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

To: Petz who wrote (45994)	1/14/1999 2:41:00 PM
From: Elmer	Read Replies (1) \| Respond to of 1570744

Re: "The reaction today is overdone. On 11/10/98, the First Call estimate was TEN CENTS and some were questioning whether there would even be a profit. " That was before Intel said they were capacity constrained and followed up by posting blowout earnings . Point is that If AMD can't make money when Intel is sold out, when can they? EP

To: Petz who wrote (45994)	1/14/1999 2:54:00 PM
From: Maverick	Read Replies (1) \| Respond to of 1570744

Confidence lost. Kumar kicks dirt on a fallen INTC nemesis for AMD embarasses him time and time again. Startled analysts cut ratings after disappointment By Binti Harvey and Stephanie O'Brien CBS MarketWatch Last Update: 12:26 PM ET Jan 14, 1999 NewsWatch Silicon Stocks Tech Report SUNNYVALE, Calif. (CBS.MW) -- Investors drove shares of Advanced Micro Devices down 15 percent Thursday amid concerns the company's fourth-quarter shortfall may be a harbinger of slower earnings growth in 1999. The Sunnyvale, Calif.-based chipmaker (AMD) posted net income of $22.3 million, or 15 cents a share, compared with a loss of $12.3 million, or 9 cents a share, in the year-ago period. Revenue rose 29 percent to $789 million from $613 million. Earnings fell below the 19-cent estimate in a 23-analyst survey conducted by First Call. Analysts also noted that the results included a tax benefit that, if excluded, brought earnings in 9 cents below consensus. BT Alex. Brown, Sutro & Co. and NationsBanc Montgomery Securities all downgraded AMD shares, while other analysts slashed 1999 earnings estimates. AMD shares dropped 3 9/16 to 24 3/16. Confidence lost "When you're going to post numbers only about half of the consensus estimate, you've got to give a heads up," said Ashok Kumar, PC hardware analyst for Piper Jaffray. "It's going to take a long time to rebuild investor confidence." Analysts were expecting a bullish AMD report on the strength of sales of its K6 microprocessors. However, a design flaw in the K62-400 chips forced the company to sell the chips at lower price points, negatively affecting the company's product mix. The manufacturing glitch pushed average selling prices to $89 from $101 in the quarter. The disappointment weakens AMD's competitive advantage in the low-end processor market, as Intel Corp. (INTC) launches an all-out price war against the company. As recently as November, AMD held approximately 70 percent of the market for chips in sub-$1,000 PCs. However, analysts expect aggressive price cuts on Intel's rival Celeron chips to bite in to AMD's pie. Discounts expected "In our view, the challenge during the first quarter is whether AMD can sell K6 product at prices equivalent to Intel's Celeron when OEMs have been accustomed to a 10 to 15 percent discount," said BancBoston Robertson Stephens' Daniel Niles. Kumar noted that Intel management has received "marching orders" to regain share in the consumer segment, and will likely move to capture customers in the first half of the year. But AMD's most important loss in the fourth quarter was its credibility. The success of the K6 allowed the company to regain Wall Street's confidence after previous manufacturing problems resulted in a spotty execution record. The latest disappointment may be the proverbial straw. "AMD has very little credibility at this point. Retailers and OEMs can't commit to you as a vendor when you have repeated production problems. There's no product loyalty and you lose market share," said Kumar. AMD will be under immense pressure to execute in the first quarter, as it ramps up production of the 400 MHz K6-2 and introduces the 450 MHz version. These higher-cost chips will be critical to obtaining healthy average selling prices in the current quarter. AMD's vulnerability has sent both analysts and investors scurrying amid uncertainty about 1999 earnings growth potential. According to Kumar, "With pricing pressure and product transition issues ahead, AMDs risk profile makes Brazil look as though it deserves a AAA rating."