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Ok this is a little better
from SI
http://www.eet.com/semi/news/showArticle.jhtml;jsessionid=IW5UYZKR1Q2WOQSNDBCSKHY?articleID=18901773
Looks like the problems IBM is having(INTC also?) are related to 300mm not 90nm.
The most interesting part of the post about IBM for me was:
Mr. Joyce said the semiconductor business was hurt because it received $100 million less from selling patented technology this year than last year, but he said that will be made up in the current quarter because of the sale of technology to Applied Micro Circuits Corp. However, he said the percentage of good chips produced at the year-old semiconductor plant in East Fishkill, N.Y., still is too low for profitable operation.
Me...
A couple of things:
They got $40M from AMD last year so this sharing of technology has got to be helping AMD's R&D expenses. It's worth noting that IBM is primarily a services company, and the hardware it sells, for the most part, is Big Iron stuff. The small amount of PC type products it sells aren't profitable by themselves, so it makes perfect sense for IBM to partner with AMD to reduce fixed costs. The synergy should be enormous. I’m sure some of the things learned are even applicable to Big Iron manufacturing.
2nd, not getting the Fishkill unit up to profitability has me a little concerned. I know management says things are going fine, but the start of 90nm production has been delayed, at least a couple of weeks, perhaps because bin splits are ok, but yields aren't? I hope it's just my suspicious nature, but I hate red flags. You would think that IBM would have used AMD's process technology to improve yields if AMD is really ready to go into 90nm production.
FMR has been the largest AMD stockholder for at least a year or so.
One thing I've wondered about a lot is how much trading goes on between funds within a mutual fund such as FMR. For instance, if FMR held a lot of AMD and wanted to raise the price they could sell a couple of million shares to one of the other FMR funds at a steadily increasing higher price during the day. At the end of the day they would still have the same number of shares, but each one would be valued higher. Of course FMR could also work the game the other way if they wanted to accumulate more shares at a lower price. There would be no risk in such actions as the stock would trade only within the company, through pre-arranged sales at lower prices, but would be reported as sales in the market thereby driving the market price down.
I'm not sure how much of this goes on, since this sort of thing smacks of the Hunt brothers trying to corner the silver market, but if the scandals that have rocked the mutual fund/brokerage industries have shown us anything it's that where something is possible there's a crook to take advantage of the situation.
As I've said before, were talking about money, so one has to expect that there are a million games going on at anyone time that we can only guess at, some legit, some not, some maybe.
As you point out the low number of shares of AMD available also lends to the volatility (2.8 Beta).
Right, IBM fabbing for AMD was right up there as one of the questions I wanted answered in the CC, but as usual those type of questions don't get asked. Not that Hector would have answered, but a lot of coughing in the background might have given some sort of indication.
Yes, the question becomes how do we get from here to there. There being defined as greater than 50% of processor volume being k8 in q4. They can't just turn on a switch in q4 and suddenly they're producing more AMD64 chips than k7's. To meet their goals they have to start producing lots of AMD64 chips in q2.
I'll leave the math up to the reader as to how many AMD64's that means. It kind of depends on what your assumptions are about fab30 capacity given the move to 90nm, yields and WSPW to name a few.
I wasn't very happy about the guidance either. I don't know who they think their fooling, certainly not INTC. I find it really hard to believe q2 sales will be flat when q1, another slow quarter, was supposed to be down also. Having exceeded guidance for a number of quarters now, they’re starting to sound like the little boy that cried wolf.
With standard flash having gone 110nm in q1 and mirrored flash going 110nm this q along with increased capacity at JV3 and the volume of AMD64 processors probably close to doubling in q2, I can't see any way sales are going to be flat.
A64 demand may not grow as robustly as we would like, but sales are still going to be probably 150% of q1. Opteron 2 way sales are going to continue to grow, and with the intro of 4 and 8 way processors along with work stations, there's more icing on the cake. On the flash side, given market conditions, it's hard to see how AMD won't continue to sell everything they can make. With the smaller geometry’s on top of the increased manufacturing capacity this can only indicate more revenue.
