Intel (Nasdaq: INTC) kicked off earnings season for tech yesterday, with sales up 18%, and earnings a good 58% better than last year. Now Advanced Micro Devices (NYSE: AMD) has the rebound. Can Intel's nemesis steal the spotlight when it reports earnings tomorrow?
What analysts say:
- Buy, sell, or waffle? Wall Street seems doubtful. In contrast to the uber-bullish sentiment surrounding Intel, a bare (and bearish) half-dozen analysts recommend buying AMD today. Eighteen more rate the stock a "hold," while eight analysts recommend selling it.
- Revenue. Even so, these analysts predict that AMD will report $0.61 billion in Q3 sales, up 16% from last year.
- Earnings. Analysts forecast a whopping $0.06 per share.
What management says:
That's certainly better than the $0.18 per share AMD lost last year, and last quarter's $0.06 loss per share -- though in that case, the company's non-GAAP earnings actually totaled $0.11 per share. Also, AMD has warned us to expect a 1% to 4% sequential drop in revenues tomorrow.
True, AMD wasn't alone in issuing an earnings warning; fellow tech icons NVIDIA (Nasdaq: NVDA), Cisco (Nasdaq: CSCO), and even Intel all issued recent cautions as well. Yet Intel at least managed to eke out a sequential revenue gain yesterday. As of three weeks ago, AMD seemed doubtful it could do the same.
What management does:
Let's not forget what AMD has accomplished. It is profitable -- and not just because of last year's $1.25 billion litigation settlement with Intel. While that's bucked up AMD's net, the improvements the company notched on gross and operating margins are all AMD.
| Margins | 03/09 | 06/09 | 09/09 | 12/09 | 03/10 | 06/10 |
|---|---|---|---|---|---|---|
| Gross | 40.2% | 40.2% | 36.8% | 42.1% | 43.1% | 44.6% |
| Operating | (17.7%) | (16.8%) | (22.3%) | (9.5%) | (1.6%) | 4.4% |
| Net | (57.7%) | (43%) | (45.3%) | 7% | 17.9% | 20.9% |
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.
One Fool says:
However, I'd really like to see more free cash flow out of AMD. Sadly, that still doesn't seem in the cards. Unlike Intel or graphics rival NVIDIA – or mobile processing up-and-comers Texas Instruments (NYSE: TXN) and Qualcomm (Nasdaq: QCOM) -- AMD's still struggling to squeeze cash out of its business. Back out the massive cash infusion from Intel, and AMD would still be burning cash on a trailing-12-month basis. In fact, it did burn cash in both Q1 and Q2 of this year. And if this company lacked the scale of production to generate cash profits in Q2, when revenue was higher than it may prove to have been in Q3, how can AMD possibly do better this time around?
I'd say it can't -- but I could be wrong. After the news comes out, please feel free post your jeers here tomorrow. I promise to accept them humbly
