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Advanced Micro Devices, Inc. Message Board

  • atopadz atopadz May 16, 2013 2:31 PM Flag

    Rebuttal to GS Downgrade

    Update: In rebuttal, Dan Niles of AlphaOne Capital Management, who was short AMD shares all last year, but recently went long the stock, tells me in a phone call today “If they’re saying the valuation is too high, that’s a bet I’ll take every time” because rising estimates will tend to lift the stock.

    On a deeper level, Niles argues that AMD is a company once thought to go bankrupt, and the company’s major problem a year ago was the delay it suffered in getting chips out the door with partner GlobalFoundries. Now that AMD has switched to Taiwan Semiconductor Manufacturing (TSM) for most of its production, “they’ve got the A Team” in chip production, ensuring a smoother ramp.

    If the company is being designed into gaming consoles, that’s a six-year cycle of steady revenue, observes Niles. He agrees that the PC market is bad place to be, but notes that AMD has been more realistic than Intel (INTC).

    “AMD has said they expect 1% to 2% decline in PC [unit] shipments this year, whereas Intel is still arguing things are going to turn around, which I don’t think they are.”

    If the gaming market starts to boost revenue above current expectations, it will likely lead to leverage in manufacturing and operating expenses, Niles argues, which could mean profit comes out higher than the 15-cent loss Covello is modeling for this year and the 20 cents profit he models next year.

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    • I dont buy and sell stock base on GS recommendation. I have more respect for IRS than GS.

    • UPDATE is posted on Barron's
      May 16, 2013, 11:40 A.M. ET
      "AMD Dives 14%: Stock’s Too Rich Given PC Woes, Says Goldman; AlphaOne Disagrees"

      (((See UPDATE)))

    • yourbestfriendintheworld yourbestfriendintheworld May 16, 2013 2:39 PM Flag

      Niles has been guressing wrong about the semiconductor industry for over 20 years; he has been in hiding for most of the last 13 due to his guilt over the internet boom.

      GF delays weren't AMD's problem. GF used to _be_ AMD. Nobody was more aligned with AMD's development processes. AMD's problem was AMD's lousy chips.

      Gaming consoles are not a "six year cycle of steady revenue". It's a short, sharp hit of revenue at the front, and six years of exponential declines. And the peak is shorter because the consoles are not better than PC competition, and the slope will be steeper because everyone but the closed-source manufacturers will be refreshing and upgrading on way less than a six-year cycle. Microsoft has itself hinted that it will open up its platform for other chips sooner rather than later. AMD can lose that on the first turn.

      AMD underestimated the decline in its PC business. Goldman has exposed that. Intel may be wrong about an increase, but AMD is totally wrong about its decrease being small digits.

      So Niles can go back into his hole for another decade. All he's doing here is hurting investors.

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