AMD's stock jumped past $47 today, a new 52-week high and a mark close to AMD's all-time high of just over $49. Intel's shares have dipped a little more than $1 to around $117. The stock jump coincides with AMD's release of an Athlon processor for performance PCs that runs at one gigahertz, a speed milestone that companies have been racing to hit for more than a year.
Although the release of the new chip gives AMD bragging rights in the PC desktop space, the jump in stock price, perhaps more importantly, comes as part of a steady upward progression that is matched by increasing commercial success for AMD. Historically, AMD's financial status has swung to extremes. A profitable quarter would often be followed by successive quarters of losses.
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.
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 physical 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.
Since the release of Athlon, the stock has steadily climbed. A number of analysts have also upgraded their ratings and increased their earnings forecasts for the company. AMD recently said it expects to see revenues equal to, or above, fourth-quarter revenues of $969 million on the strength of Athlon sales. Typically, sales go down in the first quarter of the year.
The new 1-GHz chips will add to the bottom line, but not at the moment. The chip is currently only available in computers from Compaq Computer and Gateway. Volume production won't begin until April. Volumes also appear to be quite limited for the 900-MHz and 950-MHz Athlon processors released today. While Compaq and Gateway are taking orders for 1-GHz systems, neither company has released computers with the slower chips, indicating that volumes are even lower than the 1-GHz systems.
Any significant financial impact, therefore, won't come until later.
"It is clearly still a premium product," said Nathan Brookwood, an analyst at Insight 64.
Intel, meanwhile, will release a 1-GHz Pentium III on Wednesday, sources said. A limited number of computers containing the new chip will come out this month, while volumes will start to appear in the third quarter.