil cpus were 10% higher than revised (upwards) estimates>> AMD reported earnings of $0.15 per share. While the profits were better than the $0.06 per share posted in 1997's fourth quarter, the earnings were shy of Wall Street expectations of $0.19 per share <<which of course were unrealistically raised in the week before the announcement, from the consensus of .15 that was in place for a month, by a few unrealistic bandwagon jumpers >>. Companies that disappoint analysts are rarely treated well, and AMD was no exception. After five different brokerage houses downgraded the stock, AMD was pummeled with a greater than $5 per share loss on the day in extremely heavy trading. <<argh, a painful day indeed>>
The second cliff dive came the week of February 1 after AMD warned that it could potentially see a first quarter operating loss thanks to earlier-than-expected price cuts from company nemesis Intel on its lower-end chips.<<a bad move imho, since it is clear that intc is not prepared to sacrifice their earnings and margins and will not produce more than 8-9 million celerons (~35% of total prod.? Kumar said no more than 25%) this quarter, which judging by the reviews and product selections offered by oems, will be absorbed quickly, although most at the expense of the pII. Support for this is seen in the RISING K6-2 400 price over at pricewatch> Investors and traders alike bailed out en masse as the stock wen>t from $24 15/16 to $16 13/16 in four frenzied days of trading.
True to form, Intel then announced on February 16 that it was cutting prices on its inexpensive Celeron processors by as much as 24%.<<why didn't they change the name with the mendocino core, their damn hubris cost them a lot, arguably these costs continue daily>> With production snafus at AMD not due to be fully corrected until the latter part of the quarter << actually, with one of his dying breathes Kurlak published his findings based on a pvt meeting in which he offered that all of the faulty silicon which led to the mhz glitch would be gone in the first month of the quarter>>, AMD appears to have missed the train as demand <<9/10 oems, biggest retail seller in Jan., hmm what is he smoking?>> and prices for the K6-2 start to drop <<see above>>. After signing up Gateway (NYSE:GTW - news) as a new customer, the stock has recovered a tad <<10%>> but it is still far from its highs.
BUSINESS DESCRIPTION
Founded in 1969, Advanced Micro is the world's second-largest manufacturer of microprocessors, the "brains" behind personal computers. While coming in second is sometimes an admirable accomplishment, the gap between second and first is quite vast. Industry gorilla and company archrival Intel owns a market share near 76% << waaayyy down in the last year>>, while AMD's share of the microprocessor pie is 15% based on units sold <<you know the answer here>>. Most of this share is on the lower, inexpensive end of the computing spectrum. <just what constitutes the high end anymore? I see K6-2s and 3s going for as much as $2000 and tons in the $1200 to $1700 range> Consequently, as a percentage of total revenue dollars, AMD's market share drops to the single digits. <<damn xeons>>
Beyond microprocessors, AMD also manufactures an assortment of semiconductor devices used in networked computers as well as various other communications products. These products include embedded processors, flash memory <<used to be another intc monopoly, repeat used to be. You know who's fault that is>> , EPROMs, and programmable logic devices.
AMD is a member of the S&P 500.
FINANCIAL FACTS
Income Statement
12-month sales: $2,542.1 million
12-month income: ($104 million)
12-month EPS: ($0.72)
Profit Margin: N/A
Market Cap: $2774.1 million
Balance Sheet
Cash: $697 million
Current Assets: $1,562 million
Total Assets: $4,253 million
Current Liabilities: $840.7 million
Long-term Debt: $1372.4 million
Ratios
Price-to-earnings: N/A
Price-to-sales: 1.1
Price-to-book: 1.4
HOW COULD YOU HAVE SEEN IT COMING?
Those following the Rule Maker style of investing would have steered clear of AMD this past year. It should have been painfully clear that Intel was the Rule Maker in the microprocessor market and that AMD faced a steep uphill battle trying to defeat the pseudo-monopoly Intel enjoys.
