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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (15599)	10/7/2002 9:39:50 AM
From: Bob Rudd	Respond to of 78627

Paul BARRONS ON AMD [In my notes, I large cap stuff for emphasis and inserted a comment]: >>10/6/02 BARRONS TRADER By ERIC J. SAVITZ But, hey, all was not gloom and gloom. Thanks to cost cutting and market share gains, Dell Computer boosted its earnings and revenue expectations for the current quarter, and the stock ticked up 46 cents, or 1.9%, to 24.76. But let's be clear: Dell is a market share story. PC demand remains lifeless. That was made clear by Advanced Micro Devices, which pre-announced that revenues for the September quarter totaled about $500 million, more than $100 million below Street expectations. AMD HAS BEEN HAMMERED BY THE LATE LAUNCH OF THE HAMMER, A NEW MICROPROCESSOR ORIGINALLY EXPECTED LATE THIS YEAR AND NOW SCHEDULED FOR SOMETIME IN THE FIRST HALF OF 2003. According to several analysts, the SHARP REVENUE MISS RESULTED IN PART FROM SOME CUSTOMERS SHIPPING BACK TO AMD PROCESSORS SOLD IN PREVIOUS QUARTERS -- NEGATIVE REVENUES, IN ESSENCE. One-Day Wonder: After starting the quarter with a blast Tuesday, the market was felled by earnings warnings that sent it back into its swoon, ensuring a sixth straight losing week. And that's not the least of it. There are GROWING FEARS THAT AMD'S BALANCE SHEET ISN'T STRONG ENOUGH TO WITHSTAND THE ROUGH ENVIRONMENT. While the COMPANY HAD ABOUT $1.1 BILLION IN CASH AND SHORT-TERM INVESTMENTS AT JUNE 30, THAT CASH IS QUICKLY EVAPORATING. Tim Mahon, chip analyst at Credit Suisse First Boston, EXPECTS THE COMPANY TO BE CASH FLOW NEGATIVE OVER THE NEXT SIX QUARTERS -- he FIGURES THE COMPANY'S CASH POSITION WILL GO NEGATIVE IN NEXT YEAR'S SECOND QUARTER, necessitating new financing to fund operations. Dan Niles, chip analyst at Lehman Brothers, figures AMD HAS ABOUT $800 MILLION IN CASH LEFT -- NOT A LOT, GIVEN IT IS BURNING $300 MILLION A QUARTER. He sees a "MASSIVE RESTRUCTURING" AHEAD. Merrill Lynch analyst Joseph Osha points out in a research note that AMD FACES ADDITIONAL LIQUIDITY PRESSURES FROM LOANS RELATED TO THE COMPANY'S DRESDEN CHIP FAB -- HE SAYS $160 MILLION IN LOANS ARE DUE NEXT YEAR. (Overall, the company had $1.1 billion in long-term debt at June 30, plus another $367 million in short-term borrowings.) Niles notes that INTEL, MEANWHILE, HAS PULLED AHEAD OF AMD IN PROCESSOR SPEED. AND IT WILL BE ROUGH FOR AMD TO CATCH UP. As Niles notes, INTEL WILL SPEND MORE ON R&D THIS YEAR -- ABOUT $4 BILLION -- THAN AMD WILL HAVE IN REVENUE -- ABOUT $2.6 BILLION. And that's nOT COUNTING ANOTHER $5 BILLION-PLUS INTEL WILL SPEND ON CUTTING-EDGE CAPITAL EQUIPMENT THAT NILES SAYS WILL REDUCE THE CHIPMAKER'S PRODUCTION COSTS BY 20% TO 25%. AMD, meanwhile, could be forced to outsource production -- which would save them some money in capital expenses, but require them to pay a middleman like UMC or Taiwan Semiconductor. "They're BETWEEN A ROCK AND A HARD PLACE," says Niles. [Mytake: Key Intel Competitive Adv is volume/share that enables them to spend more on r&d & equip without blowing costs out of sight cause they allocate those expenses over way more units.] Niles, we hasten to add, doesn't see AMD disappearing. At some point, he says, the company will become an appealing acquisition target. Hard to know who would buy them, though. IBM, maybe. Or a Taiwanese chipmaker like Via, which once bought the Intel-clone maker Cyrix. Perhaps Micron or Samsung would like AMD's flash memory business. But with PC fundamentals continuing to erode, and a potentially soft Christmas season ahead, the stock may need to move even lower before the vultures descend. For the week, AMD tumbled 2.23, or 38.9%, to 2.23, while Intel -- itself the subject of estimate cuts by Niles and others -- eased 91 cents, or 6.2%, to 13.71.

To: Paul Senior who wrote (15599)	10/7/2002 10:20:40 AM
From: Don Earl	Read Replies (1) \| Respond to of 78627

Paul, My first PC had an INTC processor and I've been using AMD processors ever since. Semis seem to go through a regular love hate cycle that I've never been able to relate to any real underlying fundamentals. As Timba mentioned, they're losing money, but I have a hard time picturing that as being a permanent condition. Who knows. The days when people would pay three grand for a faster system every 6 months are long gone, but the sell off in techs over the past several years looks to me as being over done at recent levels. I suppose if it comes right down to it, my AMD buy is probably as much of a gut play as anything. The fundamentals are okay, at least I don't see anything in the way of a near term cash crunch, and maybe the recent announcement of write offs will set the stage for a turn around. I think I'd have a hard time viewing the stock as being seriously over valued in the $10-$12 range in a market with a little less panic selling. Trying to second guess this market is next to impossible, so closing my eyes and hoping my account doesn't look too screwed up 6 months from now is about the best plan I can come up with right now.