Consensus when AMD was in the 40's was mostly enthusiastically positive.
AMD was the uncontested technology leader at the time.
CMW had not made its debut.
Secondary offering at 35.20 sold over 10 million shares.
Convertibles were redeemed, AMD was almost debt free..at last.
Cash, 2 billion and Debt 600 million, new ratings went to high quality.
Price war was only a rumor, and CMW was also a rumor....when the massive sell off began; it started out with a Think Equity "RATING CHANGE TO A SELL FROM A STRONG BUY."
Strong earnings were anticipated in a few weeks time, so the sell off was not given much consideration. AMD is a very high beta stock, and 3 dollar losses occurred frequently, sometimes just on Options exp. (with rumors, usually false to oil the skids).
This time it was different, the CMW Demo was done the next day, and so the sell off was likely done on Que with insider information, and very likely orchestrated by leaks from Intel to their big money friends, like Merrill for example.
The CMW demo was mostly considered an Intel "rigged up" benchmark based on Intel's normally inaccurate and exaggerated boasting, in addition to the secretive nature of the testing, (no looking inside the boxes, etc.).
However, the selling continued, and most of the longs held during this time. At about 36, selling became a sensible option. Earnings came out, as expected, but nobody listened to it, as the wave of hysteria generated by CMW and its massive advertising and publicity campaign dominated the news. The price war was also waved in the faces of all investors, also contributing to the lack of buyers of AMD stock.
Earnings didn't matter, the CMW prowess was all the rage, and the price war scare fed a short sellers bonanza. I got out at 36.00, but re-entered at 31, then out again and in again several times before 17.
I got again at 17.50, 19.00, 20.74, 20.90 and 21.14 averaging up. Still holding those shares, and made a nice profit in the downturn, and bought in more than my original position with a stash of cash on the side and still dry.
Some of the options players got out at 42, and at other various levels going down to 38 which was also a good exit for some. On this one, with "all the kings horse's, etc. we couldn't put it back together, again". Nor did many of us believe the sell off was warranted.
The TA guys made out, and on leaving they issued their warnings. The FA guys got hurt more, but most had an average entry price in the 7.00 to 12.00 ranges. Mine was in the mid 12's.
So, in the long and short of it, the selloff helped most get more shares, depending on their realizations that it was time to get away until the smoke cleared. That was a different time for each, and I am sort of in the middle.
Quite a story, but we learned a lot about the corrupt nature of Wall Street, the market, the analysts, etc. Also, we made a few bucks.
So, this was business as usual for AMD. However, 42 became the high point, and the decline went through to 17. Gradually, the longs grew concerned, and many sold before earnings. |
