![](http://investorshub.advfn.com/images/default_ih_profile2_4848.jpg?cb=0)
Thursday, January 22, 2004 11:46:51 AM
"the FASL benefit appeared to contribute 4 cents or 5 cents of EPS"
After nine straight quarters of losses, underdog Advanced Micro Devices (AMD:NYSE - commentary - research) at last pulled off a generous upside surprise after the close Tuesday, besting by a wide margin Wall Street estimates for a 2-penny loss.
Shares of chipmaker Advanced Micro Devices tumbled Wednesday morning, lately down $1.02, or $5.9%, to $16.36 as Wall Street focused on concerns about the profitability in the company's memory business and the prospects of a looming price war with chip big-daddy Intel (INTC:Nasdaq - commentary - research).
Wednesday morning, analyst reaction to the results was mixed. Even some of those who gave the company credit for progress sounded cautious on AMD's near-term investment potential.
At JMP Securities, analyst Krishna Shankar lowered his rating from strong buy to market outperform, noting the stock has approached his $20 target price, appreciating nearly 150% since Jan. 1, 2003. "As with many semiconductor stocks over the last 12 months, investors have likely ridden the easy money part of the AMD stock appreciation curve," he said in a note. JMP hasn't done recent investment banking for AMD.
Shankar identifies one of the risks for AMD over the next two years as an intensifying price war with Intel in high end 32-bit/64-bit microprocessors. Still, he said he's "long-term bullish" on AMD's processor business.
He believes AMD can maintain a profit of 4 cents a share in the first quarter, based on generally accepted accounting principles, on $1.15 billion in revenue. Shankar thinks AMD can more than double his estimated 2004 GAAP earnings of 45 cents to $1 a share in 2005
Even warier was Oppenheimer's Quinn Bolton, who has a neutral rating on AMD. Among his concerns are the relatively low incremental gross margin in AMD's flash memory business, due to a ramp-up in a facility, a weak dollar-to-yen exchange rate, and an unfavorable mix of memory. With the shares trading near 29 times Oppenheimer's revised calendar year 2004 EPS estimate of $0.60 (down from a prior $0.75), he called the shares "fully valued."
Bolton also estimated that AMD lost about 70 basis points of unit market share to Intel in the quarter and said he wonders whether the adoption of Athlon 64 has been slower than expected. "With AMD sacrificing unit shipments to preserve higher processor [average selling prices] , we believe the company leaves itself vulnerable to a price war initiated by Intel," he wrote. "We believe the low profitability of the flash memory business and unit market share losses in [microprocessor units] will remain an overhang on AMD shares."
Oppenheimer hasn't done any recent investment banking for AMD.
More positive was Needham, which reiterated a buy recommendation on AMD, saying it "remains extremely positive on the potential for the company's new 64-bit microprocessor offerings." The firm also raised its revenue outlook for the March quarter, predicting a 1 penny profit on sales of $1.18 billion in the quarter instead of $1.04 billion in revenues. Needham hasn't done any recent investment banking for AMD.
AMD reported fourth-quarter net income of $43 million, which marked the company's first profit since the June 2001 quarter, or earnings per share of 12 cents a share. Those results reflect a favorable impact of 3 cents a share based on an adjustment in previously recorded restructuring charges and purchase accounting related to AMD's memory-making joint venture with Fujitsu, called FASL.
For the December quarter, analysts were expecting earnings of 4 cents a share.
The chipmaker also reported sales of $1.21 billion, up 76% from last year's levels and substantially above the consensus estimate for $1.08 billion.
"Fourth-quarter profitability was driven by solid sales growth across all business lines," said Robert J. Rivet, AMD's chief financial officer. "Sales increased in all regions, and we saw continued penetration in emerging markets, highlighted by record sales in China and Latin America."
"They're definitely executing well. The strength is really coming from the flash business, driven by wireless," said Tai Nguyen, an analyst at Susquehanna Financial Group.
But Nguyen noted some confusion about the way AMD accounted for a benefit related to FASL, echoing a number of other analysts on the conference call. By his own reckoning, the FASL benefit appeared to contribute 4 cents or 5 cents of EPS. At the very least, the complex accounting for FASL results makes AMD's finances harder to forecast, Nguyen said.
Aside from that, he has a neutral rating on AMD shares due to risk on the microprocessor side. "We expect pricing pressure because they don't have any new product to help bring up blended ASPs. We're also seeing the road map from Intel (INTC:Nasdaq - commentary - research) could force AMD to bring Athlon XP down to the lower market segment to compete," he said. Susquehanna doesn't do investment banking.