Now if I know these things don't you think the analysts and INTC know them also? So what's the point in low-balling?
Your comments...
"AMD can overcome this entrenched bias by surprising with a figure in excess of 9 cents (which was last quarter's figure without the adjustment) together with serious good news on cost cutting and positive forward-looking guidance."
Me...
It looks like $.12 wasn't enough. What would have happened if AMD had made the analysts $.03? The market overall looks real jumpy, with conflicting info making for a very eratic market.
Don't do that, remember we're mostly senior citizens here.
Who is doing all this selling and why? Last week would have been a much more profitable time to sell. After yesterdays sterling earnings report any selling seems crazy.
Other than the jobless jump there doesn't seem to be much macro news, certainly a mixed bag at best, given the N.Y. manufacturing numbers.
Still the SOXX/NAS is down so maybe whoever is selling may have been heavy in AMD and we may be getting ancillary damage? Very, very strange.
I don't think it was me that was talking about INTC desktops in particular, maybe CJ? Do you have a particular post in mind? However, a few days ago I was talking about INTC's advantages in general. I said that they had lost their design and process advantages, but still retained their capacity(questionable), marketing and money advantages.
I fully expect INTC marketing to do whatever it takes to get the goods out the door. But as we know this is not the same AMD of years gone by, AMD now has significant advantages of design and process to counter anything INTC comes up with.
In any fixed cost business, since fixed costs are huge compared to variable, the importance of matching sales with production capacity is of prime importance. Spending on extra capacity is like throwing money down a rat hole. My contention is that INTC now has enough capacity to provide the entire world demand for processors a couple of times over. Unless demand for processors picks up this is going to be like a lead anchor holding back the SS INTC. Any increases in sales by AMD only make things worse as it reduces the number of units over which INTC can spread the fixed costs.
To answer your question, INTC will have to use its' marketing and money advantages. I think the extra capacity will be more of a drag than an advantage over the coming years. As far as I can tell INTC will have to hope for a pick up in processor demand to fill the fabs, unless they have something else in mind. Maybe the LCOS HDTV business their getting into will take up the slack? In any case I don't see processor demand increasing enough to use available capacity. To answer your question more directly, I don't have a clue what INTC's response will be, but you can bet someone is working overtime to cook up an answer.
Also, as others have said, I don't think INTC wants to get into a price war since they need an ASP much higher than AMD. This is particularly true now that AMD has a truly differentiated product for which INTC doesn't have a pricing reply.
As to today’s pricing action. While the flat sales projection didn't help, I think this is something else. I've said it before, but there are a million games being played out there in the short run, and we can only guess at what's really going on. That's one of the reasons I don't go on margin, or do options, they're just too risky. AMD will recover from today’s pricing as the quarter goes on.
Did his Blackberry catch fire?
Excellent post.
Couldn't agree more.
It's amazing how many of the old crowd are still holding AMD and posting after all this time. No matter how much AMD eventually goes up I'm sure I'll feel I earned every penny.
Keep the faith, baby.
Good point, you can have all the capacity in the world but if there isn't any demand your up a creek. Matching sales to production capacity is why plant managers make the big bucks.
For the first time AMD has a clearly superior product that is different from anything INTC has, they need to maintain that differentiation.
I would guess that one 65nm 300mm fab can produce at least 80M chips a year since AMD has a current capacity of about 32M a year. Of course once fab36 is up and running AMD should be able to convert fab30 to 65nm and 300mm. The requirements for 300mm were well known when AMD built fab30 so you would expect a conversion wouldn't be too onerous.
You would think so given that INTC guided down.
As far as I'm concerned they can pay me now or pay me later, but someone is going to pay me a lot for my AMD shares.
