AmTech?s Doug Freedman this morning cut his rating on Advanced Micro Devices (AMD) to Neutral from Buy; he cut his price target to $11 from $17.

?While we remain bullish on PC demand in general,? Freedman writes, ?we don?t see a material catalyst for upside emerging in the next 3-4 months and suspect investors will view any announcements on the company?s fab-lite strategy with skepticism, regardless of this view?s merits.?

Freedman made several other points about the stock:

• Recent Abu Dhabi investment has pros and cons and introduces a new angle for investment debate.
• Execution remains questionable with Phenom pricing and frequencies suggesting that lower R&D spending is unlikely in the near-term.
• ATI share take story likely to emerge in 2008, but not enough to move the AMD earnings needle.
• Management has been reluctant to take steps that would have added near-term value for shareholders, and there are no signs of a strategy change within management.

Freedman says he thinks the company will pursue a fab lite strategy, off-loading processor production to Taiwan Semiconductor, but that ?investors will view a restructuring that brings in third-party manufacturing partners and design partners with skepticism.?

Freedman contends that ?investors are missing the close process development link between IBM and AMD that is likely complicating the fab-lite strategy.? Using TSMC, he says, ?would alienate AMD?s long-time technology partners IBM and Chartered Semiconductor.? He adds that ?once the strategy is executed, it is likely to take a full year or more to impact the company?s operating results.? Freedman points out that ?further complexity arises from the x86 license terms,? but that Intel likely would extend the license as the thought of monopoly oversight has far greater negative implications.

And one other point. Freedman says that ?the recent disappointing launch of Phenom, and Barcelona before that, confirms that AMD continues to work through technology hurdles that are keeping R&D expenses inflated.? Freedman says there is no scenario that would allow the company to cut R&D in the near term. ?Any R&D reductions executed now would likely slow progress and distract from required engineering work,? he writes. ?As a result we think it will be several months until investors are satisfied with cost control actions by management.?

Advanced Micro today is down 33 cents, or 3.2%, to $9.94. This is the 7th day in a row that the stock has traded lower - the shares have lost ground on every trading day since its $12.70 a share placement with Abu Dhabi, for a total drop of 22%. This is the first time the stock has traded below $10 since mid-2003.