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Advanced Micro Devices
Just Call Me an Optimist...

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By Bilkid
July 10, 2001

Posts selected for this feature rarely stand alone. They are usually a part of an ongoing thread, and are out of context when presented here. The material should be read in that light. How are these posts selected? Click here to find out and nominate a post yourself!

Well, the news has hit and has had time to sink in. Thanks to all who posted. Whether emotional or technical, the analysis helps me to gain perspective on the reasons -- both emotional and rational -- that people own stocks, and particularly why we own AMD.

Here are some things to think about from a more optimistic perspective:

1. Do you really believe that AMD management is that inept? If we, the average investor and armchair manager, can see that waiting to warn until a week before earnings are to be announced is a bad thing, don't you think that Jerry and Hector understand the implications of the timing? Don't you think that they did everything they could to avoid this situation?

This warning doesn't strike me as something underhanded. Rather, it overflows with verisimilitude. Instead of management collusion, I am much more likely to believe there is a very good reason, like perhaps that flash and the Alcatel settlement had a much greater than expected impact on earnings, leading management to lump all the losses into one quarter. Call me naive, but I think all this venting and finger pointing regarding management is way too simplistic. If Jerry was trying to do something underhanded as many on this board have intimated, don't you think he would try to be more subtle than this? Something this blatant has got to have good explanation. I seriously doubt Jerry would ruin his lifework with something this obvious.

2. Preliminary indications show that AMD continues to take marketshare. That has been their focus for the last year. If this proves to be true, then management continues to achieve the goals they set for themselves. This is commendable, especially in a declining market. Even more so when Intel has put all of its weight behind an effort to stop this from happening.

I see this as a game of chicken. AMD threw down the gauntlet when they said they would achieve 30% marketshare. Intel has responded by cutting prices drastically. The market's softness right now has added to the pressure. Instead of flinching or turning aside to boost profitability, AMD continues to capitalize on the strength of the Athlon and do whatever it takes to achieve its goal. If that means that profits must suffer for a quarter or two, so be it. If you buy the message that processors have become a commodity, then you will likely see this as a negative thing. However, if you believe that we are in a worldwide downturn in the processor business that will turn around, then you see AMD marketshare gains in a terrible market as a colossal victory.

Once the market turns, AMD has positioned itself to make incredible gains. I interpret marketshare gains in this climate as proof-positive that AMD is viewed as having the better solution. Gaining that reputation is very difficult, but keeping it won't be as hard. Just look at Intel. They continue to live on their past victories. I see nothing in the current roadmaps for the two companies to indicate to me that AMD cannot continue to provide the best solutions.

3. Unfortunately, it's very difficult to see the paper losses in our portfolios. Losing that much value in one's holdings in one day will make even the most hardened investor flinch. Still, I see this as an opportunity. Just a month ago or so, AMD was in the 30s because of all the positive news coming out about the company and its solutions. What, besides the short-term price of this stock, has changed since AMD received such positive press? I find nothing to indicate that things aren't just as positive in AMD's story today as it was a month ago. That being the case, then this is an incredible time to buy a great company with incredible prospects at a very good price.

Fiontar has written quite a few rants about momentum investors and his/her desire for them to get out of this stock and to buy Intel. All this talk about dead money indicates how many of us are interested in momentum. This is a test of LTBH strategy. Have you done the DD before you purchased this stock? If you did, then you know the incredible prospects of this company. Has anything changed to indicate that AMD isn't going to realize these prospects? For me the optimist, I see this warning as due to a weak market, a price war, and an opportunity for management to flush out all of the negative stuff in one quarter. If I am right, and the basic story has not changed for AMD, then I will be well rewarded for adding to my position rather than selling. But we won't know for certain until the CC.

Well, that's one optimist's take on this event. Time will tell whether I'll be rewarded for adding to my position or punished for failing to see the "facts." At this point, I remain bullish long-term on AMD.

Bill