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

To: dougSF30 who wrote (237334)	7/27/2007 2:34:02 AM
From: wbmw	Read Replies (2) \| Respond to of 275872

Re: Anyhow, it looks like there will be no 3GHz Phenom until Q208, if ever. It's hard to say, Doug. I don't like discounting AMD, but already I assumed 3.0GHz was out of their league, even for a demo. But I was wrong. Who knows what they'll have in early 2008 with the Phenom cores. They used to have 2.9GHz on the roadmap, way back when.... But we could debate this all day long. I think a more interesting exercise would be to see if we can calculate what could happen to AMD if all their wishes came true, and they had absolutely perfect products that managed to beat Intel in performance. According to this historical ASP analysis, AMD had $86 ASPs, back in Q3 2006 before Intel had a strong ramp of Core 2: investorvillage.com Let's say they did tremendously well and were able to reach those high ASPs that existed before the price-war really got into full swing. AMD still had decently priced CPUs back then. Let's also say they also gained market share and scored record volumes in Q1 2008 at 18M units. That's $1.55B, and we'll even assume they grow their chipset business a bit to $200M for an even $1.75B. Let's assume that graphics and handhelds revenues grow to $400M, which would be quite a success story for AMD. So $2.15B in revenues. With such increased ASPs, let's say they make 45% gross margins, around their target. That's $968M in margin dollars. Subtract R&D and MG&A of $840M, and amortization of $60. Now we are down to $68M. Subtract $80M in interest payments, and now you are at a loss. But wait... this was all assuming great things from AMD. They have a stellar lineup. They get pre-pricewar ASPs. They get margins in the 40s of percent. The ATI units are operating well. Chipset sales are up. Etc. That's why, to me, it doesn't matter how optimistic someone is about AMD's performance prospects, their market share gains, their margin outlook, etc. In order for them to break-even, it would take an extraordinary event. And just what do you think that event is going to be? Will Phenom at 3.0GHz vault them back to the days of $99 ASPs, such as in Q1 2006, when Intel had nothing but Presler slightly ramped, and Smithfield/Prescott taking up the remainder...? How would that happen in a post-pricewar environment? Prices don't go drastically up in the PC market. They stabilize, and that's about it, if you're lucky. The problem with AMD is that they are deep enough in the hole that even overly optimistic upsides turn out to be a loss. And while they are losing money, the chances of them finding billions in financing in order to expand their manufacturing becomes harder to find. They are quickly approaching the point where more cash will be necessary to fund operations, let alone pay for a $3B fab expansion, not to mention an additional $5B greenspace in New York. The numbers don't lie, Doug. You are arguing a moot point with the 3.0GHz demo. It really doesn't matter either way, if your message is directed at the AMD investors on this forum.