Advanced Micro Devices (AMD)
How the mighty have fallen! AMD was once a genuine competitor in the global semiconductor business. Its market share (2.9%) and global ranking (no. 8) in the industry peaked in 2006, but was still dwarfed by Intel (INTC) that has a vise grip over the industry, with market share in the 12-13% range (Market share and ranking data source: iSuppli Corp.). AMD's market cap also peaked in 2006 at around $24 billion. Revenues peaked in 2005 at about $5.85 billion.
However, strategic mistakes have since plagued the company. AMD over expanded its production facilities, knows as "fabs" in the industry. In 2007, the company made mistakes with the design and production of its quad-core server and desktop chips. Earlier this month, AMD announced that it was going to delay a planned spin-off in the company's attempts to outsource its chip production.Now, AMD faces declining market share, an economic dilemma and cash-rich competitors, such as Intel and Texas Instruments (TXN), which can weather the current storm. AMD's debt rating is CCC+, which is categorized as "junk." In 2005 and 2006 combined, the company generated nearly $2.8 billion in cash flow from operations. In 2007 and 2008, the company burned a lot of cash (while I don't have the exact amount, I estimate the total to be just over $1 billion). AMD's debt grew from $1.3 billion at the end of 2005 to $4.7 billion at the end of 2008. When you put this all together, AMD is in serious financial distress. If the company cannot sell or spin off assets and the chip business remains weak, AMD will have to put itself up for sale or face the possibility of bankruptcy.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV