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

To: Elmer who wrote (93023)	2/14/2000 2:27:00 PM
From: Yougang Xiao	Read Replies (3) \| Respond to of 1571929

From Albert: Pru Upgrade: 08:11am EST 14-Feb-00 Prudential Securities (H.MOSESMANN 650-320-1631) AMD INTC AMD: UPGRADING TO ACCUMULATE FROM HOLD AND RAISING PRICE TARGET TO $56 AMD: UPGRADING TO ACCUMULATE FROM HOLD AND RAISING PRICE TARGET TO $56 R E S E A R C H N O T E S February 14, 2000 Subject: Advanced Micro Devices (AMD-$45 1/2)--NYSE OPINION ========== Current: Accumulate Analysts: Hans C. Mosesmann (650)320-1631 Prior: Hold Traci Tsuchiguchi (650)320-1639 RISK: High 12-Month Target Price: $56 ======================================================================= Ind. Div.: - Yield: - Shares: 152.8 mil. 52-Wk.Range: 45-14 _______________________________________________________________________ EPS FY Year P/E 1Q 2Q 3Q 4Q Actual 12/99 $ (2.18) N/A $(0.81) $(1.08) $(0.72) $0.43 Current 12/00 $ 1.90E 23.9X $0.41E $0.39E $0.46E $0.64E Prior 12/00 $ 1.00E 45.5X $0.23E $0.14E $0.24E $0.39E Current 12/01 $ 3.00E 15.2X Prior 12/01 $ 1.85E 24.6X ======================================================================= - We are increasingly confident in AMD's ability to execute and deliver. While we have been cautious on the stock given the company's history, we have since become more comfortable with the thesis that AMD will be able to string together a series of profitable quarters this year. - AMD continues to push ahead on the speed front with ample product reaching the market. On Friday, AMD announced the availability of 850 MHz Athlon processors, regaining the lead in the speed race. - We believe that at these levels, AMD is a value. By almost any measure of valuation, we believe that AMD is a bargain. In fact, at these levels, the price of the stock reflects the value of the flash business and maybe the value of its fabs alone. In our opinion, the market is assigning almost no value to its microprocessor business. - As such, we are upgrading the stock to Accumulate from Hold, and we are raising our price target to $56 from $42. We arrive at our new $56 price target by applying an 18.5 times multiple to our 2001 EPS estimate of $3.00. Comparable semiconductor companies are currently trading at 31 times 2001 EPS estimates, on average. On Friday, AMD announced at a conference that the company's sales in the March quarter would likely come in sequentially flat to nominally higher. We had modeled sales declining 3% sequentially. This announcement comes off the heels of the company's statement of the availability of 850MHz Athlon processors earlier on Friday. We believe that AMD is operationally back on track and that the addition Hector Ruiz as the company's COO will likely enable the company to continue this trend. We also continue to believe that the Athlon architecture has the legs to compete head to head with Intel's Coppermine and Willamette through the year and that the company has never been so well positioned in its product offerings. While we think that AMD is currently gaining some market share due to constraints at Intel (INTC, Accumulate, 105 7/8), we believe that Intel will rebound with its manufacturing competence. Though, the giant may not necessarily regain all of the market share AMD is now claiming. Increasing Confidence In The Quarter And In The Year Jerry Sander's statement on Friday regarding sales in the March quarter and our subsequent conversation with management has increased our confidence in AMD's ability to deliver its second strong consecutive quarter with an encouraging outlook through the rest of the year. We are optimistic about the ability of recently appointed COO Hector Ruiz to continue the momentum AMD is enjoying on the operational front. We believe that Mr. Ruiz's breadth of knowledge in the semiconductor business (formerly the head of semiconductors at Motorola) will provide the operational discipline AMD needs to continue its success on the technology and manufacturing side. This Time Around May Be Different We believe that AMD is better positioned now than it ever has been. Its current product offerings and its roadmap going forward put the company in a position to compete with Intel for the first time at both the high and the low ends. In the past, AMD was always a step or two behind Intel and could only compete at the low-end. Now, it seems that AMD has caught up in terms of technology and in product offerings and is proving to be a formidable competitor. When AMD was only able to compete and gain market share at the low-end, Intel was able to offset this with its mainstream product line. Now that AMD has become more competitive at the higher-end, it seems that this strategy may be less plausible this time around. Sustainable Momentum Or A Head Fake? We continue to believe that Intel's reaction to AMD's success will be a key determinant of the profitability of both companies going forward. The question remains whether or not Intel will be a rational competitor and concede some market share to AMD in order to preserve ASPs. We believe that this scenario would be to the benefit of both companies, and we believe that Intel has behaved as a rational competitor thus far. In our opinion, the issues regarding Intel's Coppermine ramp have been back-end related, but we are confident that Intel will fully recover as its history of manufacturing prowess would support. IDF Should Generate Plenty Of Positive Information Flow For Intel This Week. Tuesday through Thursday of this week, Intel is holding its semi-annual IDF (Intel Developer Forum) in Palm Springs. We anticipate that this event will generate a plethora of positive news flow for Intel. We expect that Intel will demonstrate a processor well in excess of 1 GHz and that there will be a great deal of discussion about the Willamette, and a fair amount of hype surrounding Itanium. (Intel demonstrated a 1 GHz processor a year ago at IDF that was manufactured on 0.25 micron process technology and used a cooling device.) We believe that the underlying theme for Intel will be servers, networking, and communications. AMD Valuation We are raising our 2000 and 2001 EPS estimates to $1.90 and $3.00 from $1.00 and $1.85 respectively. Our revenue estimates are $4,100 million and $4,825 million in 2000 and 2001, up from $4,000 million and $4,750 million respectively. At 3.5 times book value (versus 9.3 times for its comps), 2.3 times sales (versus 8.7 times for its comps), and 15.2 times 2001 calendar EPS estimates (versus 31 times for its comps), we believe that AMD is a compelling value proposition. In fact, if you consider its flash business, which we estimate to be well in excess of a billion dollar business this year, AMD's current stock price is reflective of its flash business plus the value of its fabs alone. Assigning the stock a conservative 18.5 times 2001 EPS multiple (still a significant discount to the 31 times multiple other fabbed semiconductor companies enjoy), we arrive at our $56 price target based on our $3.00 2001 estimate. Price/ Price/ 2001 Ticker Rating Price Book Value Sales P/E (Fabbed with Non-volatile memory) AMD Accumulate $45 ® 3.48 2.33 15.17 INTC Accumulate $105 7/8 12.12 11.97 32.58 ATML Strong Buy $38 _ 9.81 5.85 28.70 MCHP Strong Buy $47 _ 8.73 7.96 16.64 (Fabbed) CY Strong Buy $41 1/16 7.16 6.09 20.53 IDTI Strong Buy* $36 ª 9.81 4.96 16.11 LSI Strong Buy $102 _ 9.31 7.20 31.62 (Fabless with Non-volatile memory) SNDK Not Rated $149 1/16 8.34 16.85 70.65 Average 9.31 8.70 30.97

