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: Paul Engel who wrote (48918)	2/8/1999 3:21:00 AM
From: Paul Engel	Read Replies (1) \| Respond to of 1571068

AMD Investors & Former Investors - San Jose Mercury Article on AMD's situation. Bottom Fishing anyone? Paul {==========================} mercurycenter.com Posted at 11:59 p.m. PST Sunday, February 7, 1999 AMD may be prey for bottom fishers BY ADAM LASHINSKY Mercury News Staff Writer Advanced Micro Devices (NYSE, AMD) has burned investors again. The question worth asking now is why anyone bothers investing in the stock. The short answer is that the semiconductor also-ran's stock has fallen so far that it is being valued almost solely for its hard assets, otherwise known as book value. This isn't to say reasonable folks think AMD is a good buy. Its ''pre-announced'' earnings shortfall last week and the effects of a price war with Intel Corp. (Nasdaq, INTC) drove down the stock to a level it hadn't seen since the trough of the tech-stock market in October. But if AMD falls any further it finally may become bait for an industry bottom fisher. ''The only way to avoid downside risk on this stock is to acquire it at or near its book value,'' says Hans C. Mosesmann, the Palo Alto-based semiconductor analyst with Prudential Securities Inc. In AMD's most recently reported quarter, its per-share book value was $13.33. The stock, which hit a high of $33 in mid-January, closed the week at $16.81, a 32 percent drop from its Monday close. That spread between book value and market value would be a rounding error in any of the recent Internet mergers. Mosesmann wasn't the only analyst to lower his earnings and revenue estimates on AMD, the company that assigned itself the lonely responsibility of providing competition for Intel in the market for microprocessors. According to First Call Corp. in Boston, 17 of the 23 analysts who follow AMD lowered their 1999 earnings estimates to an average of 26 cents per share from 85 cents the day before. The range of estimates suggests that Wall Street is as clueless about AMD's ability to execute as AMD appears to be. Before AMD's stock-killing disclosure, analysts' guesses for 1999 per-share earnings ranged from 20 cents to $1.47. Now projections range from a loss of 20 cents to earnings of 70 cents, says First Call. ''The potential is huge if AMD can execute,'' says Mosesmann. ''The problem is I've lost all confidence in my estimates.'' Adds Mark Edelstone of Morgan Stanley, Dean Witter & Co., in a note to clients: ''Until AMD is able to produce significantly more high-speed (microprocessors), we believe the company's product mix will be vulnerable to Intel's aggressive low-end pricing strategy.'' AMD's long-awaited K7 microprocessor is due to begin shipping in high volumes in the third quarter. That product -- an ultra-fast, low-end chip -- is the company's promise and a potential albatross. If the production schedule slips, as it has before, AMD could miss a crucial window of opportunity to take on Intel. But that gets back to AMD's value, namely its high-quality semiconductor chip fabrication plants in Texas and Germany. Prudential's Mosesmann reckons that it would take another manufacturer $1 billion and up to two years of hard work to replicate AMD's fabs. With the entire company currently worth $2.4 billion, its market capitalization, a whiff later this year on K7 production finally could drive the company into someone else's hands. But who? Mosesmann thinks Motorola Inc. (NYSE, MOT) would pass. ''Why would they pick a fight with Intel?'' But he thinks a healthy International Business Machines Corp. (NYSE, IBM) or Compaq Computer Corp. (NYSE, CPQ) might be interested. Both make personal computers and want to see alternative suppliers to Intel.