AMD gets premarket boost after larger rival Intel posts strong 4Q, FBR upgrades stock
By APFriday, January 15, 2010
Ahead of the Bell: AMD upgraded, shares up
NEW YORK — Shares of Advanced Micro Devices Inc. got a boost in premarket trading Friday following stronger-than-expected results Thursday from its larger rival, Intel Corp. that gave further proof of a recovering PC market.
AMD is the world’s No. 2 maker of microprocessors — the “brains” of computers” — behind Intel. But while Intel’s strong results bode well for AMD, FBR Capital Markets analyst Craig Berger upgraded the company mainly citing its “accelerating move to unconsolidate itself from GlobalFoundries.”
AMD is in the process of spinning off GlobalFoundries, its manufacturing arm.
Berger raised his rating on AMD to “Outperform” from “Market Perform.”
“Once AMD reduces its ownership stake in GlobalFoundries below 20 (percent), then it will unconsolidate financial results, a positive,” the analyst wrote in a note to investors.
AMD’s transformation into a “fabless” chip company — meaning it designs the chips and outsources production — with variable costs “appears to be happening quickly” Berger added.
A fabless chip maker, Berger said referring to past comments from AMD, should garner gross margins of 45 percent to 50 percent. In the past, AMD’s lower margins — which totaled 42 percent in the third quarter — have disappointed Wall Street.
In contrast, Intel’s gross margin in the fourth quarter was 65 percent.
Shares of Sunnyvale, Calif.-based AMD rose 18 cents, or 2 percent, to $9.18 in premarket trading.
