Reggie, re:<Under 8 out of ten scenarios, AMD is still no where near $45 per share>
Lets look one reasonable and one very pessimistic scenario on yields for K6's.
Lets say AMD only manages 5% yields for the 0.25 process for 1Q, 25% for 2Q and 50% for the rest of the year. For the 0.35 process we'll assume 40% yield in 1Q, increasing to 60% in 4Q.
Lets assume AMD processes 3000 wafers/week for 1Q, increasing to 5000 wafers/week by end of year.
Lets assume that 50% of wafer starts are for 0.25 process in 1Q, increasing to 80% in 4Q.
The K6 (0.35) has approximately 150 candidate die per wafer (162mm^2 with 23% wasted space)
The K6-3D and K6 (0.25) have at least 345 candidate die per wafer.
The ASP of the 0.35 K6's will be $110 declining to $80
The ASP of the 0.25 K6's and K6-3D's will be $200 declining to $140(very conservative)
Q PRODUCT WAFERS CAND_CPU GOOD A.S.P. REV
1.......K6(.35) 1500 x 13 2,925,000....1,170,000..$110...$129M
1.......K6(.25) 1500 x 13 6,727,500....336,375.....$200...$67M
2.......K6(.35) 1466 x 13 2,858,700....1,334,060..$100...$133M
2.......K6(.25) 2200 x 13 9,867,000....2,466,750..$180...$444M
3.......K6(.35) 1300 x 13 2,535,000....1,352,000..$ 90...$122M
3.......K6(.25) 3033 x 13 13,603,000..6,802,000..$160...$1,088M
4.......K6(.35) 1000 x 13 1,950,000....1,170,000..$ 80...$94M
4.......K6(.25) 4000 x 13 17,940,000..8,970,000..$140...$1,256M
TOTAL K6* REVENUES.......................................$ 3,330M
AMD had total sales of 2.36B in 1997, and of this only 0.683B was from the CPG group. If you add up the last column, you get a staggering 3.33 BILLION in sales from the K6 alone. In fact, even if 0.25 yield never exceeds the 25% level, and K6 prices decline as shown above, the K6 revenues would total 1.5 B, an increase of 817M over 1997. Roughly 50% of this would be profit since the only cost increase is about 200M for wafer production and 200M for packaging. The 25% maximum yield scenario results in a net profit for 1998 at AMD of $396M, or $1.67 per share (40% tax). $30 to $45 would be a reasonable valuation for this scenario, given what I haven't talked about, such as increasing domination of flash market, K7, etc.
If yields can reach 50% in the fourth quarter, the potential is staggering, an extra BILLION in profits or $5.40 a share in profits (45% tax). $21 is not reasonable for either of these scenarios.
Petz |