Similarly, investors who have been turned on to the "gorilla" style of picking technology winners following advice from 1998's Gorilla Game would have spared themselves the trouble faced by AMD shareholders. With the market share numbers and raw company sizes what they are, it should have been clear that AMD more resembled a chimpanzee than a gorilla. In fact, the company's CEO even went so far as to anoint Intel the industry gorilla at an investment conference in the summer of 1998. <<is this surprising to the author? I thought it was pretty obvious notwithstanding jerry's annointment>>
Students of history also would have had pause for thought about investing in the microprocessor second banana. The story of a competitor's chip being faster and cheaper than the current Intel offering has been repeated many times in the past, yet Intel always has managed to squash the competition <<I will not go here, but i will say there are right ways and wrong ways....>>. Pick any microprocessor product cycle of the past 10 years and you will likely find a similar story as today. That is, the Intel competitor gets a spike in its stock price as rumors of Intel's defeat start circulating, but then Intel uses its size and resources <hmm...> to pull out the win in the end.
It's also interesting to note that AMD's stock is at roughly the same level it was back in 1986, while the S&P 500 has more than tripled in that time.<<boy am I glad I've only held it for the last year, whew!>> Intel, on the other hand, has managed to add billions or dollars to its shareholder value since the late 1980s. <monopoly tends to do that, is there any other possible result given the size of the ind.?>
WHERE TO FROM HERE?
There have been some recent glimmers of hope for AMD shareholders. Namely, the company has made inroads in getting its product into the boxes of formerly "Intel only" PC manufacturers. <allow me to correct the authors "inadvertant" ommission: gtwy,toshiba, sony, pb, nec, and of course old faithfuls: cpq, hp, ibm, acer, come to think of it weren't they all formers at time not too long ago?> Furthermore, the company actually sold a greater number of desktop PC processors through traditional retail channels in the month of January than did Intel, grabbing 43.9% of the market versus Intel's 40.3%. <<nuff sed>> And, with the K6-3 processor set to roll out later in the quarter <<ouch, big credibility hit>>, AMD is attempting to maintain the gains made over the last year.
Nevertheless, like numerous other industries, size is a serious advantage in the semiconductor market. While AMD has done its part to maintain technical innovation, it should have been clear that the company was seriously outgunned by Intel in marketing, research and development, and production. Even if AMD can manage to come out with a better product than Intel <<this scenario is coming to theatres this summer>> Intel can spend gobs of money on advertising, throw money at its R&D department to regain the lead, or focus on producing its chips cheaper and cheaper. Intel's R&D budget, for example, is five times larger than AMD's.<<remember these words, quality not quantity, it has an amazing application in virtually every realworld scenario>> These are some of the factors leading to the recent trouble, and it's doubtful that the situation will change any time soon. <<
Watching Intel and AMD battle is almost like watching the Harlem Globetrotters play the old Washington Generals. The Globetrotters (Intel) needed the Generals (AMD) in order to play the game (keep antitrust fears in check). The Globetrotters might have even made a match or two close to keep the spectators interested, but there was never much doubt who would end up winning the game. Perhaps the Globetrotters will actually lose their next game, but I'm not holding my breath <<<here is my hypo. I see it more like a school bully situation, where the weaker boy bides his time, while growing stronger , until the day comes where the bully just doesn't seem so tough anymore, the years of unchallenged dominance have left him an out of shape, desperate mess, who, in an attempt to retain his position will resort to whatever is necessary, although by now it is far too late, for the young boy has grown into a powerful man and the bully can no longer dictate to the man, nor can he exert his power elsewhere since others have seen the bully for what he really is: a slow to react, aging relic who must now answer for his years of abuse . Or in other words, a mere shell of what he once was>>. This is another example of website desperately trying to protect their interests, also this is far from quality investigative reporting. The author's attempt to conceal bias is elementary and crude. Good day Yousef. |
