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

To: gvatty who wrote (247277)	2/2/2008 3:00:46 PM
From: wbmw	Respond to of 275872

Re: "AMD, on the other hand, is getting propped up based on a perception that they did better than expected in their Q4 earnings" >> wbmw, Didn't AMD do better than your perception in the 4th quarter? I should have been more specific. There is no question that AMD did better than expectations. The perception, however, is that something fundamental inside the company have led to better performance. This is the ambiguous part. Clearly in my eyes, AMD's continued poor execution with Barcelona and Phenom in Q4 does not point to something fundamentally better with AMD's leadership. Hector's continued coyness with "Asset-Lite" doesn't point to any process improvement, either. What's left? Some magical force of will on Hector's part to gain market share while keeping margins high? No, I don't think so. I think AMD did what they usually do. They competed in price, and took advantage of Intel's inability to supply the unexpectedly high growth in CPU demand in the second half of the year. You need to understand that managing fab capacity is not something you can do at the last minute. The first half of 2007 was somewhat slow, and most market analysts expected only seasonal growth in the second half. From Intel's perspective, if they create build plans that produce too much and demand is not there, then they lose. If they plan to build too little and leave opportunity on the table, then they lose as well. I think Intel did the prudent thing, which was to build to the capacity predicted by the market analysts, and perhaps add a bit on top of that for good measure. You could say that being conservative is either Intel's biggest strength, or their greatest weakness, but either way, they gave AMD an opportunity to pick up additional volumes when they failed to predict demand correctly. It's the only explanation that makes sense to me. When I look at AMD's product lines, they are very stale. Customers will always find value with low prices, but what makes consumers shift demand to AMD when AMD has nothing new to offer? I think it's a matter of OEM and PC vendors driving demand, rather than end users. They buy from AMD based on price, and then they put it in a processor agnostic package that causes it to fly off the retail shelves, because U.S. retail buyers are the most technologically clueless consumers (trust me, I know - I used to work in retail for a short time). If Intel wants to win the retail business, then they have to compete in price. This will negatively affect margins, which is why Intel cedes retail market share to AMD most of the time, while they concentrate on higher margin sales. Intel's best chance of wooing these consumers is to market their technology as if people would be stupid to buy a PC with anything but "Halfnium based transistors". Seems like a good explanation for why Intel is beating the drum with this technology, even though the real technology driving the performance is far more subtle. At any rate, there's no doubt in my mind that AMD will have a tough year, and that their K10 product line will be even more of a financial burden on the company their product line in 2007. I think the benchmark reviews are already proclaiming Intel a leader this year, and we don't expect any major changes until either Nehalem ships, or AMD introduces 45nm products. Since I don't expect either until very late in the year, I think the near term is fairly predictable. Intel's 45nm ramp will help them in terms of performance and cost, while AMD's K10 ramp will hurt them in costs, while only helping them in the upper range of performance. K10 dual cores, while higher in IPC, will also be lower than 90nm Windsor cores in terms of frequency. As AMD ramps down on Windsor, they will create a gap in performance than can only be remedied by more expensive tri-cores. Overall, I expect these to do little in terms of shifting demand to AMD, while putting a downward pressure on margins. 2008 will be an interesting year for AMD investors, bulls and bears alike.