Advanced Micro Devices Inc (AMD)

[Ixse]

TMF: Don't Count AMD Out Yet http://www.fool.com/news/commentary/2005/commentary05101315.htm

Nice article. Here's one piece that breaks AMDs potential down in laymans terms:

The best proxy may be the second-quarter numbers. According to Mercury Research, AMD came in at $758 million in x86 processor revenue, or 10.3% of the total. Intel, conversely, had $6.6 billion, or 89.3% of the market. There were also roughly 55 million x86 units shipped during the quarter. Mercury pegs Intel's share of those shipments at 82.3%, while AMD accounted for only 16.2%.

Now, couple these data with the projections made by AMD CEO Hector Ruiz in his interview with trade publication InformationWeek. In it, he says that AMD hopes to garner 25% to 30% of the total x86 market by 2008 or 2009, which he estimates to be at least 400 million units. (Interestingly, that would also be double 2004's record 200 million in shipments, according to Mercury.)

Got all that? Good. We now have all the necessary pieces to make a rough guess at AMD's total 2009 market opportunity. Here's the breakdown:

- If AMD grabbed 16.2% of the market in Q2,
- and that market totaled 55 million units,
- then AMD likely shipped 8.9 million units,
- and if those units totaled $758 million,
- then AMD's per-unit sales were probably $85 or thereabouts.

If that pricing stays roughly constant, then Ruiz's 100 million shipments in 2009 would result in $8.5 billion in sales. AMD booked $3.2 billion in microprocessor sales over the past 12 months. Do the math, Fool, and you'll find that AMD expects to at least double its processor revenue over the next four years, if you were to assume base projection on market share estimates, and more if we were to employ the assumptions of constant pricing and Ruiz's unit assumption. And this is a stock that's overvalued?

Regards,

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