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Amuro
04-30-07, 08:48 AM
AMD scrambles to raise capital but risks long term company health

In July of last year, AMD and ATI merged to form one of the largest semiconductor companies. The cost of the acquisition was an enormous burden for AMD: $5.4 billion USD. Analysts at the time said that the acquisition would be a bad move for AMD, noting that the chip company would be better off plunking the large amount of cash in other core businesses like micro processors.

Of the $5.4 billion that it took to purchase ATI, AMD borrowed roughly $2.5 billion in loans and combined with $1.2 biillion common stock. The acquisition not only cost AMD much of its available principle but also left it in heavy debt. At the time, AMD did not disclose plans of how it would pay off the debt. In fact, two months before the confirmed acquisition of ATI, AMD announced that it would be spending $5.8 billion USD into the development of fabs in Dresden, Germany.

Friday, AMD announced that it will offer Convertible Senior Notes to investors in an attempt to raise roughly $2.2 billion. However, unlike common stock purchases, Convertible Senior Notes put AMD further into debt -- in this case, another $2.2 billion USD. Using Convertible Senior Notes, investors profit since the notes can be converted to common stock once AMD is performing well.

Using Convertible Senior Notes, AMD can receive usable cash now, but not have to worry about paying back its investors until its common stock reaches a predefined price. In this case, AMD set the conversion point to be $42.12 USD per share but its current price is roughly $14. In the catastrophic event that AMD goes bankrupt, Convertible Senior Notes take priority over other debts and thus investors are guaranteed the return of their money.

With excellent market performance from rival Intel, AMD posted a painful first quarter loss of $611 million USD this year. AMD is now left with roughly $1.1 billion in the bank; a figure that has analysts worried.

Nicholas Aberle, Senior Vice President of Equity Research, Caris Company, states, "AMD is still spending a good clip. Without borrowing the company could run out of cash by late Q3, early Q4." Arberle adds, "[AMD] needed to raise capital just to keep the doors open."

Raising capital is only part of the equation so far. Last month, AMD announced plans to restructure the company and to cut $500 million USD in capital spending in order to feather off some of its financial woes. While the strategy may prove to be helpful in the short term, cutting back on capital spending eats into new facilities and R&D.

In addition, cutting expenses is not an easy task in the middle of a fierce price war. AMD announced large cuts across its high-end processors earlier this April, following Intel's cuts just last week.

Both companies are expected to further slash prices as AMD debuts its Barcelona processor family this summer.
http://www.dailytech.com/AMDs+Large+Debt+Mounting+Up+Fast/article7036.htm

nekrosoft13
04-30-07, 09:02 AM
wow, so if intel and nvidia keeps killing them, amd could go bye bye soon

Quick420
04-30-07, 09:18 AM
Damn I hope the quad cpu works well,please not another 3dfx.

spaceigg
04-30-07, 09:29 AM
I truly hope that AMD suvives this crisis.

OldOfEvil
04-30-07, 09:45 AM
Would be funny if nvidia bought out AMD-ATi.. remember how invincible 3dFX was?

ViN86
04-30-07, 09:46 AM
I truly hope that AMD suvives this crisis.
yes, me too.

theres a lot of fanboys out there saying "OMG, AMD SUCKS. I HOPE THEY GO BANKRUPT". but those idiots fail to realize that if AMD goes away, then the CPU market belongs to Intel (more than it currently does).

then we will see slower performance gains between generations. (who makes a better product when they arent motivated to?) we may also see price hikes. AMD better rebound, or were in for it.

nekrosoft13
04-30-07, 09:57 AM
Would be funny if nvidia bought out AMD-ATi.. remember how invincible 3dFX was?

nvidia is doing pretty well, so this could be possible

only way amd will be able to rebound if their next chips are good, or they produce them for pennys and sell them for dollars.

Mr Bigman
04-30-07, 10:19 AM
Nvidia knows if ATI/AMD go bellyup, Nvidia can slack off when ever it feels.

And wiht the issues Nvida has with making solid drivers for Vista, it could only get worse cuz Nvidia isn't rushed for the competition. Damn that could be bad.

Xion X2
04-30-07, 12:08 PM
Here's a guy who's really pulling for AMD. I loved my X2 proc.. if Conroe hadn't been the monster it is, I would've kept it. I was perfectly happy with that chip at the time.

nekrosoft13
04-30-07, 12:27 PM
speaking of competition

we still have VIA ;)

spaceigg
04-30-07, 12:55 PM
VIA processors and GPUS?? :(

Bearclaw
04-30-07, 01:25 PM
yes, me too.

theres a lot of fanboys out there saying "OMG, AMD SUCKS. I HOPE THEY GO BANKRUPT". but those idiots fail to realize that if AMD goes away, then the CPU market belongs to Intel (more than it currently does).

then we will see slower performance gains between generations. (who makes a better product when they arent motivated to?) we may also see price hikes. AMD better rebound, or were in for it.
QFmfT. They need to survive.

zoomy942
04-30-07, 01:51 PM
amd always used to appeal to the little guys, and now they are priced like Intel. thats the problem. i remember when i could get an AMD for half the price and an Intel and laugh at the guys who spent too much on an Intel chip:)

$n][pErMan
04-30-07, 05:35 PM
I hope AMD can pull a left hook on Intel and get back in the game. I loved my old AMD computer... Untill C2D I had been a loyal AMD user for about 6 or 7 years. Just for the price of C2D it would have been a dumb decision to stick with AMD for the price and performance relationship. Im just so surprised they are doing so bad as CPU's are hardly thier main money maker. That ATi aquisition really hurt them :( Go AMD go... keep Intel on its toes and kick nVidia in the ass so we get better drivers and lower prices!

