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

To: Yougang Xiao who wrote (52165)	3/9/1999 6:15:00 PM
From: DRBES	Read Replies (1) \| Respond to of 1571873

re: "Real estate is at the heart of AMD's problems." An analogous situation exists in R&D. At any given moment iNTEL has several design teams working on each generation of chip. Witness how quickly they came up with cELERY I and cELERY II. Rather than characterizing AMD as the "Keystone Cops" or "The Gang That Can Not Shoot Straight" they are the team that has to get it right the first time. That is really hard. Especially when you are up against an adversary that has multiple design teams and multiple fabs and also fights dirty. Regards, DARBES

To: Yougang Xiao who wrote (52165)	3/9/1999 10:00:00 PM
From: A. A. LaFountain III	Respond to of 1571873

Re: "Real estate is at the heart of AMD's problems." This piece is constructed as though I was one of the analysts that claimed AMD suffered from insufficient fab capacity. Just what AMD needs right now - more depreciation. I think not. My comment can stand on its own - as AMD gains share, Intel is incented to respond with aggressive pricing cuts (we can debate the merits of this strategy, as the vendor with 80% share would appear to have more revenue/profits at risk than the vendor with 20% share, but that's another question altogether). As AMD faces more difficult pricing, it would really have only two ways in which to pursue its revenue/profit objectives. The first would be to accelerate the development of higher priced products by driving the key parameters of the product (clock speed and, to a somewhat lesser extent, overall performance, as the two mesh in a marketing sense). The second would be to increase volume. This could, I guess, be done in a brute force way by ramping wafer starts per fab or even increasing the number of fabs, but we all know that your costs go out of control when you use such an approach. The ideal would be to generate high yields of high value products (duh), but my point in the interview was that the natural inclination would be to pursue a combination of both methods. This may well be what AMD is doing. The problem is exacerbated by a strategic desire to build and maintain the OEM customer base. If an increased number of OEMs want to acquire an increased number of MPUs, there is a powerful incentive to satisfy those needs. Given the strength of the retail customers' response to the value of those PCs based on AMD parts, it's easy to understand what would be driving the OEMs to such a position. In essence, AMD's success to date on a unit basis (and let's not lose sight of the fact that even with the lower guidance for the quarter, units should be triple that of a year ago and MPU revenues are likely to be up 150% in a PC market estimated to be growing at a 15% rate in units and much less than that in dollars) has created a monster. AMD needs to run faster to create an opportunity to secure an adequate return on its investment, while Intel has profits to protect in a market that is probably undergoing an inescapable reduction in growth rates. These two trends are mutually exclusive. The key investment question is which stock presents the more favorable risk/reward in such an environment at this time and with these current valuations. With Intel's market capitalization (in theory, the discounted value of its future stream of earnings) in excess of $200 billion and AMD's at about $2.5 billion, everyone on this thread should review the news and developments from the companies and their customers for their impact on these valuations. As is obvious from my public stance, I believe that AMD is a more attractive investment by such criteria (risk/reward - in such an environment - at this time - with these valuations). But any and all of these criteria can and will change. I wonder, therefore, about the intensity of some of the points made on the thread, because they appear to preclude the writers from retaining the necessary flexibility to respond appropriately to such changes. Best of luck to all - Tad LaFountain