Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Yousef who wrote (25405)	10/31/1997 1:11:00 PM
From: Profits	Read Replies (5) \| Respond to of 1578499

Yousef, I think everyone has a right to an opinion. I also believe that you put a little more thought into your postings than Investor A. However, I don't think you're looking at any of the facts objectively. And I'm a little concerned with your last sentence. Maybe you should focus on posting some factual data rather than childish snide remarks like "Losses". Let's keep this discussion on a factual and intellectual basis. By the way, I've net over $10K this year trading AMD stock. AMD is a volatile stock and I'm a day trader. You will not find many stocks with that kind of volatility. So I think I'll keep the "Profits" name. Here are some more facts: AMD did have a yield problem in Q3 on 233MHZ 200MHZ parts sell for $100 less than 233MHZ and that is pure profit Estimates were that less than 5% of parts were yielding to 233MHZ AMD has fixed the yield issue. Forecasted volumes and Q497 1K prices below: 800K units 200MHZ @ $160 800K units 233MHZ @ $225 250K units 166MHZ @ $84 (only selling to strategics - not at a loss) 100K units 266MHZ ? not sure of price here That's nearly 2 million parts. Say it ain't so, Profits

To: Yousef who wrote (25405)	10/31/1997 1:51:00 PM
From: Profits	Read Replies (1) \| Respond to of 1578499

Yousef and Investor A and Fuchi etc., This is not about AMD vs. Intel vs. Cyrix. The CPU market is about selling PCs. The overall market for PCs continues to rise and the growth rate is healthy. Analysts say that nearly 40% of all US homes have PCs. That means 60% of US homes do not have PCs. What an incredible opportunity for companies selling CPUs. I'm pretty confident that Intel, AMD and Cyrix (well National) will all be around for quite a while. Obviously Microsoft has taken a different approach. They feel the PC market is saturated and have invested in WebTV. Why do you think that is? Well if they have a box sitting next to your TV (98% of US homes have TVs) they can expand US market penetration. Intel currently holds around 85% of the CPU market, AMD has less than 10% and everyone else around 5%. There's no doubt that Intel is an excellent company. If you're an Intel investor I applaud you. If you're a Cyrix investor I applaud you. If you're an AMD investor I applaud you. The semiconductor sector represents an outstanding rate of return. This market is large enough for Intel, AMD and Cyrix. AMD's goal is for 15 million CPUs (roughly 15% marketshare) in 1998, and 30% marketshare in 5 years. So don't trash people because they like AMD. Profits

To: Yousef who wrote (25405)	10/31/1997 2:56:00 PM
From: Petz	Respond to of 1578499

Yousef says if AMD sells more K6's they'll just have bigger loss: I don't think you understand that AMD has a yield problem for the K6@233mhz and they are shipping plenty of 166mhz parts at a loss ... so they won't "make it up in volume". Let's look at Q2 ... 350,000 K6's shipped at a slight profit (~+.07) Let's look at Q3 ... 1,000,000 K6's shipped at a loss (~-.23) Your prediction for Q4 ... 2,000,000 K6's shipped at a ??? First of all, we are discussing the hypothetical question, IF AMD sells 2M K6's in Q4, what will their profits be. The question pre-supposes that the yield and speed mix will improve, otherwise there isn't a chance in hell of producing 2M K6's. Lets examine the assumptions on average selling price (ASP) and overall cost of production which are implicit in your prediction of a loss for Q4. 1. (ASP) From Q2 to Q3 there was an extreme drop an ASP, from $285 to $150. In Q4, the 166, 200 and 233 speed grades are selling at $290, $189, $109 for October and $225, $160, $84 for the November/December (my assumption based on 25% discount to Intel). Lets assume that for October the speed mix is 50%, 40%, 10%, while for the rest it is 30%, 40%, 30% and we'll assume that production is 450K in October, 650K in November and 900K in December. The average ASP of 2M K6's will be 157.24, but lets be conservative and say that OEM deals with the Tier 1's reduce the ASP by 10% overall to $141.50. Q3 also suffered from the elimination of 50M in revenues from the K5. This will not repeat in Q4. The reduction in ASP from Q3 to Q4 is much less than from Q2 to Q3. 2. Cost of producting K6's. FAB25 probably consumed about 3000 wafers per week in Q3, and they may up this to 4000 wafers a week average in Q4. (This includes wafer starts for the 0.25 um process.) At $2000 burdened cost per wafer (i.e., including chemicals, additional labor, etc.) thats $2M additional cost/week or $26M in additional costs. There are also additional packaging costs of about $10 per good chip or $10M. AMD has said R&D will be down because Q3 included a one-time DUV investment (5M), but lets be conservative and assume that G&A and marketing expenses soak up this money. Additional cost of production for doubling output is only $36M. 3. Q3 is the seasonally worst quarter for AMD's other businesses, but lets be conservative and assume that they do no better in Q4 than Q3. 4. PROFIT ESTIMATE Profit (Loss) in Q3 (before taxes): (56M) Q4 Revenue changes due to K6 (2M @ 141.50 minus 1M @ 150): 133M Q4 additional cost of production: (36M) Q4 additional depreciation (from conference call): (10M) Q4 reduction in R&D: 5M Q4 increase in G&A and Marketing: (5M) Q4 sales of 0.25u notebook chips at end of quarter, 25K@$350: 8.75M Q4 estimated pretax profit (sum all of above): 39.75M Taxes: (15.54M) Q4 net profit: 24.2M or 0.16 per fully diluted share 1997 net profit: 15.4M or 0.10 per fully diluted share The bottom line: if AMD is successful in shipping 2,000,000 K6's in Q4, they will be profitable. If they miss it by 100K and don't ship any notebook chips, they could still be profitable for the quarter, but not the year. Petz