Xion X2
04-30-07, 05:43 PM
amd always used to appeal to the little guys, and now they are priced like Intel. thats the problem. i remember when i could get an AMD for half the price and an Intel and laugh at the guys who spent too much on an Intel chip:)

A great point. I really think that AMD should've had a price cut at the release of Conroe/Kentsfield. They didn't do this until much later, and I think it really hurt them. They lost a lot of AMD owners who went C2D because they were still selling their top model FXs for $700+ which were getting spanked by 300$ E6600s.

Redeemed
04-30-07, 05:51 PM
Also, AMD really messed up by releasing AM2. It is not necessary at this point. AM2 offers nothing over 939 except for DDR2 support. AM2 would have been better suited for Athena/AthenaFX's release.

I'm really getting worried for AMD. I almost want to go out and dump all the money I can on some purely AMD- based systems, but I know that really wouldn't help 'em much simply cause I'm just one person. Now if I could just convince enough people to... *sigh* :(

grey_1
04-30-07, 06:18 PM
Also, AMD really messed up by releasing AM2. It is not necessary at this point. AM2 offers nothing over 939 except for DDR2 support. AM2 would have been better suited for Athena/AthenaFX's release.

I'm really getting worried for AMD. I almost want to go out and dump all the money I can on some purely AMD- based systems, but I know that really wouldn't help 'em much simply cause I'm just one person. Now if I could just convince enough people to... *sigh* :(
I would hate to see amd belly up.

But *more expensive + slower* doesn't keep a company afloat.

Wow, I'd love to see their next batch soon, and coming out swinging.

CaptNKILL
04-30-07, 06:24 PM
You know what I'm getting from all of this? They are so confident that their next CPU will stomp the competition that they are digging themselves a hole that they "know" they can get out of. If they waited until after they made billions off of barcelona, everything would probably cost them more.

Seriously, why else would they spend and borrow that much money right before a major release? They have been around for a really long time, I don't think they are the kind of company that accidentally blows all its money in one year with no real plan for making it back.

I will be very very surprised if this gets significantly worse and they either sell ATI to someone else or sell out completely.

Its partially wishful thinking (AMD getting the performance crown back would be pretty awesome) but it also makes sense from a business perspective.

Redeemed
04-30-07, 06:56 PM
I would hate to see amd belly up.

But *more expensive + slower* doesn't keep a company afloat.

Wow, I'd love to see their next batch soon, and coming out swinging.

Yeah, I know. But when you consider the possible long-term alternative, it doesn't sound too bad. ;) I'd much prefer to purchase from AMD for the sole purpose of fueling their ability to compete with Intel then purchase from Intel and drive AMD out of business.

It's all in the perspective, my friend. ;)

You know what I'm getting from all of this? They are so confident that their next CPU will stomp the competition that they are digging themselves a hole that they "know" they can get out of. If they waited until after they made billions off of barcelona, everything would probably cost them more.

Seriously, why else would they spend and borrow that much money right before a major release? They have been around for a really long time, I don't think they are the kind of company that accidentally blows all its money in one year with no real plan for making it back.

I will be very very surprised if this gets significantly worse and they either sell ATI to someone else or sell out completely.

Its partially wishful thinking (AMD getting the performance crown back would be pretty awesome) but it also makes sense from a business perspective.

Though that is the conclusion I've drawn as well- in reality that is how it has to happen. If Barcelona and Athena\AthenaFX performs worse than anticipated they're in deep-$h!t without a way out. :( Assuming the recent R600 benchmarks are infact accurate, AMD's only hope right now lies on their next CPU architecture.

Considering that it was the Opterons that got them their huge performance lead three years ago, hopefully the Opterons can pull it off again with Barcelona. *crosses fingers*

Sazar
04-30-07, 07:09 PM
Would be funny if nvidia bought out AMD-ATi.. remember how invincible 3dFX was?

Impossible, unless Nvidia borrows a ton of money.

Plus, I am sure there will be severe anti-trust implications unless the graphics portion is spun off.

Redeemed
04-30-07, 07:32 PM
Impossible, unless Nvidia borrows a ton of money.

Plus, I am sure there will be severe anti-trust implications unless the graphics portion is spun off.

True. Which is partially why I doubt Intel would buy AMD. That would make Intel essentially a monopoly (neither IBM nor Motorolla could compete with Intel like AMD managed to all these years)- and with ATi + all the resources Intel has available nVidia's demise would only be a matter of time.

No, I doubt anybody will buy AMD out- unless... IBM did. Then they could actively compete against Intel and nVidia. Not sure how IBM stands financially though so I can't say how realistic even that is.

K007
04-30-07, 07:57 PM
If this goes bad...we are so screwed ><..

Amuro
04-30-07, 09:19 PM
Here's a guy who's really pulling for AMD. I loved my X2 proc.. if Conroe hadn't been the monster it is, I would've kept it. I was perfectly happy with that chip at the time.
I still keep my X2 4800+, it's in my wife's system now. Great chip. Anyways, AMD needs to be bought, best way to get outta of this financial crisis, just not buy Nvidia or Intel, lol.

superklye
04-30-07, 09:31 PM
Anyways, AMD needs to be bought, best way to get outta of this financial crisis, just not buy Nvidia or Intel, lol.
*cough*

IBM


*cough* *cough*

Madpistol
04-30-07, 09:49 PM
Nvidia buying AMD/ATI = Thriving chip manufacturer w/ very innovative technologies.

Intel buying AMD/ATI = Death to Nvidia due to advanced architectural designs for graphics boards, and a processor monopoly.

If there's going to be a buyer, it had better be Nvidia and not Intel.