) plans to report its Q2 2011 earnings Thursday following its much
larger rival Intel (
) that reports Wednesday, and many believe that 2011 could stack up
as the company's most profitable year since 2000. This implies that
investors will looke for improved profits in Q2 vs. last year as
well. We take this opportunity to look at some key areas that
investors should watch out for given several significant
developments that have taken place in first half of 2011.
Our price estimate for AMD stands at $9.50
, implying a premium of about 45% to the market price.
Uncertainty Around Leadership
It seems that AMD still hasn't found a suitable leader to
replace its previous CEO who was removed by the company's board
earlier this year. We are aware that many investors are looking
forward to some concrete information or indication regarding future
leadership. This is partly the reason why AMD's stock has fallen
significantly in the past 3-6 months. However, according to
Bloomberg, AMD is still having difficult finding a new CEO, which
has added fuel to short sellers.
How Server Business Would Have Grown?
It is critical for AMD to regain
share in server microprocessor market
where it holds a paltry 7% market share. The situation did not
improve in Q1 2011, and it will be interesting to see if the
company has made any progress on this front in Q2. Likely
indicators would be revenue growth in servers coupled with ASP
(average selling price) trend. Why is this critical?
First, the company's server microprocessor market share has
fallen dramatically from a historical high of 25% indicating that
there plenty of room for AMD to improve its position in this
market. Secondly, this market is lucrative because of high average
selling prices of server processors.
Any Indications on Early Adoption of Llano Chips
Since Llano, a hybrid of CPU and GPU, was launched recently, its
impact will not be visible in Q2 2011 results. However it will be
useful to see if AMD gives any indication regarding early demand
that it is witnessing for Llano chips. Why is this critical? If
received well, it could help AMD gain
market share in notebook segment
, which constitutes almost 30% to its value and is therefore one of
the most valuable segments. Notebooks is another area where AMD's
market share has dropped since its historical peak and Llano could
help turn this around.
See our complete analysis for AMD's stock.