mgl Thursday, 01/08/04 08:55:32 AM Re: kpf post# 22276 Post # of 95809 Thanks kpf It appears there is a lot of speculation in this report... Athlon 64 Trends Recent information suggests that Athlon 64 shipments were roughly 170ku in Q4. AMD has not given an official target for Q4, only saying that unit shipments would be "in the hundreds of thousands." Channel partners were apparently told at the start of the December quarter to be prepared for 300k units. Since we believe demand for the new Athlon 64 products is good, the difference between 170k and 300k may be due to one of two reasons. First, it is possible that AMD is facing manufacturing constraints. AMD has made public statements that it is happy with the way the Athlon-64 ramp is unfolding, and 170k units might technically meet its public goal of 'hundreds of thousands of units'. In that case, maybe the second possible reason is best: perhaps the 300k target was given to channel partners to create a sense of critical mass. According to Kirk Yang (see 'The Asia Motherboard Beat' of 12/24/2003), AMD's channel partners are apparently being told 700-800k Athlon 64 units are likely in Q1 and 1Mu by Q2'04. If the 170ku figure is accurate, it would make the chances of 700k-800k units for Q1 seem improbable, in our view, and again may be intended to create a sense of critical mass. We are currently modeling 500k for Q1, but there is a wide range of error possible around that figure. No Changes to the Model We are modeling 350ku of Athlon 64 unit shipments for AMD in Q4, but as we wrote in our previous AMD note we thought that figure may turn out to be high. Today's developments reinforce that concern. However, we continue to believe that the company's NOR flash business is solid and might be able to offset the Athlon 64 difference. Our investment thesis for AMD largely hinges on the company's ability to make Athlon 64 units in sufficient volumes, and our Sell rating is based upon the belief that AMD will struggle with yields for at least the next six months. While NOR flash is currently helping the company, it looks like the processor side may be a burden. We would get more positive on the company if evidence of Athlon 64 manufacturability were to come to light. Bottom line, almost every quarter for AMD is difficult to forecast, and it sounds like there are still enough pieces in motion right now to cause us to avoid the stock.