Advanced Micro Devices AMD
May 04, 2000 - 12:44am EST by
2000 2001
Price: 43.88 EPS 1.43
Shares Out. (in M): 152 P/E
Market Cap (in $M): 0 P/FCF
Net Debt (in $M): 1,427 EBIT 0 0

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For 1999 the total year revenue was 2.85 billion. First quarter of 2000
had revenue of 1.09 billion and normally first and second quarter are
the worst part of the year for semiconductors. With Earnings/share of
1.15 for Q1, annualized this gives a PE of 19. I expect earnings as
high as twice this. Keep in mind that because of high fixed cost, past
a break even point much of revenue is profit.

The market cap for AMD is 13 billion versus 396 billion for Intel. Based
on the impending growth rate for AMD, on basis of market cap, I would target
50 billion market cap if AMD merely executes on their current plans.

Main reason for this pick is that I am a computer geek. I spend more than
2 hours a day scouring news sites, AMD sites, hardware sites. I also
check the circulars every sunday to see what is being advertised. AMD
is nearing 50% of the retail market and once it begins to take share in
the corporate market should be able to reach it's goal of 30% overall
market share(17+% now) by the end of 2001. is the link to one of
the best technological analysis of why AMD will do well. It is the
final straw that led me to invest 100% of my portfolio in AMD as well as
to get 27 friends/family/coworkers to invest in the low 50s. Of 38 tech
stocks which I track it is the ONLY one to break a new high since the
friday crash, with the next closest being about 10% down.

Once thunderbird and duron are realeased they will compare very favorably
to intel products until at least november when williamette is released.
Intels IA-64 platform uses an unproven new technology which is not
natively compatible with existing 32 bit applications. This will require
emulation which will make it slower on existing hardware which could create
a situation much like when the pentium pro was slower than pentiums for
16 bit software.

Besides the technology is the human factor. AMD is used to competition
and if the recent Intel mistakes of the last 6 months are any indication,
Intel is not. You could say AMD has the eye of the tiger, always being
on the edge of destuction has created a company of battle hardened veterans.
There are rumors that intel has become an terrible place to work and as
a result there has been a brain drain that went to AMD. AMD also has
some of the key people who developed the BEST processor ever created,
DEC's Alpha. Consumers never heard of it, but geeks have. Much of this
technology is in the Athlon. These human factors are most obvious when
you consider AMD received more patents in 1999 than Intel! Then keep in
mind Intels treatment of vendors in the past. With such perferential
treatment of Dell, leaving some suppliers without enough product this has
been good for AMD, especially with their new fab coming on line. A fab
which has been critized for the years when it was being built because it
wasn't going to be needed. Guess what, it is.

This is the first time Intel has had complete competition across all
market segments so they cannot pursue thier old tactic of a price war
on the low end by subsidizing it with profits from the high end. Intel
is also not focuses on chips and much of their resources are bent towards
entering into internet infrastructure. This is as close as you get to a
sure thing, but most investors are following traditional wisdom which
says Intel will trounce AMD with ease yet again.


The catalysts are many for this stock. The most important is past failures
and the false assumption that intel can just crush them yet again. After
all AMD is the ONLY opponent still standing against intel and many have
tried. Further cataylsts include the realization by the non-technical
people that RAMBUS is not the future, DDR DRAM is and that is the memory
that AMD is backing. AMD also has a much better 64 bit strategy which is
more doable as well as based on more proven technologies than intel.
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