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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Apollo who wrote (32680)	10/1/2000 3:14:07 PM
From: EJhonsa	Read Replies (2) \| Respond to of 54805

Intel is kicking butt in servers, which is an extremely hot market now and in the foreseeable future. To an extent, this is true, but in the segment of the server market that's seeing the most manic growth, namely the internet server market, Sun has a very firm grasp on the high-end. The fact that they continued to take market share during the past couple of quarters even with a semi-antiquated product line speaks volumes. Now that they've released a new line of which upon which they're basing their next-generation servers, things should become even more difficult for Intel on the high-end. It still remains to be seen whether the Itanium (or AMD's Sledgehammer, for that matter) will have much success displacing Sun, and to a lesser extent, IBM, from the high-end server market. My doubt are not merely due to the performance of Sun's boxes, but also due to their reputation for reliability. If an enterprise has a couple of its application servers go down for 30 minutes, it can probably get by without having too many problems. However, if AOL or Yahoo ends up having a couple of their servers go down for such a long period of time, there could be hell to pay. The financial losses would be far more than whatever price premium the company happened to pay for a Sun server. And, as I said earlier, while servers based on Intel's chips seem to have good potential in the enterprise market, cost becomes a factor here, all the more so as companies begin dedicating a larger and larger percentage of their IT budgets to networking, bandwidth, and storage-related needs. Intel is dominant in notebook mpu's; we'll see what AMD puts out, when it puts out, and what it's Fab capacity will be to meet demand then. That's true, no one can predict with any certainty how the Mobile Athlon will turn out. However, considering how the release of the Athlon for the desktop market completely changed AMD's position in this field, and it's possible that a similar effect will be made when it's releated for the laptop market; and if the Mobile Athlon does turn out well, AMD should have more than enough capacity to handle production, as its Dresden fab is currently less than 50% utilized. Intel is strong in Flash Memory, which you also rightly pointed out. This field's getting to be very interesting as well, as AMD's starting to make a lot of inroads. AMD's flash business now makes up roughly 1/3 of its revenues, a number that should rise over time. They're the primary supplier for both the world's leading data networking equipment manufacturer (Cisco) and the world's leading optical networking equipment manufacturer (Nortel). Furthermore, AMD's recently struck major deals with the world's leading printer (HP) and handset (Nokia) manufactrers. The Nokia deal is especially worth noting, as Nokia's traditionally been an all-Intel shop, and as the deal involved Nokia's next-generation, high-margin 2.5G/3G handsets. AMD's expecte to do $1.5 billion in flash sales this year, a number that could easily exceed. If you were to give this business a P/S ratio equivalent to that of SSTI, an embedded flash pure-play, the market cap it'd receive would be larger than the current market cap for AMD as a whole. I don't have a position in AMD right now, but for this reason, I'm considering entering. That, and the fact that the company's expected to earn roughly $2.50/share this year, which means that if the stock doen't move, and AMD only meets these numbers (they've vastly exceeded estimates in the past couple of quarters), it'll be trading at a P/E of 10 come January. Given the circumstances, and the valuation of its peers, a P/E of 25-30 definitely wouldn't be unreasonable. Eric