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

To: Voltaire who wrote (17861)	11/19/2000 9:42:23 PM
From: Voltaire	Respond to of 65232

To: richard surckla who wrote (61506) From: mishedlo Sunday, Nov 19, 2000 4:40 PM ET Reply # of 61526 From Bob - On the AMD thread - you will like this! boards.fool.com I am currently an AMD long and usually I am a pretty vocal contributor to this board. But before you laugh too hard about that post on the Intel board, pretty much everything he states in his post is true. If AMD performs as its new revised 2001 plan suggests and Intel ramps the Pentium 4 as they plan, we will not be seeing AMD selling Athlons at anything close to the Athlon ASP of $190 in 3Q00. I would normally have sent out my 2001 earnings estimates, but I am still not sure if AMD will be able to maintain its Athlon ASP. AMD guidance is perplexing at best. The speed ramp for the Athlon looks horrible. What people here do not realize is the slow down in PC sales has given Intel the necessary manufacturing capacity to pump out Pentium 4's instead of Pentium III's. Even though the Pentium 4 cost is much greater than the Pentium III, the price it can sell at is much greater. AMD has a tough marketing problem selling lower clock speed Athlons against higher clock speed Pentium 4's. At the same time, AMD is switching all its Austin capacity to Durons, which I suspect are selling at an ASP of $50. The market for the highest speed parts is relatively small (probably less than 20%). Intel's Pentium 4 should reclaim some of this at least and potentially force AMD to sell at a discount again. Before AMD did not have to worry much because Intel could not compete at the highest speed and demand exceeded supply. Look what happened to the Duron Processor (a clearly superior product) when supply (due to the market segment) exceeded demand. Intel is going to do what it has done to AMD many times before: Drive the prices down on all products that AMD competes with Intel on and increase prices on all products AMD can not match. Currently, AMD does not compete in the mobile space and might have problems with the Highest speed space if Intel can ramp the clock rate faster than AMD. The mobile processor is AMD's biggest question mark. The new core must be capable of much lower power than it is today. Lower power is not free, it requires a trade-off against speed. AMD is at a slight dissadvantage here as the Athlon is a much more complex processor than the Pentium III. If AMD can move into the mobile space, where demand exceeds supply, then Intel will not be able to punish AMD, but if they can't, we are in trouble! If you think that AMD has executed flawlessly the last 4 months, you are mistaken. For some unexplained reason, we have pissed away Austin Athlon Thunderbird capacity over the last three months and plan to continue to piss away some more capacity to produce $50 dollar Durons while we are waiting for a chipset from Via. This is a screw-up! While we have been apparently wasting time readying the Mustang Server chip, AMD has been bleeding Mobile market sales. This is a screw-up! Either AMD thinks it doesn't have to ramp very fast for the next year or they can't ramp very fast next year, or they are sandbagging next years ramp. In any case, the Analysts are not going to give you credit for great earnings next year, if your guidance doesn't show expanding ASP's and earnings. . This is a screw-up! I haven't had a chance to speak directly with AMD to clarify a few things in my Model, but if AMD does what it says, earnings next year will suck! I define this level as flat. I am not convinced that AMD will actually meet that very dismal guidance suggested by the Analyst Conference call. There are many conflicting statements, so I am not sure what will happen. Bob Volts