Replies to post #36282 on Advanced Micro Devices Inc (AMD)

[rupert]

kpf: Thanks for the Smith Barney semiconductior industry report. I did not see the alleged reference to a drop in NOR prices of 2% last week. Perhaps I missed it?

SB maintains a $12 target for AMD! In general the report is dominated by its preocupation with Intel and Texas Instrument. Its over reliance on macro economic indicators is also a weakness. It does not convince that it has mastered the operational dynamics of the industry.

I think it could be summarised as follows:

1. The semiconductor cycle has passed its peak,

2. However, it will be good, if declining into mid-2005.

3. Savvy investors are already drawing money out.

4. But the recent decline in stock prices, and other dips to come, provide a good buying opportunity based on expectation of a 2H 04 seasonal rally.


I found references to inventory building at Intel TX and Dell to be confusing. In the first part it is described as troubling, but in the second half it is described as not troubling by historical standards.

There is still skeptical bias against AMD as though he is reading from the Intel briefing sheet. 64 bit is described as more hype than reality.


"AMD
Pros

• Conversion to a server orientation breathes new life into sales and marketing
strategy
• AMD64 tracking to plan, versus some fears manufacturing is holding back parts
• Strong investment in automation and process control helping to improve
manufacturing

Cons

• Recent datapoints concerning white box sales show marked deterioration—this
tends to be the domain for AMD processors
• Memory markets remain mixed and while not impacting the NOR market at this
time, we remain mindful of the potential for memory as a whole to worsen

Conclusion

We are actually encouraged by AMD’s operational and strategic changes and recognize that their recent processors (AMD 64 and Opteron) have gained good initial traction. We are most mindful, however, of trends we are seeing in white box PC sales and broader memory markets and the impact this could have to AMD’s 2Q results. As we get clarity on these
trends, we look to revisit our stance on the company."

EDIT:

- the report correctly notes that, historically, semiconductor stocks have outperformed the market in an environment of rising interest rates: