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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: kapkan4u who wrote (72151)	9/17/1999 7:10:00 PM
From: kapkan4u	Respond to of 1572208

An analyst's opinion posted on Yahoo: Outlook: Management has indicated that the shift in the low-end MPU business appears to preclude further market share gains for the K-6 and that pricing pressure should serve to cap the line's revenue growth. This places the entire burden for the restoration of profitability squarely on the Athlon. We are estimating an order of magnitude growth in Athlon units for the third quarter to over 350,000. With ASPs estimated to be over $350, these parts could contribute $123 million of revenue, which helps to offset a projected decline in the K-6 as modest unit growth from 3.7 million to 4 million is likely to be insufficient to offset projected ASP decline in that part from $67 to $55. Total microprocessor revenues are estimated to advance 20% from $259 million in 2Q to $341 million in 3Q. A significant ramp in associated parts, such as chipsets, would take Computation Products Group revenue from $317 million to $437 million. Continued growth in flash memory should nearly offset the loss of the Vantis revenue, so we look for total third quarter revenues to grow from $594 million to $708 million, which is a 19% advance. A continued ramp in the Athlon should benefit the fourth quarter. Management indicated comfort with 4Q99 Athlon production in excess of one million units; we are using 900,000 in our revenue model, which leads to CPG revenues of $635 million. Normal pricing degradation for the Athlon should be countered by the mix effects of the rollout of a 650MHz part in the third quarter and a 700MHz part by the end of the year. The non-MPU components of the revenue stream should continue to benefit from the cyclical industry recovery, so that total revenues in the fourth quarter are estimated at $930 million. This should cu t the losses to under $50 million, or $0.32 per share. However, the continued ramp of the Athlon, including its penetration into the server markets that we anticipate early in 2000, sets the stage for substantial revenue growth of 109% next year to just under $6 billion. With an anticipated steady ramp in gross margins as the year progresses to the 40% level, we expect the operating margin to reach 12%. Taxes will be non-existent, so a restoration of substantial profitability would flow right to EPS, which we estimate at $3.64. Taxed at a 35% rate, this would equal $2.30. For the five year outlook, a decline in revenue growth to more typical levels in the out years would lead to 2003 revenues of $7.5 billion. Reduced margins from what may turn out to be peak levels in 2001-02 could still generate EPS of $4.50 on a normally-taxed basis. Financials: AMD's finances have reflected the pressures brought on by the lack of profitability, and the delayed resumption of profitability would have an adverse effect on the cash position. Capital spending is expected to total $825 million for 1999, but depreciation should be well over half that amount. AMD had about $488 million in cash and investments at the end of the second quarter. There is also an untapped $150 million revolving line of credit. The combination of the losses projected for the remainder of this year and the working capital requirements associated with the revenue ramp we are estimating for next year should strain AMD's cash resources. There is an aspect of self-correction involved, as the revenue and profit ramp that we are projecting would stress the balance sheet, but would also lead to a financing window. AMD has reached an agreement relieving it of its obligation to raise $200 million in equity by June 30, 1999 in conjunction with the Dresden fab. Receivables and inventori es are in good, but inventories are likely to suffer some writedowns in conjunction with the K-6 sales problem.