Is AMD Losing the Processor War with Intel?

Case Background: Having recently fallen to a new 52-week low in morning trading, it looks like Advanced Micro Devices will miss its first-quarter target of $1.6 billion to $1.7 billion. The burgeoning company's problems originated from a product line perceived to be out of date, resulting in a reluctance on the part of investors to keep faith. AMD shares fell 24 cents to $13.94 in afternoon trading. Its PE ratio is currently N/A. Discussion: A product line in need of refinement is far from being AMD's only problem. Its biggest obstacle is the gargantuan Intel Corp., whose size, resources, and name recognition have proved to be very difficult to combat. Intel shares are currently just above $19; the company's PE ratio stands at 22.27.

Conclusion: AMD is by no means a lost cause. However, it is currently experiencing a negative momentum from the combination of Intel's strong competition, investor shyness, and profit shortfalls. The wise investor will examine all the evidence and consider carefully whether this company represents a great opportunity at shares $5 lower than those of Intel. Disclaimer: P/E ratios are a quick way to sort out the leaders within the same sector. Never use a P/E ratio exclusively to make an investment. Remember, a P/E ratio is measured using historical trailing earnings for the previous 12 months and does not necessarily indicate strong future earnings. P/E ratios, when used with other market value ratios, can help investors to make consistent returns and to minimize losses. Various interpretations of a particular P/E ratio are possible: 0-13 - Either the stock is undervalued or the company's earnings are thought to be in decline. 14-20 - For many companies, a P/E ratio in this range may be considered fair value. The average U.S. equity P/E ratio is usually around 14, which means it takes about 14 years for a company's stock to earn back its full purchase price. Average P/E over the entire market is a good indicator of overall market strength. 21-28 - Either the stock is overvalued or the company's earnings have increased since the last earnings figure was published. 28+ - A company whose shares have a very high P/E ratio either really does have an exceptionally rosy future or the stock may be the subject of a speculative bubble. A company with no earnings has an undefined P/E ratio. Financial information was provided by http://finance.yahoo.com (03/05/2007) This investment article was edited by http://www.proof-reading.com; copyright © 2006 PE-Ratio.com.All rights reserved.