Recent INTC News
- From Athletes to GenAI Developers: Intel Tackles Real-World Challenges with AI Systems • Business Wire • 07/18/2024 03:00:00 PM
- Darden Acquires Chuy’s for $605M, BYND Drops 14% Amid Debt Restructuring, Petco Appoints Ex-Five Below CEO • IH Market News • 07/18/2024 09:59:44 AM
- Intel Launches Its First US Apprenticeship for Manufacturing Facility Technicians • Business Wire • 07/15/2024 06:00:00 PM
- Ericsson Reports 14% Profit Increase, UBS Downgrades Tesla Shares, Ozempic Linked to Reduced Dementia Risk • IH Market News • 07/12/2024 10:28:11 AM
- Intel to Report Second-Quarter 2024 Financial Results • Business Wire • 07/10/2024 08:30:00 PM
- Microsoft and Apple Exit OpenAI Board, TSMC Exceeds Forecasts with Record Revenue, and Other Key Updates • IH Market News • 07/10/2024 10:42:17 AM
- BP Slashes Profit Forecast by $700 Million; Morgan Stanley Predicts S&P 500 10% Drop, and More News • IH Market News • 07/09/2024 10:54:32 AM
- Intel Corporation Incorporated Sued for Securities Law Violations - Contact the DJS Law Group to Discuss Your Rights - INTC • PR Newswire (US) • 07/01/2024 07:25:00 PM
- Intel Corporation Sued for Securities Law Violations - Investors Should Contact The Gross Law Firm for More Information - INTC • PR Newswire (US) • 06/28/2024 09:45:00 AM
- Intel Demonstrates First Fully Integrated Optical I/O Chiplet • Business Wire • 06/26/2024 03:00:00 PM
- Class Action Filed Against Intel Corporation (INTC) - July 2, 2024 Deadline to Join - Contact The Gross Law Firm • PR Newswire (US) • 06/25/2024 09:45:00 AM
- Intel Corporation Sued for Securities Law Violations - Investors Should Contact The Gross Law Firm for More Information - INTC • PR Newswire (US) • 06/20/2024 09:50:00 AM
- Intel Corporation Securities Fraud Class Action Lawsuit Pending: Contact The Gross Law Firm Before July 2, 2024 to Discuss Your Rights - INTC • PR Newswire (US) • 06/17/2024 09:45:00 AM
- Form 8-K - Current report • Edgar (US Regulatory) • 06/14/2024 09:17:08 PM
- Form 11-K - Annual report of employee stock purchase, savings and similar plans • Edgar (US Regulatory) • 06/13/2024 09:11:27 PM
- FDA Panel Supports Eli Lilly’s Donanemab, Rio Tinto Expands Stake in Boyne Smelters, and More News • IH Market News • 06/11/2024 11:11:40 AM
- July 2, 2024 Deadline: Contact The Gross Law Firm to Join Class Action Suit Against INTC • PR Newswire (US) • 06/10/2024 09:45:00 AM
- Apollo Buys 49% of Intel’s Irish Plant for $11bn, BlackRock and Citadel to Create Texas Exchange, and More News • IH Market News • 06/05/2024 11:41:36 AM
- Class Action Filed Against Intel Corporation (INTC) - July 2, 2024 Deadline to Join - Contact The Gross Law Firm • PR Newswire (US) • 06/05/2024 09:45:00 AM
- Form 8-K - Current report • Edgar (US Regulatory) • 06/04/2024 08:07:51 PM
- Intel and Apollo Agree to Joint Venture Related to Intel’s Fab 34 in Ireland • Business Wire • 06/04/2024 08:05:00 PM
- Intel Accelerates AI Everywhere at Computex 2024; Redefines Compute Power, Performance and Affordability with new Xeon 6, Gaudi Accelerators and Lunar Lake Architecture to Grow AI PC Leadership • Business Wire • 06/04/2024 03:00:00 AM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/03/2024 08:42:58 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/03/2024 08:40:51 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/03/2024 08:39:15 PM
Greenlite Ventures Completes Agreement with No Limit Technology • GRNL • Jul 19, 2024 10:00 AM
VAYK Expects Revenue from First Airbnb Property Starting from August • VAYK • Jul 18, 2024 9:00 AM
North Bay Resources Acquires Mt. Vernon Gold Mine, Sierra County, California, with Assays up to 4.8 oz. Au per Ton • NBRI • Jul 18, 2024 9:00 AM
Nightfood Holdings Signs Letter of Intent for All-Stock Acquisition of CarryOutSupplies.com • NGTF • Jul 17, 2024 1:00 PM
Kona Gold Beverages Reaches Out to Largest Debt Holder for Debt Purchase Negotiation • KGKG • Jul 17, 2024 9:00 AM
Avant Technologies Welcomes Back Former CEO with Eye Toward Future Growth and Expansion • AVAI • Jul 17, 2024 8:00 AM