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Technology Stocks : Advanced Micro Devices - Moderated (AMD) -- Ignore unavailable to you. Want to Upgrade?

To: andreas_wonisch who wrote (18612)	11/10/2000 3:34:51 PM
From: Maverick	Read Replies (1) \| Respond to of 275872

ML:AMD will sell out Athlon & Duron in 4Q00 Excerpts from ML Research 11/10/00 Investment Highlights: • We attended AMD’s Analyst meeting yesterday. Management presented on both of its largest business segments, flash memory and microprocessors. Most of the attention, however, was centered around AMD’s flash business. • AMD staunchly defended its belief in strong end market demand for flash and suggested that its business strength will continue for several years. We believe that increasing density and tight supply will continue to increase ASPs through 2001. • While we believe that AMD continues to enjoy good performance in its microprocessor family - shipping 28 million units in 2000 and selling out of both Athlon and Duron processors this quarter - the company has confirmed that overall PC demand this quarter has been disappointing. • We believe that the company is on track to deliver $4.8 billion in revenues for 2000. Our estimate are unchanged, $0.74 for 4Q, $2.56 for 2000. Our recommendation is an Accumulate/Buy. We attended AMD’s Analyst meeting yesterday. We believe that the company is on track to deliver $4.8 billion in revenues for 2000. Management presented on both of its largest business segments, flash memory and microprocessors. Most of the attention, however, was centered around AMD’s flash business. Our estimate are unchanged, $0.74 for 4Q, $2.56 for 2000. Our recommendation is an Accumulate/Buy. Reassurance on the flash business With much attention focused on the future prospects of the phenomenally growing flash industry, AMD staunchly defended its belief in strong end market demand for flash and suggested that its business strength will continue for several years. We believe that increasing density and tight supply will continue to increase ASPs through 2001. AMD’s management believes that cellular handset shipments should number 575 million next year and that the supply/demand imbalance will continue into 2002. The company did mention a few instances where customers pushed out flash orders. However, we do not believe that these examples were indicative of general market demand and note that AMD was able to resell the products to other customers. Building sufficient capacity to meet demand continues to be the main focus for the company. The company continues to add significant capacity with its Fujitsu JV. JV2 fully ramped flash production during this year, while its Iwate and Gresham fabs continue to ramp. The company’s JV3 facility should bring additional capacity in 2001. AMD expects to increase flash capacity by 77% and ship 350mm units next year. We expect demand for flash will grow over 100% YoY. Fourth quarter lags; the return to normalcy in 2001 for PCs? While we believe that AMD continues to enjoy good performance in its microprocessor family - shipping 28 million units in 2000 and selling out of both Athlon and Duron processors this quarter - the company has confirmed that overall PC demand this quarter has been disappointing. We have heard that excess inventory levels in the third quarter have spilled into fourth quarter throughout industry. The fourth quarter’s typically strong Christmas sales have yet to materialize. After this tough second half for the PC industry, AMD believes that next year should follow more “normal” seasonality, with PC units shipments growing in the mid teens YoY and microprocessor unit shipments growing in the high teens YoY. The company’s MPU growth prospects in 2001 are helped out by several factors in its roadmap. Not only will AMD have its new line-up of processors in place, but also it will have the core logic platforms for its processors. DDR chipsets for the high-end are already sampling and will begin to ship in volume early next year, while the low-end UMA chipsets should be available by then, as well. We believe the company’s assertions that its MPU ASPs – currently $90 - should remain around the same levels next year. We expect the sales mix to shift to more high-end processors, which should firm up ASPs. Microprocessor Roadmap into 2002 AMD revealed more details about its microprocessor product and technology roadmap into 2002. In 1H01, we expect to see upgraded versions of its Athlon processors. Palamino, the high-end processor, will reach 1.5 GHz by 2Q01 and will be manufactured on 0.13 micron process by 4Q01. The low-end version, Morgan, will trail the Palamino by a quarter. The release of mobile versions of these processors will fill an existing gap in AMD’s line up in the mobile space. With the Palamino and its Hammer family, AMD will have the ability to enter the low-end volume server/ workstation market. However, we believe that AMD’s penetration into the market will take time, as this is an entirely new market for the company. Later in 2001, AMD expects to sample its Hammer family and ship in volume by 1Q02. The Clawhammer will target the mainstream market of 1-2 way servers, workstations, performance desktop and mobile products, while the Sledgehammer line will target the higher-end market including 4-8 way servers. We believe that AMD will have the capacity to bring on these new products as its Dresden fab will ramp to full production next year with SOI and 0.13 micron process capabilities.