AMD Faces Possible Buyout by Private Equity Group

[bing]

Even though I'm standing at Intel boat now, just don't like Intel to monopoly the processor scene, not good for customer !


Source -> EETimes

AMD faces cash crunch and LBO, says analyst

Mark LaPedus
EE Times
(02/15/2007 11:24 AM EST)

SAN JOSE, Calif. — Advanced Micro Devices Inc. (AMD) faces a potential cash crisis amid rumors about a private-equity buyout for the microprocesor maker, according to an analyst.

''We were surprised to see AMD shares rally yesterday given what we believe to be increasing concerns about cash flow at the company,'' analyst Doug Freedman of American Technology Research Inc., in a report on Thursday (Feb. 15). The analyst issued a ''Sell'' on AMD's share with a price target of $12.

''When we polled clients as to the reason behind the strength we were told that private equity rumors were circulating,'' he said in the report. ''While we do not doubt that private equity is sitting on cash it needs to put to work, we have a hard time seeing how it would get involved in AMD at the present valuation.''

Still, AMD (Sunnyvale, Calif.) needs cash amid a bitter price war with Intel Corp. (Santa Clara, Calif.). ''In the meantime we think management will be forced to come to the capital markets for operating cash before the end of the summer,'' he said.

There are other bad signs for AMD. ''We see Michael Dell's return as CEO at Dell as a negative development with strong ties to Intel,'' he said. ''OEM relationships are straining to stay engaged with AMD at this time given its stale product line-up. We continue to think AMD needs to get new products out to regain a competitive stance.''

AMD did not comment on the report. "AMD does not comment on rumors or speculation,'' a company spokesperson said.

It's not all doom and gloom for the company. AMD took its largest slice ever--25.3 percent--of the X86 market in the last quarter of 2006, according to a report released by PC market watcher Mercury Research.

But now, Intel in recent months has regained its groove and is gaining ground with a string of quad-core processor releases, a new relationship with Apple, and, most recently, new inroads with Sun Microsystems.

Recently, AMD reported fourth quarter 2006 revenue of $1.77 billion, an operating loss of $527 million, and a net loss of $574 million, or minus $1.08 per share. In the previous period, AMD posted a profit of $119 million on sales of $1.328 billion. The company reported a profit of $268 million on sales of $1.351 billion a year ago.

 

[WonderingSoul]

I don't think AMD will be down and out yet...

 

[Rinne]

Me neither,

they've just acquired ATI, I doubt they would have done this if they had too much financial problems... Also the graphics market should bring them in lots and lots of money...

 

[Randyman...]

Recently, AMD reported fourth quarter 2006 revenue of $1.77 billion, an operating loss of $527 million, and a net loss of $574 million

Wow - they lost 1/2 a BILLION dollars in '06. That's not chump change, especially with how much they just invested in ATI.

 

[Rattle]

I wonder if they count the cost of buying ATI in that loss

 

[inkfx]

AMD needs to get some new hardware released. They sure are taking their sweet time with it.

 

[xTrEmEoVrClOcKr]

Totally agree with inkfx. I am really excited to see their new line of products.

 

[IAmMoen]

I wonder if they count the cost of buying ATI in that loss

no they shouldnt be taking that into account seeing as they say their operating loss is at 5xx million. Cash flows from operations do not include investing or financial activities. Unless they are not using General Accepted Accounting Principles...

 

[MRD]

The athlon 64 has really been out for a long time now. They need another flagship product. It was released in 2003, so it's going on 4 years now, and I haven't really heard anything about a next-gen chip in sight. That's making me a bit nervous for AMD. I'm a die-hard AMD supporter (see sig... I don't own an intel chip over 400 mhz). However, with their current financials, they really should be in a better position in terms of product cycle. Maybe they've got something up their sleeves (i.e. K10 anyone?) but I haven't heard much at all about it. The K8L isn't going to cut it.

The athlon 64 wasn't really even a big enough improvement in raw speed over the athlon xp. Sure it was 64 bits and that was neat and all, but it didn't crush the athlon xp like the athlon did the k6-2 series, and it didn't scale in power like the initial athlon 5-600 mhz slot A chip did up to the xp 3200 barton.

nVidia is also beating ATI right now in the graphics market, having substantially beaten them to market with the first directx 10 compatible video card. The 8800 really caught ATI with its pants down imo, and is pretty much dominating the high end gamer market.

The other thing is, we tend to view this as techies... who has the better chips. We see AMD vs Intel as close. AMD's and Intel's chips are fairly comparable in raw power. Wall Street doesn't see it that way. They see balance sheets, and Intel's looks a lot healthier. Much more cash on the books. all the R&D money to make the core 2 duo was money Intel had in the bank. AMD had to borrow the funds to develop the Athlon 64, which puts them at a disadvantage. It's very much in our interest as consumers though for AMD to succeed, if Intel gets a monopoly again, chip prices will go up by a factor of 4 (or more).

 

[Hipcrostino]

AMD needs to get some new hardware released. They sure are taking their sweet time with it.

they can't just spit out a new chip, you have to develop these things. personally i would prefer them to take time and do it right like intel did with conroe.

 

[netmask]

AMD will survive and will keep making our computer world a better place ( and cheaper ). Don't worry AMD is not a company, it's an idea and ideas are debt-proof (a little stealing from V will do for this phrase I think ...). Intel will burn in hell and deserves it. It's everyones right to own a OCable, cheap and nice cpu. I'll never forget that money I wasted to buy that useless 433 celeron.


