Advanced Micro Devices Inc (AMD)

[JackDye]

I am new to posting on these boards, but an avid reader of the AMD thread. But seeing the updated analyst estimates for Q2 made me finally post.

What world are they living in to expect lower earnings in Q2 than delivered in Q1?

I base my case on the following observations:

Guided to slightly lower revenue in Q1 during Q4 conference call, beat Q4 levels by roughly 3%. Guided to flat revenue in Q2, will beat it again.

Increased margins by 2.4% from Q4 to Q1. Response on CC was "upwards from here" when asked about future margins.

SUN and HP announced a lot of products in Q1, but volume shipments are just now beginning. ASPs will go up.

Flash pricing stable (from CC) and just beginning to realize efficiencies from the merger. Ties to the comment on margins.
Flash revenue expected to be up. Backlog of 10+ weeks from the call. They already have the quarter in the bag for memory.

Stronger than expected PC shipments from IDC and Dataquest this past week for Q1. It will continue to be robust.

SG&A increased $20+M for the quarter. On CC, Rivet explained part was advertising, part Fab start ups, and part non-recurring one-time items. Should be able to count on that decreasing by $7-8M for the quarter.

Put all this together.

Earnings last quarter $45M
2% margin improvement on base$25M
Op Exp in-line adjustment $ 7M
Flash rev increase($50M Rev) $12M
Flat processor revenue $ -

Earnings $90M
EPS 24 cents

If processors actually kick-in like it is possible. Another $50M in revenue at 50% GM would contribute another 6 cents for the quarter.

Maybe they do not get the 2% margin improvement, but you would normally not say something like that on the cc call unless you are pretty damn confident. Also, when you beat as much as they did in Q1, your balance sheet tends to be pretty heavy (in a good way). Just normal tendencies.

My guess - they will report somwhere between $.24 to $.30 in EPS for Q2. Feel free to ridicule me sometime in July.