In an alarming trend, AMD's stock seems to be on a free fall since last week. Today the stock reached a new 52-week low dipping below $10 no thanks to the downgrade by analyst Doug Freeman. It's nice to see that the investment community is finally catching up with our own sentiments about AMD's future.
"We do not expect sentiment to improve anytime soon and believe even improved execution will not be enough to show true operating leverage in the near-term," he wrote in a research note...While we remain bullish on PC demand in general, we don't see a material catalyst for upside emerging in the next 3-4 months and suspect investors will view any announcements on the company's fab-lite strategy with skepticism, regardless of this view's merits."
What I find interesting about this downgrade is the suggestion that even if AMD improves on its execution, the outcome still won't be enough. Even if AMD proceed with its yet to be announced asset-lite strategy the outcome will still be immaterial. And even if the PC demand remains strong AMD will continue to lose money. So what that means is if AMD becomes lucky enough to get a "perfect weather" of good execution, strategy and excellent market conditions, still, there is no hope for the struggling company, not now or anytime soon. "Investor skepticism" has finally caught up with AMD and it will be interesting to see where the stock settles after hovering around the $13-14 region for a year.
Now if only some of the missing bloggers return and put up the usual face of hope, maybe the AMD stock can rally back up.
There is a report that AMD is in talks with TSMC to sell Fab30. As AMD struggles to bring the company back to profitability this particular “rumour” doesn’t sound so outrageous, especially when we’ve already entertained the possibility of such a strategy. The “idle-race-car-in-a-pit-stop” description mentioned by Mr Ruiz on the current situation of Fab30 is probably not the best metaphor for an empty Fab. A Fab with a ready capacity is the real “idle race car”, but then again this cost $millions to sustain. An empty Fab without cash for the necessary upgrade sounds more like an empty pit stop - no race car! And if such is the case then its just a wasted asset. There is also the other problem of excess manpower that AMD isn’t allowed to release lest they lose their grant. Anyone familiar with wafer manufacturing knows that an idle Fab however less costly is just as bad as an underutilized one.
If there is one reason why anyone should believe the rumour it has to be based on this simple fact. Nobody builds or upgrades a Fab without expecting enough volume to sustain the added operating cost, let alone a return on investment. The initial assumptions made to support an AMD with two Fabs did not materialise and the result of which is just one idle Fab that it cannot afford to keep. Even if AMD did have the money to upgrade Fab30 to 300mm/(Fab38), there won’t be enough volume to support such a massive increase in operating cost. Clearly AMD finds no use for Fab38 at the moment and if AMD plans to keep Fab30 idle then that simply goes against any asset-lite approach. An unutilized asset which incurs cost doesn’t make any sense. What makes more sense is a foundry like TSMC with enough customers to fill a Fab jumping in and taking over. This even coincides with the other rumour that TSMC will ramp AMD’s 45nm in 2009.
As if the initial Barcelona benchmarks submitted eons ago wasn't bad enough, SPEC.org appears to have labelled them as non-compliant. IBM having problems securing enough Barcelonas failed to meet the requirements of shipping systems 90 days after submitting results.
What I find really surprising is the fact that even a Tier1 vendor like IBM can't seem to get hold of AMD's latest quad-core. If an important customer can't even ship a lower bin 1.9Ghz Barcelona months after product launch one has to wonder how many has AMD really managed get out of the door. I was joking around when I said AMD most likely shipped 20,003 Barcelona's because it's the lowest end of the statement "shipped tens of thousands". With the news spreading and the gathering noise about K10's lack of availability, it appears my tongue in cheek comment may be a bit more accurate than first thought.
IBM fails to ship even the most meager four-core Opteron box - The Reg
"In the meantime, IBM has to look the sucker with NON COMPLIANT stamped all over its benchmarks."
If you're one of those that ever wondered what is the worst kind of evidence when caught doing a paper launch,... well, now you know!
In basic economic terms, 'price' is the monetary equivalent of 'value' at a particular point in time. But 'value' is such an abstract concept that it varies from person to person, from time to time and depends very much on circumstance. One such circumstance is of course availability. We know the more scarce an object is the more valuable it becomes. The second is the benefit it provides. If Phenom is the best processor at any meaningful measure, naturally it should also be the most valuable processor in the market.
Then why is Phenom being rumoured to launch at a priced only equivalent to Intel's mainstream quad processor, the QX6600 at $288? For a consumer, the bottom line is value for money and usually that means the most performance per dollar spent. Processors are typically priced based on how they will perform and AMD and Intel follows this accordingly. So at the end of the day, it doesn't matter what the benchmarks says or what some crazy blogger thinks. If AMD has priced its next generation processor right around the bottom of Intel's old generation products, there isn't much anyone can say about how badly K10 turned out to be.
How much is Phenom valued? (as per Newegg 5th Nov 2007):
Intel Core2 Extreme QX6850 3.0GHz at $1029.99
Intel Core2 Extreme QX6800 2.93GHz at $1015.00
Intel Core2 Extreme QX6700 2.66GHz at $949.99
Intel Core2 Quad QX6700 2.66GHz at $534.99
Intel Core2 Duo EX6700 2.66GHz at $319.99
AMD Athlon64 FX-74 at 3.0GHz at $299.99
<-- Phenom launches here -->
Intel Core2 Quad QX6600 2.4GHz at $284.99
Intel Core2 Duo E6850 at 3.0GHz at $279.99
Phemon performance sits where it is priced. End of discussion? Not really because we can still discuss how launch prices are typically overvalued due to the anticipated initial demand. But that's just beating a dead horse.