AMD: Great Results

WOW!!! What results! Who would have ever thought this from AMD.

• YOY revenue growth of 20% for 11 consecutive quarters
• Channel partners continue to improve, which is important for this company that has a history of chip durability.
• HP, IBM, and the 3rd largest China PC company are doing more and more business with AMD. And Lenova continues to increase business with AMD.
• Gross margins of 58% and free cash flow of $270 million. Wow!!! Is this AMD?
• ASPs increased.
• Inventories down by 6 days going into a seasonally weaker period which is very good.

The big plus in this semi upturn is that a lot of the growth is occurring in new markets that were not aware of AMD chip problems in the 1980s and 1990s and are willing to try them--sales strong in China, Russia and other Asian countries. In addition, enterprise, data center, blade servers are all doing well—all important high growth market segments.

Gross margin outlook OK and most likely being overly cautious but it appears serious pricing pressure at the high end is still not a concern for 2006. AMD management still believes it can get 30% market share.

With quarter after quarter of good results, large institutional portfolio managers will have to continue getting back into AMD.