Tuesday, April 04, 2006

Riding the roller coaster

The little I know of the dynamics of AMD's share price is this:

1) There may be the most impressive stream of good news that I have seen about a competitive situation for a company, and yet AMD's stock price may slide and slide and slide.

2) If I am right about the current situation, we will touch $50 after the CC, but just to avoid disputes, I spoke of $45+

3) But there is no way to sustain that price level without the help of Wall Street. But since the last quarter, AMD became Wall Street's #1 enemy, and I am being serious:
a) This is a disrruptive company, that WS doesn't like because it is not able to understand is cooperative model.
b) This company is destroying a former largest capitalization company not to replace it with itself, but with an ecosystem (!!)
c) Being neither exploitative nor monopolistic, AMD simply doesn't appeal to Wall Street, although the tertiary industries (such as chipsets) that it may create could be good for the whole world

4) Wall Street has to defend the $80 billion it has on Intel somehow.

5) Having WS as your enemy means that the formidable leverage on the media will be exploited to the maximum against you. Every positive spin on Intel (bad) news will be highlighted, every negative spin on AMD will be highlighted too. We have lost the game of perception before hand.
a) Look at Conroe: That is a dead end, over complicated tweaked processor, and it is duped just like the Vergelstungswaffen that will bury AMD.
b) Look at the price war that is not happening but that AMD already lost.

6) Most investors are not able to resist a concerted brainwashing effort from the whole of Wall Street. I am an engineer with solid background in ยต-proc architectures; yet, I must confess that I have doubted my knowledge trying to give it a chance to Conroe, all because I intuitively feel that I can't be right and the whole world wrong. Well, this is me accepting a bit of brainwash. Anyway, must investors don't have my experience, so, they are vulnerable, and they will lose faith, they will sell, the money will get out of AMD, and the price will fall

7) Once the price starts to fall, the "technical analysts" will see bearish tendencies on it, and will intensify them, so we will have once again the whole brunt of the day traders selling and the stock price sliding

8) Until new conference calls or news of such caliber take the price back to where it belongs, only to reiterate the cycle.

You see?
We will have plenty of opportunities to buy cheap.

I myself will be aware of when the bashers and the technical analysts start to come back to AMD and speak of bearish signs, not to short AMD, but to write (covered) short term calls to be closed/let allowed to expire worthless, and buy back when the absurdly cheap levels are even understood by the bashers. In this cycle it was $34, next cycle I think it will be $38


Anonymous said...

"b) Look at the price war that is not happening but that AMD already lost."

From the moment an analyst "predicts" a price war, until the price war begins, there is a certain ammount of time.

Look at this fresh article from the register, that in a few hours/days/weeks will be picked up by ./:


In a nutshell: Leaked data shows that a big discount is comming in the following weeks. That, my friends, is the first salvo of the price war that intel will wage on AMD. Not to destroy AMD, simply to clean the channel so that there are less old architecture chips when conroe debuts.

Now, about this post, when a person does not understands all the factors associated with an event, is all too easy to assign the blame to a ""conspiracy".

"Wall-Street is conspiring to destroy AMD"... Yeah right! Like all the guys with shares in AMD will voluntarily lose money to keep intel running, for the greater good of wall-street! Well then, why are they not killing VIA, as well?

As a counter example, AMD is less disrupting than GNU/Linux, and yet, Red Hat is doing fine, thank you. Or, an even better counter example: Novell is MUCH more traditional company than Red Hat, and both have excellent enterprise GNU/Linux products, and guess whose stock is performing better?

Why doesent wall-street conspire to destroy those crazy sandals and ponny tail guys from Red Hat and keep the good suits from Novell in control of the GNU/Linux thingie? Because, simply, there is no such conspiracy!

So, is not a conspiracy, is simply that Wall Street is looking at some sides of the 12 facet dice, and the poster is looking at a different set of the same dice.


Eddie said...

Thank you for your intelligent post.

When I refer to Wall Street, I refer to both the diverse interests of the multiple agents in the stock market and also sometimes to a concerted effort. Your post has made me think that perhaps I should make clear when I am referring to the broad WS and when to the concerted efforts.

About the price war, I wrote here in this blog a long article detailing my reasons to dismiss such option. Nevertheless, Intel may have a glut of products, and the only reasonable way to get rid of them is to stimulate demand lowering the prices. By the way, I believe that AMD/Intel processors are not direct competition, but that Intel products are substitutives of AMD, that is, only when AMD is not available (or outrageously expensive) the purchaser would go to Intel. There is some loyalty playing favorable to AMD. Remember that this company has had the upper performance hand for over 6 years now, that engenders loyalty.

Now, perhaps you don't remember, but just last Earnings Report, when AMD reported on Thursday after closing, on that week thre were two momentous downgrades of AMD, one by the Deutsche Bank, and the other by Merryll Lynch. You should know, just as Sharikou demonstrated, that the D.B. is a major holder of Intel, who has been dumping that stock, and Merryll Lynch, less than a month afterward was the underwriter of the $500 million AMD stock issuance. It is clear to me that the D.B. knew the excellent developments AMD had in the last quarter, because their shortage of products was highlighted as a hiccup in production and not as excessive demand, but the D.B. may have had information coming from AMD's german factories that production was just sold out, and yet they downgraded. Similarly with M.L., they had to know about AMD doing terrific.

Other than that, I subscribe to the opinion that the media is not treating with fairness the news in this area, that's why it is clear for me to speak with ease of a mild conspiracy of spinning positive news about Intel and negative news about AMD.

Your examples about Linux are very good. Nevertheless, they don't apply, because they are not eroding all across the board Microsoft's businesses, and that market is much more plural, in the x86 arena it is only AMD and Intel. Let me be clear: To damage Red Hat doesn't benefits Microsoft, to damage AMD benefits Intel.

Another thing is the issue of *scale*, AMD became a real, credible threat to Intel last year, if Wall Street could afford to be dismissive last year, it can't anymore, this little David is really eating Goliath's lunch.

One last thing, I would've enjoyed knowing who I am talking to, or at least having a callsign.