Strange...this IBD story directly contradicts SSB
Story from today's IBD, certainly written before Joseph's death knell, is completely bullish regarding flash at AMD. Sold out, any incremental flash production increases consumed by current customers, third megafab needed -- such terrible problems.
DVD, DSL, Cell Phones Ring Up Sales For AMD
It's a hot summer for semiconductor sales. And after years in the cold, Advanced Micro Devices Inc. is sizzling.
Propelled by demand for Internet-ready cell phones, digital videodisc movie players and high-speed digital subscriber line modems, worldwide chip sales are expected to hit $ 190 billion this year. That's up 28% from $ 149 billion last year, according to the Semiconductor Industry Association. Researcher Dataquest Inc. is more bullish, forecasting chip sales of $ 220 billion this year.
Production problems have kept AMD from enjoying boom times in the past. But not this year. "These last 10 months have been the most exciting in our history," said Hector Ruiz, who AMD hired in January as president and chief operating officer. Analysts expect AMD to earn $ 5.13 a share this year, up from a loss of $ 2.20 per share in 1999. The company now has 17% of the market for personal computer processors vs. less than 12% last year, Dataquest says. Ruiz is seen as the likely successor to Jerry Sanders, AMD's chairman and chief executive. According to AMD documents, Sanders is due to retire within two years. But Ruiz says he's in a learning mode for now. "In a collegial way, we're sharing the leadership in running the place," he said. "I didn't come in to do a fixer-upper but to match up with Jerry and complement each other."
Need For Manufacturing Space
Ruiz joined AMD from Motorola, where he spent 22 years in management. His arrival at AMD in January coincided with a run-up in the company's stock, which rose to nearly 95 on June 21 from 31 on Jan. 1. It's now at about 84.
The roses have thorns, though. AMD needs more manufacturing space if it's to keep up with booming chip sales, Ruiz says. Demand is especially strong for the company's new Athlon microprocessor. Athlons have copper lines, which enable them to run at more than 1 gigahertz - faster than traditional aluminum and silicon chips. AMD opened a chip plant in Dresden, Germany, to build Athlon chips. The facility was completed in spring 1998 at a cost of $ 1.9 billion, but has been running at just 25% of capacity. Ruiz expects the plant to hit full stride late next year, but says that still won't be enough. "We're also in the beginning stages of planning our next microprocessor factory and determining where it should be located," he said. The company hopes to have a site picked for this factory - its third - by the end of this year, he says.
AMD also is struggling to keep up with sales of flash memory chips, which are used in various hand-held devices, such as cell phones. "Demand for flash is strong, and we're working hard to squeeze out every unit out that we can," Ruiz said. Until it can handle current demand, AMD isn't taking on new customers for flash chips.
Fujitsu Helps With Flash
Joint ventures could give AMD some relief. Its venture with Japan's Fujitsu Ltd. to make flash chips is widely seen as a win, as it's enabled AMD to boost output at a time of great demand. The same strategy could work for other chips as well, Ruiz says. "At some point in time, we might consider a manufacturing alliance, either producing silicon or testing silicon." Despite a shortage of capacity, AMD has vastly improved its production.
Early last year, the company couldn't produce enough of its K6 microprocessors, which act as the brains of PCs. That was the most recent in a series of manufacturing problems for AMD over the last decade. But the K6 experience was especially stinging. AMD introduced the chip as its flagship product in a campaign against market leader Intel, and analysts liked the design. But most of the K6 chips coming off the production line were flawed and couldn't be used. The K6 shortage precipitated a sell-off in AMD, halving the stock price to 16. The turnaround began in April 1999, when AMD fixed the problem.
Linley Gwennap, founder and principal analyst at The Linley Group, says Ruiz is keeping things moving in the right direction. "He's a smart guy who understands the business," he said. He's not as technically knowledgeable as Atiq Raza, AMD's former president, Gwennap says. "But I don't think you really have to be. It's really a matter of motivating the troops."
Nine of the top 10 PC makers buy AMD chips today. The holdout is Dell Computer Corp. AMD chips are used mainly in home computers. Now it's time for AMD to branch out, Dataquest analyst George Iwanyc says. "They've moved into pretty much all of the consumer PC markets," Iwanyc said. "The next big challenge is to move out of that market and into markets where Intel has a dominant presence, like the corporate PC market." |
