Monday, September 11, 2006

Calls of Note Part 1

- ThinkEquity's Eric Ross and Eddie Cheung are doing it again! This time, on AMD (NYSE:AMD). They note they have heard from several sources that orders for AMD processors are well beyond its fab capacity. Even with Fab 36 ramping fast (and 65nm expected in volumes in January), and Fab 30 and Chartered's Fab 7 ramping, they believe AMD will not be in a position to ship to its demand. Despite a challenging PC environment, they believe AMD has orders beyond its capacity for 2H06 and into 2007. Distributors have been on allocation since mid-August.

Demand for AMD processors is spectacular. The firm has heard AMD is gaining share at every major PC and server maker. Several contacts inside major PC OEMs have indicated if AMD had even more capacity, they would transition more share to AMD.

Several of firm's sources say that if distributors are not a key provider to the big PC makers, they have been essentially locked out from any mid- and high-end processors. Low-end processors can still be found, but inventories are tight. This is a 180-degree change from three months ago when inventories were building from already high levels.

With the virtually 100% utilization at AMD's internal facilities, gross and operating margins for the company should reach all-time highs. The firm can not imagine how AMD would consider not maximizing capacity utilized at CHRT. They also believe AMD's pricing is much stronger than investors are expecting.

According to the firm all this will likely make their 2007 estimates (already the high on the Street) appear conservative. In their opinion, any recent weakness in the AMD shares should be considered a possible buying opportunity given AMD's share gains and the potential for more wins with other OEMs. Reiterates Buy rating and $30 price target.

Notablecalls: Another nice call from ThinkEquity's Semi team! It's calls like this one that make money for investors. I expect AMD stock to move up in the coming days. Eric, Eddie! You
guys make larger firms look bad!

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