The Day Ahead: AMD 'reasonably uncrushable' vs Intel
Published: 20 Jul 2000 13:03 BST
This just in: Advanced Micro Devices has proclaimed itself "reasonably uncrushable" when it comes to battling its larger nemesis Intel.
We'd take it a step farther and say AMD has graduated from being a chimp to a gorilla. Now there are two 800-pound gorillas in the chip market. Luckily for us, the gorilla warfare is entertaining. AMD checked in with its latest quarterly results Wednesday and threw in a stock split for good measure. The company reported second quarter net income of $207.1m, or $1.21 per share. First Call's survey of 18 analysts predicted an AMD profit of $1.14 per share for the quarter ended 2 July. Sales were up seven percent sequentially to $1.17bn. Exactly a year ago, AMD was losing tons of cash.
The results, coupled with strong demand that only "an act of God" could derail, had AMD officials giddy.
And why not? AMD has been running circles around Intel, which has had numerous problems and took a $200m charge to replace defective motherboards in its second quarter. In the chip race, AMD is giving Intel a great run with strong products. In addition, AMD's quarter was refreshing because it was clean and easy to understand. Translation: no major investment gains to puff up results.
Intel's quarter was messy to say the least. The company had a $2.1bn investment gain in its second quarter. Back that gain out and Intel doesn't look so hot. In fact, operating earnings were flat.
Of course, Intel gets a free pass on Wall Street. Of 33 analysts only three are cautious on the stock. No matter how many glitches, odd financial items or body blows Intel takes from AMD, analysts are usually cheery despite the challenges.
"We believe that Intel will likely outperform in the second half," said Scott Randall, an analyst at Wit SoundView, who reiterated a "strong buy" rating Wednesday.
But even the biggest cheerleaders have a few concerns. Ashok Kumar, of USB Piper Jaffray, said Intel "left some money on the table" by underestimating demand in recent quarters.
Meanwhile, AMD keeps making a lot of noise.
On a conference call with analysts, Hector J Ruiz, president and chief operating officer for AMD, struggled to be negative. "I have to think hard to say something negative," he said.
The processor market also looks robust, executives said. Shipments of 1GHz Athlon chips quintupled during the quarter, said Ruiz. "We were able to meet our commitments to all our customers in this high-end segment," Ruiz said, contrasting Athlon's availability with the shortage of Intel's 1GHz Pentium III chips.
As for the flash memory market, there's no slowdown in sight. AMD said it is already sold out through the year. Some analysts have said flash memory, which powers wireless devices, was headed for a slowdown.
On its core Athlon and Duron processors, AMD was also bullish. The company said shipments will increase to 3.6 million units in the third quarter and to 7.2 million units in the fourth quarter. The growth should provide higher average selling prices.
The chip market is fragile and has a history of boom and bust cycles, but for now AMD is booming.
After three quarters devoid of revenue growth, investors were hoping for any kind of optimism coming from IBM's second quarter conference call. Big Blue delivered.
As far as the second quarter results go, IBM had a ho-hum quarter. The company topped estimates with earnings of $1.06 a share, but sales fell one percent year-over-year to $21.7bn.
The outlook, however, was the real focus. The company remains comfortable with analysts' full year earnings estimates, chief financial officer John Joyce said, during a conference call with analysts. First Call currently predicts a profit of $4.36 per share for 2000. Joyce also said he "felt good about our momentum".
Joyce said mainframe shipments were perking up (one percent growth in the second quarter after previous declines), and added the second half looked strong. Joyce even went out on a limb and said the company could hit double-digit revenue growth in the second half.
Analysts estimate that IBM will post mid-single-digit to low double-digit revenue growth in the second half. IBM even said its PC division may post a profit by the end of the year. Now that's optimistic.
See Chips Central for daily hardware news, including an interactive timeline of AMD and Intel's upcoming product launches.
See ZDII for US tech investor news.
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