AMD - A Cockroach?

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“Hang on, it’s going to be a bumpy night” (if you know who said this, your age is showing).

More appropriately, it’s going to be a bumpy year.

One thing going for AMD will most likely be a net profit during the first quarter, but NOT because chip sales are taking off – rather due to a one-time cash infusion with the closing of the Abu Dhabi deal to the tune of $800 million to $1 billion. AMD’s revenues may not even break $1 billion during the first quarter, which should translate to a loss on continuing operations of something like $500 million – if things break right.

Nice to have some cash, but one-time selling off assets for cash only lasts so long – you have to assets to sell, and right now AMD’s cupboard is looking pretty thin. Could be that there will be a fire sale – anyone interested in ATI? AMD has written off almost all its goodwill so what’s left are real assets, at least on the books, that could be converted to more spin-out cash. A thought: Who might want to fund a leveraged buyout?

The news during the at least the first half of this year is looking really bleak – some recent headlines:

Need I go on? In reality what is shaping up as a global depression is going to result in some familiar companies going out of business, or in the best case being absorbed by the stronger ones. AMD is NOT a strong company, although it is a survivor. AMD is shaping its operations to break even on sales of $1.3 billion per quarter, although the way things are shaping up, maybe even this is going to be a tough slog.

Electronics markets across the board will be slumping, and those that show some life are going to be low-cost, low-margin products with netbooks a prime example (a market AMD has decided not to enter). This trend is one that’s troubling¬† “Nvidia CEO [who] says Intel’s Atom could hurt the hardware and software industries.”

I don’t wish ill on AMD, but let’s be realistic – AMD is weak, the markets are slumping badly and AMD’s options are narrowing. However, having endured some very bleak times, maybe a company such as AMD is like the cockroach – best suited to survive what’s shaping up to be a nuked financial scene.

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