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: Merlo who wrote (48979)	2/8/1999 10:10:00 PM
From: KM	Respond to of 1571704

Investors Bail Out of AMD as Intel Drops Prices By Marcy Burstiner Staff Reporter 2/8/99 7:53 PM ET The more Intel (INTC:Nasdaq) drops its chip prices, the harder it gets to find shareholders hanging tight to Intel rival Advanced Micro Devices (AMD:NYSE). On Monday, Intel announced yet another round of price cuts between 11% and 24% for its Celeron line of low-end PC chips. That means that Intel chips will now sell for as low as $63. In response, AMD announced price cuts late Monday on its PC chips that bring its lowest-priced chip to $62. For AMD -- which has depended on the ability to sell chips at a 25% discount to Intel -- this has got to hurt. To maintain a 25% discount on a $63 product, AMD has to sell a chip of comparative performance at $47, which leaves little room for profit. As chip prices drop, so does AMD's stock price. Investors have been keeping a sharp eye on whether AMD can maintain an average sales price for its chips of $100 or better -- a price target it found elusive during its most recent quarter. AMD said it expects to end the current quarter with an average sales price of $89. The result? A 46% drop in AMD's stock price in less than a month. If it drops just 11% more, the company will have completely reversed the gains it saw during the semiconductor market recovery that began Oct. 8. Not surprisingly, institutional investors who say they're long the stock are getting harder to find. "We got out a month ago after they missed their earnings estimate," says an analyst with a California-based hedge fund that manages $3 billion in capital, but who asked not to be named. "That was a warning flag." The fund had held AMD for about six months. The final straw, he says, came in January, when CEO Jerry Sanders reported that the company had production problems. Dean Dordevitz, an analyst with investment management firm Ferguson, Wellman, Rudd & Purdy says his firm held a sizeable stake in AMD and pulled out recently. Dordevitz wouldn't say when his firm pulled out, only that, "We did well on it." Piper Jaffray analyst Ashok Kumar, who has a neutral rating on AMD, says the company can only compete profitably against Intel if it executes flawlessly. Any problems in production are costly. That's because Intel's low-end line only accounts for about 10% of its revenues -- but for AMD it accounts for the bulk of sales. "AMD is a one-trick pony," he says. AMD missed its prime opportunity during the last half of 1998, he says. Back then, Intel had not yet fully woken up to the competitive threat AMD was making by taking market share in the sub-$1000 sector. "If AMD had executed well with its K6-2 chip, they would have made money hand over fist," Kumar says. "Now they're up a creek." Kumar also sees AMD's much-touted design penetration into Gateway 2000 (GTW:NYSE) as bad news. AMD is likely selling at cost low-performance chips that came off its production lines -- in other words, the rejects that didn't meet the high-performance speeds for which they were designed. (Piper is not an underwriter for either Intel or AMD.) Not everyone is bearish on the company. Paul Klein, a portfolio manager with Gelfund Maxus Asset Management, is eagely awaiting AMD's recovery. His fund manages about $1.3 billion and saw a 8.5% return in 1998 for its value equity accounts. "It ran up fairly strongly on convictions that were maybe misplaced," Klein says. "But it is a long-term story. We are unhappy that it has such a volatile character. As a competitor to Intel it has always played second fiddle." Klein says Gelfund has held AMD since early 1996. At that time it was trading at about the same level it's trading at now. Still, Klein is a believer. "In AMD's case the important thing is to show they have a good handle on the operating side, that they have little slippage in their product manufacturing cycle." Others say don't bother holding your breath. "It has always been a difficult strategy to compete against someone as strong as Intel," says Lehman Brothers analyst James Barlage, who has had a neutral rating on AMD for about eight years. "Just when they make progress, they fall back. Intel is driving the market so rapidly it is hard for them to keep up." Lehman is not an underwriter for either AMD or Intel, but has handled some mergers and acquisitions for Intel. Barlage acknowledged that if the company can get its upcoming K-7 chip out on time it can come back, because the K-7 is rumored to be better than anything Intel has on the market. But that's a big if. "Historically," he says, "they have been late with their product."

To: Merlo who wrote (48979)	2/8/1999 10:15:00 PM
From: Elmer	Read Replies (1) \| Respond to of 1571704

Re: "AMD is one of the only semi conductor company's able to keep up with Intel, the rest are having trouble or are being left behind. " May I ask how you define "keeping up". As a business they are hardly keeping up with anybody. As an investment they are one of the worst performers imaginable over the entire life of the company. If your interests are academic and your only concerns are benchmarks and MegeHertz then a case can be made to say that AMD is clearly behind but not too far behind. I guess it's all in how you define "keeping up". EP

To: Merlo who wrote (48979)	2/8/1999 10:25:00 PM
From: Yousef	Read Replies (1) \| Respond to of 1571704

Merlo, Re: "AMD will shortly have two super fabs both capable of building .18 micron parts." Even more AMD HYPE ... You would think that people would "shy" away from the HYPE after the "A$$ Whoop'in" that AMD has taken the past month. I guess you are just a "slow learner", Merlo. Make It So, Yousef

To: Merlo who wrote (48979)	2/8/1999 10:36:00 PM
From: greg nus	Respond to of 1571704

Merlo, last time Intel used the price sword on AMd, Intel stock dropped from 105 to 60 and stayed there for a year. Intel just now got some investor confidence back and here we go again. All AMd has to do is keep ramping Fab 25 and start some wafer starts out of the german fab. If they can get to 40 million in chip production they solve all financial problems and the stock skyrockets. They have the sales momentum going for them and intel is all balled up in there market right now. nothing inside to brag about. Ok I'll go out on a limb here Dell conceeds to an aMD productline by yearend in face ofstiff competion I recently called dell to talk about a laptop with a 15'in screen I have my eye on the price was $300.00 more than Qunatum @ 2,800.00 spec for spec. So I asked whatmakes you so much proder to ask $300.00 the guy said you can call us after the sale after we charge you $300.00 more. I have never had an occasion to call a computer manufacturer about the box I bought. granted prior to now I bought Ibm. but is that worth $300.00 more just to be able to call. I think not. I'm hot to trat for the gateway jap box now that i know it come with a AMd 400-3dnow. How long before the flood gate opens and the gateway phone lines get jammed from guys like u and me calling for one of the hot jap boxes. Synara, Do so tak san isshi ban sucano!