AMD's stock peaked at $60 today before closing at $53.25, a gain of about 12 percent. Despite the late drop, the closing price is still an all-time record for the company that hit the market in 1969. The previous record was $48.50, AMD executives confirmed.
The stock surge follows AMD's release yesterday of an Athlon processor for PCs that runs at 1-gigahertz (1-GHz), which makes it the fastest PC processor on the market. Roughly, speeding up a chip results in smoother, more realistic graphics, among other benefits. Intel will release a 1-GHz Pentium III tomorrow.
To keep the momentum going, AMD has to start gaining ground with corporate PC makers, analysts say. And any success will spark a reaction from Intel.
"When you start to gain share in the corporate market, especially in the server market, that is where Intel draws a line in the sand," said Scott Randall, an analyst with SoundView Technology Group.
The new 1-GHz chips will not contribute mightily to either company's bottom line at the moment as only limited supplies of these chips will come out. Perhaps more importantly for AMD, the record stock price comes as part of a steady progression in commercial success. Historically, AMD's financial status has swung to extremes. A profitable quarter would often be followed by successive quarters of losses, which often prompted complaints and grumbling among analysts and pension fund managers.
Last quarter, for instance, the company reported a larger-than-expected profit of $65.1 million, or 43 cents a share. For 1999 as a whole, however, the company reported a net loss of $88.9 million, or 60 cents a share, including a one-time after-tax gain of $259 million from the sale of its Vantis division. Without the sale, losses surpassed $337 million. In 1998, the company lost $104 million despite gaining significant market share.
The company has not reported an annual profit since 1995.
In April 1999, the stock was trading in the $15 range and few analysts recommended it. One pro-AMD analyst at the time said that a purchase of the company's stock at those levels could be justified, among other reasons, on the grounds that AMD's assets could cover the stock price.
The picture has changed since the release of Athlon last August. The chip scores well on benchmark tests against the Pentium III. AMD has also encountered few snags in producing adequate volumes of the chip or the speed to keep up with Intel, two problems that plagued the company in the past. AMD has also been able to match Intel on price cuts.
Still, despite these recent successes, the company will face difficult challenges in the near future, Randall said.
The company is currently in the process of opening a new fabrication facility in Dresden, Germany, that will produce, for the first time, AMD chips made with copper, rather than aluminum, wires. So far, no problems have been reported, but it remains a major undertaking that has yet to be completed. Second, Intel will release the successor to the Pentium III, code-named Willamette, toward the middle of the year, which could easily hand Intel back the crown in the performance space.