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Contributors: Douglas McIntyre Jon C. Ogg

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Thursday, October 19, 2006

AMD: Street Implies That Intel is Winning

Advanced Micro Devices (AMD) posted a strong quarter $0.27 EPS and revenues of $1.33 Billion. The street was looking for $0.24 EPS and $1.31 Billion.

AMD expects demand to be seasonally strong in the fourth quarter and sales to increase sequentially on an ex-ATI basis.

Next quarter estimates are $0.33 EPS and $1.44 Billion.

Third quarter gross margin was 51.4 percent, compared to 56.8 percent in the second quarter of 2006 and 55.4 percent in the third quarter of 2005. That is from the Intel-AMD price wars. Desktop processor sales were flat sequentially with increased unit shipments offset by decreased ASPs. It posted an 18% quarter-over-quarter increase in microprocessor unit shipments.

So the real question is: Who is telling the truth, and who is lying? Yesterday Intel noted it was taking back some lost market share, yet AMD posted these gains. It appears that the lower margins may tell it all and trying to look back now may be driving by the rearview mirror.

AMD was down 12% in after-hours trading around $21.00, so it looks like we know which company the street is really trusting now. INTC is down a bit with it, but we'll tune in later after the conference call to see what the real reaction will be.

Jon C. Ogg

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