Ya, it's that "restrained q2" estimate that's probably keeping us back. Bob did answer, in one question about product availability, that their sales estimates were conservative. There were other more subtle indications that a flat q2 was a CYA. Let's hope that at least a few of the analysts read between the lines and got past the bold print.
I think I'll listen to the CC again and see if I can pick up any inferences.
One of the good things about all the basing AMD has done, and the last 2 days of selling by the weak-kneed, is that there are probably now lots of holders that feel AMD is worth a lot more than $17. Shares, in any volume, may be tough to come by, particularly if trading volume is high.
I'm not going to be selling, and I bet the overwhelming preponderance of AMD stockholders feel the same.
As I remember it multi core was just one of the things Hector listed in response to a question about how Opteron would compare with No-come-a.
If one went just by the "After Hours" reaction you would have to think that no one believed the analysts and the market really expected about $.09 or$.10 in earnings. Still, these are just the little guys, perhaps the big boys will react more favorably to what has to be considered great news by anyone with half a brain.
LOL EOM
You have it. In this business variable costs are not very important. Still, I enjoy the machinations that people go through trying to estimate the number of angels dancing on that famous pin-head.
Ya, I was pretty sure, as were others, that the analysts were off by a mile. The only problem is that the stock doesn't go up when I upgrade it. AMD needs to convince the analysts that the stock is worth a lot more than $17.
No, but do you really think the next quarter is going to be flat? With more flash production coming online and reduced costs due to 110nm flash and mirrored flash becoming more of the total product line, not to mention A64 gaining more and more acceptance, how reasonable is a flat estimate? And that's what the analysts will use in figuring out q2 earnings.
Don't get me wrong, AMD came in very close to what I expected and I'm elated, but all this low-ball chicanery is a bit much.
Fool me once, twice, 3,4,5 and now 6 times in a row. That's 6 quarters in a row the analysts have either overestimated the loss or underestimated the gain. To make things worse their estimates have been getting steadily worse. Last quarter they were off 200%, this quarter they are off by 300% if you calculate it the way Yahoo does.
Frankly I'm beginning to believe that these guys are so slow we would have a better chance of training a snail to tap dance than to get these guys to recognize "promise less and deliver more" as the mantra of the "New AMD".
Ok, I'm being a little tough on the guys. Their not all idiots so there must be another explanation for them not even hitting the target much less the bulls eye.
These guys have to go by what management tells them, and as long as AMD insists on underestimating they will underestimate. There may have been good reasons to keep INTC in the dark as much as possible, but really how much benefit is there left in underestimating earnings. Until the analysts raise their estimates there will be no upgrades, and us long suffering AMD faithful deserve a payday.
Personally, I don't need any more buying opportunities and I wouldn't object to AMD being a little more forthright with the analysts. I want this stock to the moon, and the sooner the better.
I don't think it has anything to do with INTC not wanting to abuse its’ monopoly position, as far as I can tell INTC does it all the time. They're just better at hiding their tracks.
I'm reasonably sure if there weren't some really nasty consequences to getting rid of AMD (splitting up INTC), INTC would have done so long ago. Instead they have just used their vast resources to keep AMD on life support.
Unfortunately, for INTC, AMD has managed a miracle and Easter like resurrected itself from the dead. It does remain to be seen as to whether a full recovery is possible, but things are definitely on the mend.
Good Points. Trading low-end processor volume for high ASP reduced processor volume was another one of those great management decisions Hector is becoming famous for. Now if 90nm allows AMD to increase the volume of high-end processor sales AMD will be in pig heaven.
I have this feeling that A64 acceptance will happen quickly once it starts. I’m just not sure what the implementers will be that causes the market acceptance. A number of things could cause the transition including the move to 90nm and the NewCastle processor, or the 939-pin chipset, or the availability of an MS OS. In the end it will probably turn out to be something more mundane like an OEM’s (HP?) getting behind AMD64 in the retail market.
Anyway, it continues to look like things are going AMD’s way, for the time being.
What it means is that INTC has again decided, through its' constant bumbling, to help AMD out.
