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AMD gains as analysts cheer 1Q results

Analysts cheered first quarter results for Advanced Micro Devices Inc. (NYSE: AMD) Thursday, but the chip maker couldn't build on its after-market gains.

AMD shares were treading water at 76, their after-market closing price Wednesday. At the 4 p.m. EDT close, AMD shares were at 64 1/2.

Prudential upgraded its rating from "accumulate" to "strong buy" and Deutsche Banc Alex. Brown upped its rating from "market perform" to "buy" after AMD reported first quarter earnings, which were twice as large as First Call's consensus estimate

"Unbelievable, I mean literally unbelievable," said Peter Wolff, an analyst with ING Barings in New York shortly after learning of AMD's earnings. "They blew away the Street."

AMD posted record net income for the quarter of $189.3 million, or $1.15 a diluted share -- nearly double Wall expectations of 58 cents a share. It also reported record sales of nearly $1.1 billion, which wasno surprise, since the company said April 5 its sales would be above the billion mark.

"AMD had the best quarter in its history," W.J. Sanders III, chairman and CEO, said in a statement. "Each of our product groups reported significant growth in the first quarter."

Analyst Ashok Kumar of U.S. Bancorp Piper Jaffray wasn't as ecstatic on the stock's long term prospects; he said he remains skeptical the company can continue on its record pace.

"We think PC unit sales are going to be down sequentially in Q2, and the only way they can perform better is to capture market share from Intel, and that I think is a stretch of reality," Kumar said. Intel has traditionally held 85 percent of the market share.

"Intel will use the weapon it has, which is price, to maintain market share, and there is not much AMD can do about that," he said.

In a report for Piper Jaffray, which reiterated Kumar's rating on the stock as "buy, aggressive" he wrote that "with only a retail mobile presence and no traction in the server segment, we are cautious about the long-term outlook for the company."

PC Week contributed to this report.

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