To: Elmer who wrote (93023)	2/14/2000 2:28:00 PM
From: Road Walker	Read Replies (2) \| Respond to of 1571929

Elmer, RE: "A informed investor is a wise investor." This thread is living proof that that statement is not always correct. John

To: Elmer who wrote (93023)	2/14/2000 2:48:00 PM
From: tejek	Respond to of 1571929

Ted this statement makes no sense whatsoever. First off MHz did not sell all AMDs processors in Q4. Second what does Intel's exact reason for undersupply have to do with AMD's inability to sell all their product, regardless of MHz? Are you saying once we know the exact reason then AMD will be able to sell all their processors? EP, so long as you come from the place that a sold out vendor is the more competent one, there is very little reason to argue with you. It is my contention that the capable vendor on top of its game plans ahead so that it has an adequate supply of product for its main customers and a reasonable amount of excess inventory to satisfy increased demand should it arise. Given these parameters, clearly Intel is not the quality vendor. Further its your contention that demand was so great at Intel that it sold out. There are others who contend that Intel's production capabilities were lacking this past quarter. Without knowing which is the real reason for Intel's shortage of chips, it is very difficult to evaluate whether AMD's surplus indicates a demand problem for AMD's products or not. However I still contend that the inventory at the end of Q4 was normal for a company executing well. And I believe that Sanders has vindicated my position with his upside preannouncement for Q1 this past Friday. Why you continue to go after AMD and not Intel on these issues is beyond me. I think you should be more concerned with the state of Intel. After all, its not AMD that is screwing up all the time. ted

To: Elmer who wrote (93023)	2/14/2000 10:21:00 PM
From: Dan3	Read Replies (1) \| Respond to of 1571929

Re: First off MHz did not sell all AMDs processors in Q4... No, but AMD went from a huge loss to a record profit - the fact they went from having slower processors than Intel to faster ones is just coincidence? Time for a thought experiment! Elmer, if Intel cuts the speed of all of the processors it produces in half (so that the range sold is from 200MHZ PII's and Celerons to 400MHZ PIII's - and makes sure they are all clock locked) but keeps the prices the same (so a 400MHZ will cost $900 or whatever the 800 sells for now), do you think sales will: A) go up B) go down C) stay the same Anxiously awaiting your answer, Dan