It really is amazing how often INTC has avoided the knock-out-punch of just lowering prices and grinding AMD into the dust for the quick fix proprietary solution. Frankly, I've been completely bemused by INTC's actions. The only thing that has made sense is that lowering prices solution is just too blatant and would expose INTC to all sorts of nasty things like SEC investigations and the Japanese investigations going on right now.
INTC has traditionally had 4 things over AMD. These were better processor design, better production facilities/processes, better marketing and a lot more money. What we've seen lately is a total dropping of the ball by INTC as they have allowed AMD to gain superiority in processor design as well as production processes. The result has been a reduction in the INTC advantages to manufacturing capacity, marketing, and money. While those advantages are still formidable INTC no longer has the ability to terminate AMD's existence at will, like they used to have. All the mistakes on mistakes at INTC have provided AMD with breathing room that could eventually cause severe problems for INTC. The next year or so should tell the tale.
Anyway, I continue to watch AMD intensely, and if the situation changes I will adjust. In the mean time I expect to make gobs of money, something you INTC fanatics don't seem to care about.
Ya, Jerry was right "volume is the vaccine". INTC knows this, and in the past has fought tooth and nail to keep AMD from gaining market share, or even increasing production in an expanding market.
As a result AMD is a lean and mean design/production machine where any extra sales fall almost completely to the bottom line. Variable costs (labor/materials are almost an after thought in comparison to fixed costs (R&D and P&E).
Despite INTC's best monopolistic efforts over the years to keep AMD in its place, Rambus, Itanium, P4, etc., these have all failed and AMD has just gotten stronger and stronger with each passing year.
While these failed policies, in the past, were minor inconveniences that barely affected the bottom line, the latest production/design problems are much more than chinks in the armor. It appears that for the first time ever; AMD not only has the best-designed processors, but also the best production processes. For the first time INTC is being exposed, in all its glory, to the world as the bumbling idiot it has become and all the money and marketing might in the world isn't going to be able to deny AMD.
If INTC doesn't get its’ act together soon the damage is going to become permanent. Once AMD starts taking sales away a host of other problems will start to beset INTC, not the least of which is what to do with all those shiny new fabs. The tide is turning, maybe by this time next year AMD will have INTC on the run?
Yes, that's the bigest thing I expect to get out of the CC. That 90nm production has started.
That's pretty much what I'm thinking too, but the news about about portable sales has me a little concerned. Hopefully INTC has an exclusive on that problem too.
As usual, because the sale of a few extra units adds so much in the way of earnings it's very hard to get a handle on just what AMD profitability is. This fixed cost business AMD is in demands a large production/sales volume to spread the fixed costs, something AMD has never been able to do. 90nm should help a lot.
I don't know. I guess we'll have to wait and see if thay say anything about it in the CC.
You would think so since the CC is looking through the windshield while earnings are looking through the rear view mirror. Unfortunately, for most investors trailing earnings are more important than management’s projections. Of course a lot depends on the company, which is one of the reasons AMD hasn't taken off yet. A lot of people still have very bad feelings about AMD and don't think the company will ever succeed as long as INTC is around. And yes, some of those people own AMD stock.
Realistically, what is it that you expect to find out in the CC you don't already know? All I'm ever looking for in the CC's is confirmation of what I already know. And then, they usually don't talk about the things I really want to know about anyway.
That’s why it's so important to be constantly on top of a very volatile company like AMD. You have got to be ready to cut and run at the drop of a tidbit and the information you need to make that timely decision won't be coming from management.
To be fair though, things only occasionally ever happen at light speed. Usually, as in AMD’s case, changes are years in the making. But even for AMD, where forward progress has been fairly continuous over the last 5 years, there have been quite a few periods when progress stalled and the best place to have been was on the sidelines or in other stocks.
A very suspicious nature is the best weapon you have against getting screwed. Not that I have any reason to doubt anything AMD management has said, but things are not always as they seem, even to management.
