A higher valuation is justified when a company's earnings growth is significant. AMD's growth prospects are substantially higher than Intel's.

We believe FEI is poised for improvements in operating efficiency following the conclusion of its reorganization and restructuring efforts in 2005. We see FEI as undervalued due to its prior struggles and believe that the impact of its recently completed reorganization has yet to be appreciated by the market.

Most people are used to the old story of AMD and Intel where they were tied together and the fate of Intel was the fate of AMD.

But the story has changed fundamentally over the past couple years.

The semiconductor industry is entering a new growth phase which includes new product development for consumer applications, the entrance of new players in China and India, and more complex challenges due to advanced technologies. These issues are impacting the manufacturing strategies.

The growth outlook relative to developed markets is still in tact. We believe in the consumer story in emerging markets.