Advanced Micro Devices Inc (AMD)

[VBG]

AMD Strategy to be Watched Closely

I don't agree with the analysis, but...

http://biz.yahoo.com/zacks/080225/11638.html?.v=1

Advanced Micro Devices (NYSE: AMD - News) is the second largest producer of microprocessors and chipsets in the world. December quarter revenue missed the consensus by a sliver, although the EPS exceeded handsomely. Forward guidance is for revenue to be down in-line with seasonality (we estimate around - 7% sequentially). The company has launched the first triple-core processor families, and these products are expected to gain traction in 2007.

Additionally, margin improvements shall continue as new products gain momentum and 45nm production ramps up. We are extremely bullish about this stock, and our Hold rating is based on uncertainties in the macro environment. Shares of AMD are currently trading at 0.6x our 2008 sales estimate (P/S).

While Intel Corporation (NasdaqGS: INTC - News) remains unparalleled at the high end of the microprocessor and chipset market, AMD has been steadily taking share at the low end. Management's strategy of providing lower cost solutions has enabled the company to gain share in the greater China region.

We think we will see the advantages of this strategy unfold over the next two years. As AMD churns out faster and more efficient products at the low-to-mid-range, a large percentage of users, with smaller functional needs are likely to switch to the lower-priced product. We are reiterating our Hold rating and $11 price target, which corresponds to a 0.94x multiple of our 2008 sales estimate.

-VBG