Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Dealer who wrote (7806)	10/13/2000 9:28:07 AM
From: Dalin	Read Replies (2) \| Respond to of 65232

CREE report kicked butt, but they warned about future margins. Looks like a BIG sale on it today! :0) D.

To: Dealer who wrote (7806)	10/13/2000 9:44:21 AM
From: Dealer	Read Replies (1) \| Respond to of 65232

INTC--AMD can't escape Intel's shadow By Dan Briody Redherring.com, October 13, 2000 The confounding saga of the semiconductor industry added another bizarre chapter Thursday when Advanced Micro Devices (NYSE: AMD) beat earnings estimates amidst a supposedly slowing PC market. But if you think that's surprising, wait until you see how investors took the news. After remaining silent while several others in the PC semiconductor sector, including arch-rival Intel (Nasdaq: INTC), preannounced earnings warnings, AMD surprised investors with earnings of 64 cents per share, as opposed to the expected 62 cents per share. So what happened? Wall Street greeted the seemingly good news by selling off AMD shares -- the company lost about 5 percent of its market value on Thursday. But that's not even the best part. While AMD's stock got punished in return for its positive news, Intel, the company that AMD supposedly stole market share from during the quarter, managed to stage a small rally, tacking on 5 percent to its own ailing share price. Nobody said this was going to be easy to understand. So pay attention. NOT SO FAST, AMD A closer look at AMD's numbers revealed a much more disconcerting story for analysts. Top-line revenue numbers for the company fell short, by approximately $10 million. Add in lower average selling prices (ASPs) and an impending inventory overload (a really bad thing for semiconductor companies), and it was enough to prompt Lehman Brothers (NYSE: LEH) and Prudential Securities to lower their target price on the stock and revise earnings estimates downward for 2001. "It's all about expectations in this business, and AMD missed their top line," said Hans Mosesmann, an analyst at Prudential. "Their ASPs were about $9 below what we expected, and the company has a reputation of bringing down ASPs when things are tough. And I think there will be an inventory glut." In addition, experts are anticipating some serious pricing pressure to affect AMD over the next several quarters. "We maintain a cautious view on the stock given the potential for a more aggressive pricing environment in both flash [memory] and processors," said a report from Lehman Brothers, which lowered its fourth-quarter estimates from 74 cents a share to 68 cents a share. So much for hopes that AMD would buoy the flailing tech market. IT'S ALL ABOUT INTEL Since Intel's earnings warnings two weeks ago, the whole investing world had been anxiously awaiting AMD's earnings so they could see what it meant for Intel and the rest of the PC market. Theoretically, if AMD did well it would make Intel look worse, isolating the chip giant's problems to its own internal affairs. If AMD did poorly, investors were likely to characterize Intel's woes as a reflection of overall market concerns and a possible end to the semiconductor cycle. AMD did both, which allayed investor fears about the overall PC market just enough to allow them to pick up some depressed Intel stock. After all, things could hardly get any worse for Intel. The company's stock has lost 53 percent of its value since the beginning of September, trading down primarily on news of an earnings shortfall. But delays and recalls have dogged the chip maker throughout the year. In a one-month span from the end of August through the end of September, Intel recalled its 1.13 GHz Pentium III chips, delayed delivery of its Pentium 4 chips, and outright cancelled plans to deliver a low-end chip for Internet appliances, called Timna. Considering all of that, it would be hard for AMD not to cut into Intel's market share at least a little bit. But in the end, the fight between Intel and AMD shakes out the way it always has, in Intel's favor. "The sense is that if these two companies are battling it out, Intel wins that battle," says Mr. Mosesmann. "AMD is just so exposed to the consumer market, and they have gained market share. But they have never been successful in the corporate market, and I don't expect that to change." Intel trades at about 21 times 2001 earnings estimates, while AMD has a price-to-earnings (P/E) ratio of about 9 times 2001 estimates. Given that Intel is still in the driver's seat -- although the car is much slower than it used to be -- the discrepancy in P/E ratios is probably warranted. It seems Intel's bad news is out of the way, and is already reflected in its stock, while AMD's bad news is yet to come. That makes Intel the smarter play in the PC semiconductor market, but we think the overall sector is still a huge question mark.