|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)
Advanced Micro Devices, Inc. (NYSE: AMD $14.18) Estimate Changes
Sell March 5, 2007
AMD Update: A One Quarter Problem?
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.
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.
AMD's business model is fundamentally broken, in our
* 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 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
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.
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Distribution of Ratings/IB Services
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
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