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Technology Stocks : Advanced Micro Devices - Moderated (AMD)
AMD 19.98-0.1%4:00 PM EST

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From: combjelly3/5/2007 6:25:54 PM
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have you heard that even mosessman is down on amd:

AMD :AMD Update: A One Quarter Problem? (condensed)
2007-03-05 15:45 (New York)




Company Update
Advanced Micro Devices, Inc. (NYSE: AMD $14.18) Estimate Changes
Semiconductor Devices
Sell March 5, 2007

Hans Mosesmann
646-445-6403
hmosesmann@ncpi.com

AMD Update: A One Quarter Problem?

Stock Data
Ticker AMD
Rating Sell
Price Target $8
52-Wk Range $42.70 - $14.43
Market Cap (MM) 7.5B
Avg Daily Volume 26.26M
Shares Out. (MM) 531.0
Debt/Total Capital 10%
Net Cash/Share $4.44
FY End December

Prv Prv Prv
FY06A 2006 FY07E 2007 FY08E 2008
1Q 0.37 — (0.43) (0.22) (0.04) (0.01)
2Q 0.18 — (0.24) (0.15) (0.02) 0.01
3Q 0.27 — (0.15) (0.11) (0.01) 0.03
4Q (1.08) — (0.13) (0.08) 0.00 0.04
Year (0.26) — (0.95) (0.56) (0.07) 0.07
Y/Y Chg NM NM (92.6%)
P/E NM NM NM
Prv Prv Prv
FY06A 2006 FY07E 2007 FY08E 2008
1Q 1,332.2 — 1,470.0 1,670.0 1,680.0 1,780.0
2Q 1,216.4 — 1,570.0 1,620.0 1,680.0 1,830.0
3Q 1,327.6 — 1,650.0 1,750.0 1,800.0 1,950.0
4Q 1,772.0 — 1,750.0 1,800.0 1,890.0 2,040.0
Year 5,648.2 — 6,440.0 6,840.0 7,050.0 7,600.0
Y/Y Chg NM 14.0% 9.5%
P/S 1.3x 1.2x 1.1x
Note 1: Our previous revenue estimates are not included in this
table. For our previous income model, please refer to our December
18, 2006 initiating coverage report.

Company Description
Advanced Micro Devices, Inc (AMD) designs, manufactures, and markets
microprocessor solutions for the computing, communications, and consumer
electronics end markets. In addition to microprocessors used in the PC
market, the company also manufactures embedded microprocessors for
personal connectivity devices and other consumer markets. Headquartered in
Sunnyvale, CA, the company operates primarily in the United States, as
well as in Europe and Asia.
Investment Thesis
AMD's business model is fundamentally broken, in our
opinion.

Key Points

* Problems in 1Q07 are being positioned as a one quarter issue given that
the miss is due to bad timing between channel and OEM segments (AMD
favored OEM at the expense of channel in 4Q06). A key OEM (likely Dell,
in our view) did not meet its own goals and thus created a problem for
AMD.
* AMD still believes it can grow its x86 business 20% longer term and
believe it will continue to gain market share.
* The company continues to ramp production with the intent to gain over
30% of the market over time.
* Management's view that the current dynamic is a near-term execution
issue is misguided and puzzling, in our opinion.
* Note that virtually all of the issues we have raised regarding AMD of
late have not yet impacted the company: 65nm yield problems (poor speed
headroom); the Barcelona die size is not an economically viable desktop
or notebook solution until 2008; the four-way/two-way server dilemma;
significant exposure to lagging edge 90nm 200mm manufacturing in 2007;
and our view that Barcelona will at best achieve parity on par with
Intel's "current" product lineup.
* We are lowering our 1Q07 sales and EPS estimates to $1.47 billion and
($0.43) down from $1.67 billion and ($0.22).
* Our FY07 sales and EPS estimates are now $6.44 billion and ($0.95), down
from $6.84 billion and ($0.56).
* Last, our FY08 sales and EPS estimates are now $7.05 billion and
($0.07), down from $7.6 billion and $0.07.
* We reiterate our Sell rating for AMD and our 12-month price target of
$8.


Valuation
Using book value seems to us to be useful under conditions of duress,
which we believe AMD will face over the next two years. As such, using a
0.7-0.8x multiple to book value (a depressed level, indeed) of $10.89
supports our $8 12-month price target.
Risks to Valuation
Risks that could potentially impact AMD's results include: increased
competition from Intel resulting in reduced unit sales, average selling
prices, and gross margins; failure to secure market acceptance of AMD64;
inability to secure synergies from the company's recent ATI merger; PC and
communications end-market weakness; poor execution of manufacturing
upgrades; and a slowdown in overall semiconductor growth.


Disclosure Appendix
To access price charts and disclosures specific to covered companies,
please refer to nollenberger.bluematrix.com



Distribution of Ratings/IB Services
Nollenberger
IB Serv./Past 12 Mos.
Rating Count Percent Count Percent
BUY [B/TO] 42 54.55 0 0.00
HOLD [N] 30 38.96 0 0.00
SELL [S] 5 6.49 0 0.00




Nollenberger Capital Partners is referred to hereinafter as "NCPI".
Analyst Certification
I, Hans Mosesmann , certify that the investment views expressed in this
research report accurately reflect my personal views about any and all of
the subject securities or issuers at the time of this publication. In
addition, I attest that no part of my compensation was, is, or will be,
directly or indirectly, related to a specific recommendation or views
contained in this research report.

Explanation of Ratings
Buy - We recommend buying at current levels. We expect the share price to
appreciate on an absolute basis. Thematic Opportunity - We expect the
company's share price to appreciate 100% or more within the next two years
if the market opportunity the company addresses develops as we expect. The
share price could also fall significantly if certain market developments
do not occur. These shares should be more volatile than the average stock,
should not be expected to correlate with broad market indexes, and are
appropriate only for investors with the highest tolerance for risk.
Neutral - We do not recommend adding to or reducing positions at current
levels. Sell - We recommend selling at current levels. We expect the share
price to decline on an absolute basis. Under Review - The stock rating and
estimates have been removed and are under review.
Important Disclosures
The research analyst principally responsible for preparing this research
report received compensation that is based upon various factors, including
Nollenberger Capital Partners Inc.'s total revenue, a portion of which is
generated by Nollenberger Capital Partners Inc.'s investment banking
revenues.
General Disclaimers
The information contained herein is based on sources that NCPI believes to
be reliable but is neither all-inclusive nor guaranteed by NCPI and may be
incomplete or condensed. The information and our opinions, if any, are
subject to change without notice. NPCI does not undertake to advise you of
changes in its opinion or information. Some of the securities NCPI follows
may be unrated or below investment grade municipal bonds, mortgage
securities, high yield corporate bonds or thinly traded equity securities
that typically involve a higher degree of risk and more volatility. The
securities discussed in this report may be unsuitable for investors
depending on their specific investment objectives and financial situation
and needs. This report is for informational purposes, and under no
circumstances is it to be construed as an offer or the solicitation of an
offer to buy or sell any security. This report is not a recommendation
that any particular investor should purchase or sell any particular debt
security in any amount or at all. NCPI may now or in the future purchase
or sell as principal securities of the companies mentioned in this report.
This report may not be reproduced or distributed in any manner without the
permission of NCPI.
>
> For further information regarding this report contact your registered
representative at 1-800-619-6274.
>
> Nollenberger Capital Partners Inc 101 California Street, Suite 3100, San
Francisco, CA 94111



_www.bluematrix.com_

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