Calls of Note Part 4

- Banc of America notes that based on channel checks within the Asia supply chain, they believe that AMD's (NYSE:AMD) Sept qtr is tracking above current consensus forecast for 7.5% Q/Q rev growth. The upside in large part is being driven by 1) a significant improvement in microprocessor fundamentals from depressed levels in 1H06; 2) a healthier inventory situation in the channel following significant reduction to excess inventory for AMD's parts from elevated levels in June; and 3) the ramp of Dell's business, which, although only a modest contributor to AMD's Q3 results, is having a 'ripple effect' by driving upside to near-term orders from OEMs and the channel. Consequently, they are raising otheir Sept. qtr rev est from +3.5% to +9.9% Q/Q, with new CY07 GAAP EPS est. now at $1.35, up from $1.15 previously (consensus of $1.34).

Despite the strong unit upside vs. initial forecasts, the firm believes that the strong reception of Intel's Conroe, coupled with the attractive prices for Intel's other desktop products is limiting AMD's market share gains in desktops. Overall, despite the increased presence at Dell (they project 15-20% share at Dell by Q4), they think AMD's overall market share gains will be limited at best, and will likely be offset by share gains by Intel elsewhere (Apple, channel).

Maintains Neutral. Tgt goes to $26 from $23.

Notablecalls: Sorry, guys from ThinkEquity beat you by about 2 weeks. Also, AMD stock looks to be turning South from here.