I didn't mean to imply that they had to set up a reserve, just that they could. What I was really thinking is that it's those sort of gray area that gives companies a lot of wiggle room in reporting. Those sorts of areas are more prevalent when a company is crossing a boundary such as going from losing money to making money since the reporting bias usually changes. Last quarter was just such a quarter for AMD so it was especially hard to tell what really went on.
One thing I do know is that it gets progressively harder to hide things as time goes on, losses or gains. The picture we get of the finances of the company are so abbreviated it's usually very hard to figure out what really happened. Even if you have access to the complete chart of accounts, unless you look at every transaction separately, you can't be sure what happened. Auditors get around these sorts of problems by invoking the concept of materiality, but there's no way they can do anything but spot check a companies books unless they are looking for something specific. You wouldn’t believe how many mistakes there are, either by design or otherwise, in most companies books.
Incidentally it's good to be talking to you again, it’s been awhile.
Kind of like the $.03 last quarter? If it is going to be ignored why not take the hit now and get it over with?
Are you sure about this? If it seemed likely they were going to take a hit, as far as I know, they could set up a reserve and take the hit to q1 income. I'm not sure they have to prorate the $15M over a 3 year period since it's a settlement based on possible litigation.
Is there a CPA out there?
Believe it or not, not all AMD investors are longs. Anyone that has held AMD stock for any protracted period of time has probably been burned, at least once. There are lots of people with very deep wounds that may like playing AMD, because of the volatility, but the last thing they want is a long-term relationship. These people will unload at the slightest provocation, and buy when things look right. There are probably a lot of fund managers that feel this way also.
I didn't mean to imply that I think there will be a sell off, only that there will be a lot of selling/buying if AMD misses market expectations by much. The CC will only help confirm or deny everyone's expectations, just as the earnings will confirm or deny expectations.
If AMD makes the $.03 the analysts are predicting then the $25M would be meaningful. It could wipe out the profit, or most of it depending on the margin.
I was thinking of short-term volatility. I think there are a lot of people with one finger on the sell/buy key right now, waiting for earnings.
Undoubtedly, the CC is going to be what everyone will focus on. But, if the CC is like most of AMD's CCs the big questions, like IBM fabbing for AMD, just won't get asked. I'm not sure how forthcoming AMD would be to such a question anyway since they would probably want to keep it from INTC as long as possible. As far as 90 nm production goes I think everyone is assuming it's going as management said, production started April 5th? Anything less would be a real turn off for the stock. I thought SSE3 was built into the 90nm chips?
Low volume.
From the very low volume today one would have to guess that everyone has already placed their bets, and is just lazing about, sipping their Mint Juleps, waiting for the race to start.
Just like a horse race there is a feeling of anticipation in the air as the last minute bets are placed and the touts express their opinions about the horseflesh in the event.
To me, in this horse race, it seems like any deviation from the expected earnings, $.07 to $.10, will create a very elastic pricing condition. I know the analysts are still saying $.03, but based on the price appreciation lately one would have to say a lot of money has been bet in the expectation that AMD will beat the analysts predictions handily.
Getting back to elasticity. If AMD earns outside of those expectations we'll probably see a big price jump, one way or the other, given the hidden agenda and the volatility normally associated with AMD.
On another subject, I sure would like to know how AMD is going to handle the $25M Intergraph charge. They could set up a reserve for all of it, none of it, or part of it in q1.
Opterons continue to gain acceptance.
http://crn.channelsupersearch.com/news/crn/49289.asp
Yah! it was great.
Nice to see an AMD info-mercial. It's about time AMD marketing started getting the AMD view out there. I wonder how many hits this type of advertising gets?
Your right, it just sounded a little too rehearsed. A few less obviously condescending questions and a few questions with some meat on the bone probably would have been less of a turn off to those informed, but I don't think this was directed at that audience.
Well, this was the first I've heard anything like this type of advertising from AMD. Perhaps they will get better on the next attempt?