Jefferies & Company report...
AMD focused its guidance and highlighted further heavy CapEx
spending in 2006 and 2007. AMD is behind in their manufacturing
migration and Intel is coming on line fast with their 65nm production.
We maintain our HOLD rating and $22 price target.
Me...
The whole report seems predicated on INTC having a huge cost advantage with 65nm/300mm. While INTC may have 65nm product that their selling no one knows just how many they're yielding or how they're binning. Further, so far it doesn't look like 65nm is helping much with heat/power issues and INTC is still saddled with ancient FSB technology that requires huge caches to be competitive. This of course means huge chips that reduce whatever 300mm/65nm advantage INTC has. Further, INTC doesn't have SOI and APM which I suspect will limit INTC's capacity.
Too much conjecture based on what INTC is saying for me. I think I'll wait awhile before I start worrying about the sky falling.
Again, between fab30, fab36, and Chartered I suspect AMD should be able to produce north of 100m processors a year, even with the expected increased size of chips. If that means AMD is going to be capacity bound any time soon I would be delirious with joy.
Jefferies & Company report...
We remain at a HOLD with a price target of $22, based on a
carve-out analysis of AMD's MPU business as a stand-alone unit. We have taken Intel's historical price/earnings multiples of 22x and applied it against our revised CY2006 estimate of $1.03 for the Microprocessor division to obtain our price target of $22. As a result, we believe the stock is fairly valued to our price target.
Me...
While I agree that AMD needs to get going on the next fab, I think his estimate of $1.03 is off by at least 50%. Imagine using INTC's historical PE to value AMD. That alone ought to tell anyone that this guy is from another planet.
Over all he seems to be making the usual INTC biased analyst mistakes in that he seems to unquestionably accept everything INTC says while discounting everything AMD says. From an AMD point of view it's difficult to understand these biases, but these guys have had many years to develop them and it's not something easily shed.
Notably I find it amazing the way these guys talk about INTC's new products as if AMD is standing still. From my point of view the large cache/ancient FSB issues will relegate INTC to second class price/performance for as far out as I can see, no matter how many 65nm fabs INTC has. And that doesn't even take into consideration the superior manufacturing processes AMD has.
In any case AMD is going to take market share from INTC going forward and there is nothing INTC can do about it. The only question is how much market share it will be?
