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

To: dhellman who wrote (59084)	10/18/2001 8:25:24 AM
From: dhellman	Respond to of 275872

ML continued:Results in line, but 2002 comes down again AMD reported results for the September 2001 quarter that were largely in line with our estimates, although the earnings picture for the December quarter declines again as a result of pressure on MPU pricing and still-weak flash. We are also cutting our 2002 EPS numbers yet again, and are now calling for a loss of $0.27, down from our previous estimate of a $0.23 profit. Our intermediate- term rating continues at Neutral - although we feel AMD is doing a good job of combating the Intel P4 blitz so far, we expect pricing pressure to be intense during the coming year. Some market share loss, but not much MPU unit volume of 7.7 million units was flat on the previous quarter. Given the fact that our model shows Intel's unit shipments increasing by 2 million units sequentially, AMD appears to have lost some market share, although the shift is minimal. The AMD Duron product continues to be more competitive than Intel's Celeron, and now accounts for half of AMD's overall volume. AMD actually managed to hang onto more Athlon volume than we might have expected, but at the cost of dropping ASPs sharply. The $106 million sequential decline in flash memory revenues was largely in line with our model. Blunting the P4 thurst will be a challenge . . . The real question for AMD centers on how it will respond competitively to Intel's extremely aggressive pricing of P4, especially now that the P4 is available in high volume. AMD's claim that Intel has sacrificed performance on an instruction per cycle basis appears to be legitimate. The response - badging Athlon XP based on comparative performance, not clock speed - makes sense, in our view. It has been tough in the past to convince consumer to buy on measures other than clock speed, however, and with an enormous P4 holiday marketing campaign likely imminent, we believe AMD has its work cut out for it. The shift to 0.13 micron manufacturing should help The move to 0.13 micron manufacturing should help, and we credit AMD with doing a good job on manufacturing execution so far. If AMD is successful in cutting its average die size on Athlon XP by 40%, the cost reductions should allow the company to keep pace with price cuts from Intel without sacrificing gross margin. Our current model does show gross margin improving over the course of the year. We're on the sidelines for now For the moment, we'll simply stand back and wait. It is important to note that AMD has executed very consistently on all of its product ramps during the last twelve months, which suggests that the company is well prepared to deal with Intel's P4 push. We also note that Intel's Celeron lineup appears stale, and we expect AMD to continue to take market share in that segment. Whether AMD can blunt the P3 Tualatin offensive in notebooks, shortly to be followed by a P4 mobile push, remains to be seen. The challenge in terms of shifting buyer focus away from clock speed remains as well. Our Neutral intermediate-term rating on the stock is reiterated.