AMD DEATH = INTEL ALIVE
INTEL ALIVE = A LOT OF MONEY FOR NOTHING (except c2d )

 

[>HyperlogiK<]

AMD will survive and will keep making our computer world a better place ( and cheaper ). Don't worry AMD is not a company, it's an idea and ideas are debt-proof (a little stealing from V will do for this phrase I think ...). Intel will burn in hell and deserves it. It's everyones right to own a OCable, cheap and nice cpu. I'll never forget that money I wasted to buy that useless 433 celeron.


AMD DEATH = INTEL ALIVE
INTEL ALIVE = A LOT OF MONEY FOR NOTHING (except c2d )

Don't kind yourself

Intel are a big bunch of two bit scumbags, but AMD are just a smaller, more innovative bunch of two bit scumbags.

Neither cares about it's customers in any respect other than how they might screw more cash out of them, and neither is the good guy.

The big difference is that one makes average-to-good products despite big bloated and inefficient by virtue of an enormous RnD budget, while the other
average-to-good products despite being short on cash by virtue of some innovative and ballsy RnD people.

 

[therookie]

cross your fingers then

 

[IAmMoen]

actually when you think about it if amd gets bought out and or liquidated intel will have all of the market and wouldnt the anti trust laws we have here in america be REALLY angry about that. I believe that is why in the beginning intel and amd basically came about at the same time and amd made generic intel procs. This way intel wouldnt be a monopoly and be slapped with a lawsuit. However as soon as amd figured out that they could make more money by producing their own chips they went their own way but intel had a 20 year or so headstart on the company building so they are obviously still the dominant force so they want to have a price war with amd because they WILL win. But they don't want to win. They just want to cripple amd so that they have just enough of a market share to make sure intel isnt a monopoly but not so much of the market share to take away too much of intel's profits. Time will tell. No c2d for me personally. I just hope it is more of an investment for the future of the processing world to wait for amd to come out with their answer to c2d (hopefully someday)

 

[jtjuska]

This is making me nervous for AMD as well. I think its fair to say I am die hard Intel fan but I also realize that Intel needs AMD. Heck I am selling my C2D to a friend and am playing with a P4 651 at the moment but I am thinking about getting some AMD stuff just to do something different that what "most people" seem to be doing these days (aka C2D). Helping AMD out wouldn't bother me any either


~jtjuska

 

[One Bull]

I sure hope AMD survives, else we would mis AMD AND Ati sniff.

Seriousely, development won't go as fast without much competition.

 

[>HyperlogiK<]

Of course AMD will survive, likely worst case for us is that they go bankrupt and somebody steps in to buy up most of their assets whole and continue making CPUs. I'm pretty sure that AMD is worth far more to a potential buyer as a working chip manufacturer than as a series of fabs, machines and patents to sell off bit by bit.

In fact there must be investors who relish the thought of AMD being declared bankrupt, just so they can snap up the whole company for less than it is worth.

Also, bear in mind that a few years ago (~yr2001) AMD had debts of >$2 Billion and was hemorrhaging money, the K7 architecture was beginning to struggle to keep up with what intel had, and then K8 chips started making a difference to their balance sheets.

I doubt that their K10 chips are going to be quite the sucker punch to intel that K8 was, but K10, CGPUs, and increased volume through their deals with Dell and Chartered are bound to start making them some money again in the near-medium future.

 

[netmask]

Don't kind yourself

Intel are a big bunch of two bit scumbags, but AMD are just a smaller, more innovative bunch of two bit scumbags.

Neither cares about it's customers in any respect other than how they might screw more cash out of them, and neither is the good guy.

The big difference is that one makes average-to-good products despite big bloated and inefficient by virtue of an enormous RnD budget, while the other
average-to-good products despite being short on cash by virtue of some innovative and ballsy RnD people.

I just hate Intel that's the thing.

 

[MRD]

intel will have all of the market and wouldnt the anti trust laws we have here in america be REALLY angry about that.

Yeah, cause the laws have done oh so much to shut down the monopoloy Microsoft has. I mean, the US government has just crippled Microsoft's monopoly. If I were Intel, I would be utterly terrified to suffer Microsoft's fate, a complete monopoly with tens of billions of dollars on the books and every other company bowing to your will out of fear... /sarcasm off.

I believe that is why in the beginning intel and amd basically came about at the same time and amd made generic intel procs.

Not exactly. This goes all the way back to the 8088/8086 series processors. Intel designed them, but didn't have the production capacity to meet demand, so it licensed out production to a number of other companies. Intel received a portion of the profits on those processors. If Intel had had the production capacity, they wouldn't have licensed out the processors, and in fact, they stopped doing so as they ramped up their own production capabilities. Later on, AMD re-entered the market with the AMD 386DX-40, which was AMD's own design, basically a clone of the Intel i386, but running at a faster clock speed. Intel didn't license it or receive any money. This ****ed off Intel, and led them to change their chips from 80x86 to pentium since apparently a name can be copyrighted but a number cannot be.

Intel are a big bunch of two bit scumbags, but AMD are just a smaller, more innovative bunch of two bit scumbags.

The bottom line is that I want there to be competition. I wouldn't want Intel to go out of business either, although I'd like to see a 50/50 split in the market and the two companies closer to market parity. If either company achieved a monopoly, consumers would lose. The fact that there is competition is why processors are so much more affordable today than they were in the past, and I hope it stays that way. The other processor companies really can't compete (Via C3/C7 are kind of a joke to anyone that needs real power).

 

[jtjuska]

The bottom line is that I want there to be competition. I wouldn't want Intel to go out of business either, although I'd like to see a 50/50 split in the market and the two companies closer to market parity. If either company achieved a monopoly, consumers would lose. The fact that there is competition is why processors are so much more affordable today than they were in the past, and I hope it stays that way. The other processor companies really can't compete (Via C3/C7 are kind of a joke to anyone that needs real power).

QFT and totally agree . Well said.

~jtjuska