Friday, November 30, 2007

Global semiconductor rankings

Alas - sad news for AMD and good news for Intel. iSuppli released it's preliminary results of the world's largest semiconductor companies and Intel outgrew the industry with 7.7% growth while AMD declined by 22.7% and also dropped out the top 10 after being in there for just one year.

This is yet another catalyst for a change at the top at AMD. Hector was apparently in Bangalore opening a new R&D centre. If I were him, I would be making sales calls 24x7 on his biggest customers.

Wednesday, November 28, 2007

And in the news today...

AMD is apparently pondering the purchase of Aegia.

This of course is a smart use of executive time when you have no cash in your pocket and a competitor who is coming at you like speeding train. But heck - let's sell out the company completely to acquire whatever we need because we're all so fixated on getting 30% market share.

It's no wonder AMD's stock hit a 1 year low all the way down to $9.80 a share. When you have them publicly contemplating folly like the above, of course investors are going to get spooked.

And my final whinge is Doug Freedman from ATR who downgraded the AMD stock. Saying there are no positive catalysts...

I contniue to laugh at how blase some folks on Wall Street can be as I point you to these post I had written some time ago chronicling how the gurus on Wall Street get to call the market with little impact:

Post 1

Post 2

I had vented when Mr Freedman called a Buy on AMD at 14 odd $ back in May. So read the posts and now think about how much money you would have made or lost had you followed the recommendations.

The primary fall out of AMD's stock going sub 10$ is the board will have to consider replacing Hector. Now don't get me wrong. I like Hector. I think he has cojones and he took on Intel and gave them a fight that must have scared them half to death. But he let it go to his head. He got to focussed on breaking Intel's market share and getting to 30% which he must have though is the tipping point. What he should have done is focussed on building a profitable and sustainable business and the market would have rewarded him with the market share.

Alas, it is human nature to want to touch something shiny...specially when you think it's soooooo close. But if you over extend yourself, you topple over and that is what you should never forget. The laws of physics still apply - so work within them.

Sunday, November 25, 2007

Intel increases dividend

Intel raised their cash dividend by 13% effective quarter 1 2008.

I had mentioned earlier they may increase their stock buy back to have a blow out Q407. This looks like an alternative route to having the same effect. Basically signalling to the market that the board believe the fundamentals are incredibly strong. Personally, I prefer stock buy backs because reducing the outstanding shares nudges up the EPS which is what many investors keep their eye on.

Dividends are great for long term investors but many tend to overlook this.

Thursday, November 22, 2007

AMD stock south of $11

I'm going to say I told you so...because I did.

Now I'm not trying to gloat even though it's gratifying to be right. However, the problem here is AMD continues to pile on the debt and dilute shareholder value/equity as Hector blindly chases 30% market share in a bid to topple Intel.

The wise man would run away to fight again another day. But Hector is not behaving wisely at all. And it is a matter of time before he is no longer the man in charge. First they'll replace his CEO responsibilities with Dirk Meyer. And then they will quietly ease him out a few months later. And this is going to happen within a couple of months. Specially if Hector cannot deliver a kick @$$ Q4 coupled with a stroke of genius in terms of their asset lite strategy.

The EEE PC - the future is nigh

Back here I had written a post on the EEE PC.

The EEE PC is selling like hot-cakes. This is the future my friends. A low cost, reasonable performance, ultra portable PC. And this will only get better with SIlverthorne and some of other Intel's products on their roadmap. Imagine what a killing they're going to make with a 25$ CPU on which they can still make 50-60% margins. AMD is about to miss out on a big new profitable market. Kind of the way the other MP3 guys watched Apple seduce the world with the iPod. Notebook switches the world over will get accelerated. Governments will want this technology inside their versions of OLPC or whatever thing they're buying for mass education.

This is a game that AMD is not even in. The market is going away from them once again.

Wednesday, November 21, 2007

AMD sells stake to Abu Dhabi

AMD heads back to the market for more cash. This time Abu Dhabi buys an 8.1% stake.

Interestingly, AMD only got 12.70 $ per share so there really wasn't any premium. Which is interesting and a telling sign. The positive of this transaction is that they now have a vested interest from backer who has unlimited funding at his disposal. So should they need to secure more cash, they know where to go. The down-side seems to be that this backer isn't paying a premium so it's shareholder equity to which they must say "ta ta".

In other news, anyone seen wide availability of Barcelona yet. Very very disappointing launch and Phenom isn't that much better either. Anandtech has a review. Core 2 Quad whoops the Phenom's ass and when Penryn comes out, AMD will need to churn out faster Phenoms at lower prices. There is only one way for AMD to win in this environment. Cut your prices and trash your margins. Not good for business though.

And all this while Intel is developing low cost high margin products like Silverthorne. When Otellini displayed this some months ago, I said this is a game changing product. If the reviews of the EEE PC are and indicator of what a reasonable performance low cost part can do, AMD needs to seriously re-consider it's strategy. Because Hector is nowhere close to 30% market share and better forget that dream.

In fact, I'd be pleasantly surprised if he stays in his job for another 30 weeks.