|To: Dinesh who wrote (236834)||7/21/2007 2:59:20 PM|
|From: wbmw||Read Replies (2) | Respond to of 272331|
|Re: Indeed! Yet, as you digest that little gem, do bear in mind one tiny little fact - that the stock price today is barely a third of what it was back then. That might help see the nothingness in the article - not the precipitous fall in GM%, or the liberal use of red ink. Of course, it might not, and that's within the domain of possibilities.|
That's your argument...? That the stock price has already fallen 66%, and that should be enough?
Get real, Dinesh. When AMD was priced at $40, people thought they would have a 2007 EPS of over $2.00, and a 2008 EPS even higher than that. Now, AMD is looking at losses much greater than $3.00 EPS for 2007, with 2008 a complete mystery. Do you think that going from $40 stock price to a $16 stock price figures all that in...?
Please, don't insult the rest of the investors on this forum.
Re: As for that wonderful what-if analysis (recasting the P&L statement with GM pegged at a hypothetical 57%), why, even my third-grader can understand that. Kudos. Of course, the argumentative might wish to argue, had AMD been able to snarf a 57% GM, the poor little thing might have also roared up a few more dollars in revenue: and thus ruin Mr. Trent's otherwise impeccable spreadsheet.
You obviously missed the point of the article. The only reason the author used a hypothetical 57% GM was to illustrate that this GM was at the peak of AMD's historical rate, not an average or a figure to assume going forward. Bob Rivet agreed with this during the earnings conference and said that GM % would probably have to be in the 40s in order to hit their goals.
However, given the new post-ATI cost structure, even 57% GMs are far from allowing AMD to reach break even. And if 57% GMs cannot do it, how would anyone reasonably expect GM % in the 40s to come anywhere close...?
The point of the article (hence: "required reading") was to show that AMD's cost structure inhibits a return to break even anytime in the reasonable future.
Just look at the balance sheet for yourself. AMD's R&D, by itself, is larger than the gross margin dollars that AMD made last quarter. Their $600M loss was the result of all their other expenditures. Now, figure in their cash flows, and they are still spending money to ramp their manufacturing, they still want to build a fab in New York, they still have $3.0B they have to spend to refit Fab38 (of which the German government is only offering a subsidize a small percentage), and you can quickly see that AMD is far, VERY FAR, from being able to afford all this.