Wow. Hels is going to hate me for posting this, because she thinks I'm too negative on AMD, but I'll let this article speak for me until someone can refute these numbers: http://chip.seekingalpha.com/article/32973 Investors Reading Too Much Into AMD's 'Plea' To Private Equity Posted on Apr 20th, 2007 with stocks: AMD William Trent submits: Our preview of earnings for Advanced Micro Devices (AMD): Expected to lose $0.46 on $1.34 billion in sales this quarter and $0.36 on $1.35 billion next. Given how disastrous the current outlook is, we may be getting near the bottom for estimates. Valuation, however, remains questionable. We hate negative P/E multiples. Like many prognostications, we didnât call things exactly right. AMD Reports First Quarter Results: AMD (AMD) today reported financial results for the quarter ended March 31, 2007. AMD reported first quarter 2007 revenue of $1.233 billion, an operating loss of $504 million, and a net loss of $611 million, or $1.11 per share. These results include ATI acquisition-related and integration charges of $113 million, or $0.21 per share, and employee stock-based compensation expense of $28 million, or $0.05 per share. Maybe now weâre closer to a bottom. First quarter 2007 gross margin was 31 percent, excluding stock-based compensation expense and acquisition-related charges, compared to 40 percent in the fourth quarter of 2006 and 59 percent in the first quarter of 2006. The decrease from the prior quarter was largely due to significantly lower microprocessor unit shipments, lower microprocessor average selling prices [ASPs], and the inclusion of the former ATI operations, which generally have lower-margin products, for the entire quarter. Selling fewer items at lower prices is seldom a recipe for success. Guidance, meanwhile, was cryptic: In the seasonally down second quarter, AMD expects revenue to be flat to slightly up. Well, consensus was correct about the âflat to slightly upâ part. The only thing is, it is off the $1.233 billion base rather than the $1.34 that had been expected. As to the questionable valuation, AMD took a page from Linear Technologyâs (LLTC) book and dangled the prospect of huge share purchases in front of investors, according to TheStreet.com. Executives said the company was evaluating various âasset-lightâ options, which involve outsourcing portions of chip fabrication to third parties instead of building multibillion-dollar facilities, and noted that the company was not averse to seeking shelter from the rigors of the public markets through a private-equity deal. We think investors are reading too much into this in the wake of the Linear-inspired giddiness. Linear actually had the cash to do half its buyback and tons of cash flow with which to finance the remainder. AMD, by contrast, is running out of cash - which is why it needs capital in the first place, public or private. Turning to the more mundane task of sifting through the mess that is AMDâs financial statements, inventories managed to grow 15% sequentially and have now nearly tripled on a year/year basis. They can cover 106 days worth of sales with what they now have on hand, but remember - the value of the inventory on hand declines almost daily. âDeferred income on shipments to distributors,â also known as âchannel inventory,â would cover another 20 days. Forget âasset lightâ - AMD shouldnât need to spend another dime on capacity for some time. AMD shed nearly $400 million of cash during the quarter, to end with less than $1.2 billion. A couple more quarters like this and theyâll be looking for subprime lenders rather than private equity buyers. AMD 1-yr chart:
Even when it was $40 a share this was always going to be a great short. INTC outcompetes AMD. Simple.
The problem this creates for me is morality trap: I detest Intel, and am actually rooting for AMD, which is why I won't invest in or short either. It's a recipe for disaster to be personally vested in companies as one would be in their favorite team. :eek: http://usmarket.seekingalpha.com/article/32966 Short interest on the NYSE is at a record high. I think we're going higher, at least for a little while.
Intel is going to make another attempt to crush - even bury AMD. Just watch Intel's next chip cost-slashing announcement. At the very least, the increasingly heated competition is going to give traders considering upgrading a computer some intriguing options.
I hope everyone remembers how many times I've mentioned that AMD may NOT a great buy right now because there's no real sector news. Intel has just come out with a quad core...oooooh. AMD has one in the pipeline.... ooooh. Who needs a quadcore? There's no application I can think of right now that can even use the power in a quadcore unless you are running servers crunching astonomical figures (last I checked, normal people with normal pc's don't need to access the Hubble's telemetry database?). No one trading, or even video editing, needs a quadcore, there's no public software that can use it. That's just hype. So AMD is losing money. Big deal. Are they going to go bankrupt? Hardly. Remember, they still own ATi? If anyone actually looks at their financials, the REASON they are losing money is because they BOUGHT ATi, the best graphics hardware company on the planet. What did ATi cost AMD? $400 million. hrm. So AMD is 'going broke'... to the exact tune of ATi's cost. Is ATi going broke? I don't think so, and ATi's bottom line will be added to AMD's next year. Hrm. What kind of dumb person doesn't understand in investing in business to grow? Apparently a lot on Wall Street. Was buying ATi wise? Maybe, maybe not. But it worries the hell out of Intel, or there wouldn't be a price war. Intel is seeing the best of SOMETHING behind it, to risk their own bottom line to kick AMD while down. Hrm. Wonder what that could mean. So, can Intel really CRUSH AMD? Er... no. Because it would be the most pyrrhic victory of all. Driving AMD out of business (a near impossibility), would put Intel squarely in the sights of the Fed for monopoly status. Not US monopoly even, world wide monopoly. There is no competition for chips from anyone else. Can Intel really win? Not possible. So what IS Intel doing? Lets think about this a minute. AMD TOOK market share from Intel, and Intel wants it BACK. Real dominant position there huh? Is AMD going to lose it back to Intel? Maybe... But I would imagine they have contracts covering their sales, when they contract with Dell or Apple, there's a lot of advertising and planning involved, those companies immediately begin investing big bucks in ad campaigns... they're not going to drop AMD on a dime. AMD may be forced to adjust pricing, but I don't think they're going to lose the ground they gained. The 'average' PC, even now, is not yet even a Duo Core, it's the $500 cheap back to school bread and butter computers... and from that standpoint, AMD is cheaper and has always been. And AMD is gaining % ground on Intel. So why the price war when both stand to lose? Well, and here we are going off into a Hels tangent and not published fact, logic would dictate that the only gain Intel can get is delaying AMD's spending. AMD wanted to spend 1.5 billion dollars to update and crush Intel. Forcing them to scale back, by damaging Intel's own bottom line, is a stall tactic. If there's nothing to worry about, then they wouldn't need to do it. Would they? That's the only rational reason for the price war. You hurt your own bottom line if you think you can hurt your opponent more. You don't do this to your own bottom line because you don't believe there's a threat. It would have to be a very big threat. AMD has had only 6 months to digest ATi. If Intel didn't do SOMETHING now to cause AMD a setback, they would not have the opportunity again. And that something is akin to sticking a finger in the dike, because AMD does indeed own ATi, and Intel has no chance of buying Nvidia. So a healthy company makes a huge sacrifice to their own bottom line to hurt a competitor why? Because they are not worried? I don't think so. I think it's possible that in the short term, Intel's price war may succeed. If it didn't, AMD's ambitious spending plans, paired with their new joint R&D ability with ATi's not unimpressive R&D would be capable of hurting Intel very fast and very badly. If they can manage to prevent AMD from growing NOW, they might set AMD back far enough to be a lesser threat for many years. But from where I sit, it's only delaying the inevitable for Intel. We'll see how AMD fares in their hunt for capital, but you're talking about a company that's used to being an underdog, that consistently has produced a surprise every few years. It's an interesting contest. My bet's on AMD, and we'll see in 2 years how it all shakes out.
"You hurt your own bottom line if you think you can hurt your opponent's more" Ok.. Intel reported in-line earnings, how did AMD hurt intel's bottom line? All they did was royally fuck their own bottom line.
http://finance.yahoo.com/q/is?s=INTC&annual I'd call dropping nearly 30% net income over 2 years hurting yourself just a bit, in or out of line. Intel profits are up, but they had a 1% drop in revenue for the first quarter. I'd call that hurting your own profits, given the only CPU makers in the world are Intel and AMD and they both have stinky bottom lines. AMD bought ATi a few months ago. What's Intel's excuse for their bottom line falling 30% over 2 years? You call negative growth a good thing?