Wednesday, October 18, 2006

AMD's margins going up day by day

AMD beated conclusively the analysts expectations in Revenue, Net Income. I liked this passage of Syndrome(*) on the subject: "Unlike Intel, who had to sell investments to book profit, AMD had organic growth".

The expectations where $0.23 per share EPS and $1.3 billion dollars in revenues, which were beat with $0.27 EPS and 1.33 G$. AMD's 51% gross margin is superior to Intel's 49% for the second consecutive quarter. It is worth noting that Intel does other products than just Microprocessors that in principle didn't endure a price war.

Just like AMD's management depicted in today's conference call, AMD's cost are getting lower day by day with the addition of larger production volumes coming out of Fab36, and at 65nm, that is, gross margins are improving.

The organic growth speaks volumes about the consolidation of the duopoly. Once Intel dessists of the price war, solves its inventory problem, or not, it doesn't matter, then the market for microprocessors will experience high premiums that will be shared more equitatively by AMD and Intel, but this is long term.

Short term, AMD is harmed by Conroe, just like we expected. It is keeping up with Woodcrest, and probably will be hit by the double dual cores, but it will survive to see the day of its true quadcores at 65nm in the market.

I find tonight's after hours excursion to the sub $21 levels so absurd that I scrapped every penny to buy like there is no tomorrow. Tomorrow, I will see how to unwind the margin call (don't worry, I am long in enough puts)