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: david alexander who wrote (38991)	10/12/1998 12:35:00 AM
From: Paul Engel	Respond to of 1588185

David - Re: "Won't AMD also benefit nicely from a general turn in semis. It has carved out some significant niches and a host of new customers " Herein lies the PROBLEM ! AMD has landed IBM, HP and Compaq, ACER, and Fujitsu among the tier 1 OEMS and a host of smaller ones. And what has it done for AMD's bottom line? A penny per share - the first profit in 15 months. AMD's ASP's are at $100 and Sanders predicts that next year AMD's ASP's will still be at $100. Question - WHERE IS THE UPSIDE? AMD has clearly BOUGHT market share simply by LOW-BALLING PRICES. The big OEM's use CHEAP AMD chips to stick into low priced, low end systems that they sell on PRICE. Again, where is AMD's upside? How many more top OEM's can they add? Not many since they have all but DELL and Gateway. And if AMD does land Dell and Gateway it will be for one reason and one reason only - AMD will sell their top-of-the-line CPUs at rock-bottom prices. AMD is selling on price, not value. The value that these sales bring to AMD's shareholders can be seen in AMD's earnings - ONE SHTINKO PENNY in 5 quarters with significant losses on the other 4. As for the Semiconductor Equipment companies, I don't hold out too much hope in the near future for several reasons. First, the past 6 or 8 years of growth by AMAT, SVGI, Teradyne, Lam, etc. have gone to Japan, Inc and Korea Inc and none of these companies are making a penny (unlike the great AMD). In fact, the Korean companies appear to be technically BANKRUPT each being MULTIPLE BILLIONS OF DOLLARS in debt and unable to re-pay their debts now that the piper has come calling. Clearly, Korea achieved phenomenal growth because they borrowed money with impunity to build more and more wafer fabs with no thought of ever having to make a real profit and pay back these debts. Well, times have changed. Even though the semiconductor rebound may occur, huge excess fab capacity exists and the number of PROFITABLE Semi companies that can afford to buy new equipment is incredibly small. I don't see these companies (Semi Equipment) returning to their prior levels for many years to come - until PROFITABILITY returns to the Semi companies and New Technology calls for a new wave of equipment. This world-wide shake out due to a glut of semi capacity coupled with a ton of DEBT by many Asian companies and a few American companies - AMD is one of them - means a new order will emerge. The current profitable companies will grow stronger and the unprofitable ones will stagnate unless they can take on more debt - which will eventually hurt them even more. As for NSM - their product development is slipping by multiple quarters and their current technology appears to be lacking. They have spent a ton of money on a new 0.25 micron fab and early indications are that the 0.25 micron process does not produce competitive CPUs. Thus, with no financial return on the 0.25 micron process, they are tap dancing their way to a newer 0.18 micron process for their MXi and Halla-Peno CPUs, whatever they may be. What they are is LATE, a ticket to certain death. Re-read AMD's 1995 - 1998 History with their K5 and MegaFlop 25 saga, having to go from n original 0.5 micron proces to 0.35 micron to a new 0.35 micron process to a 0.25 micron process before even smelling a competitive part and a profit. NSM is repeating AMD's history. Except NSM is willing to lose even more money per CPU than AMD. Paul