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

To: cruzbay who wrote (193960)	4/18/2006 4:52:35 AM
From: brushwud	Read Replies (1) \| Respond to of 275872

didn't understand your comment. The quoted text seemed to make sense to me. Rivet said in the January CC that he expected depreciation to be $825 million this year and reiterated that last week. Depreciation has a lot of inertia and doesn't zigzag like revenue or earnings. Once equipment starts being depreciated, it's going to continue more or less at the same rate. Think of an oil tanker as opposed to a sailboat. And if a company is growing, its capital investment is going to be greater than its depreciation, although today's capital expenditures set the stage for higher depreciation in succeeding years (along with higher revenue and profit, one hopes). So as AMD depreciates its bigger new fab (roll on) and ceases to depreciate its old fab because more and more of the old tools in place have been fully depreciated (roll off), total depreciation is going to ramp. It's a mistake to think depreciation would be the same for all four quarters of 2006. The text you quoted from Doug Freedman, an analyst with American Technology Research Inc., stated, “We believe that this [Q1 depreciation less than one quarter of $825 million] means AMD ramped Fab 36 slower than expected and that this will be viewed in one of two ways. Either the ramp has gone slowly as a result of poor execution (this would be the bear point of view), or management was being conservative in previous guidance by giving a large depreciation number, and after the fab began producing mature yields at a quick pace, demand did not warrant further equipment start-up until later in the year”. But AMD is doing what Rivet said they would and no conclusion about "poor execution" or "demand did not warrant further equipment start-up" can be drawn.