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AMD stock rose on Monday in response to LBO rumors, but then fell on Tuesday

Shares of AMD rose on Monday amidst rumors of a leveraged buyout. AMD shares were up 74 cents, or 5 percent, at $15.43 in yesterday’s morning trading on the New York Stock Exchange. AMD has traded between $14.43 and $42.70 over the last year.

“It wouldn't surprise me if there was some sort of 'creative solution' in the works to help (strengthen) AMD's balance sheet,” said FTN Midwest Securities analyst JoAnne Feeney to the AP. “They took on a fair amount of debt for the ATI acquisition, and clearly AMD needs to do something about its balance sheet.”

"When they acquired ATI, they had to borrow quite a lot to finance that purchase and that's created a higher debt-to-capital ratio than they had in the past. It's still in that squeeze,” Feeney said to Reuters.

“The volume in AMD March calls have been abnormally high,” said Steve Sosnick, equity risk manager at Timber Hill and common source for M&A commentary. “There are rumors of a private equity buyout. At least in the near term, the options market is giving some credence to these rumors.”

While the analysts quoted by the recent news agencies reports seem to think that such a buyout is possible, another Wall Street analyst, American Technology Research's Doug Freedman, said earlier this month that AMD would be an unattractive candidate for private equity firms due to the company’s struggling cash flow from its price war with Intel.

In related news, FTN Midwest today cut its stock rating for AMD from a “buy” to a “neutral,” citing that the Sunnyvale company could be facing increased competition if Intel is able to deliver its 45nm product ahead of schedule. Analysts believe that AMD would have to cut prices even further to avoid further losses of market share, and may not recover until mid-2008.

Shares of AMD current sit down nearly 4 percent at $15.06.

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RE: Intel Athlon...
By TomZ on 2/27/2007 3:35:44 PM , Rating: 1
Are you saying you read somewhere that Intel might be considering acquiring AMD?

I wouldn't think that would be possible from a DOJ/anti-trust perspective.

Most likely, a buyout would be from a private group of equity investors, such as those that bought out some of the other semiconductor companies over the past few years.

RE: Intel Athlon...
By therealnickdanger on 2/27/2007 3:40:32 PM , Rating: 2
Haha, no, no, no! I didn't read about Intel anywhere, but if anyone had the buying power and the motive to make it happen... Besides, IBM is still out there, so it's not like it would be a monopoly.

RE: Intel Athlon...
By stromgald on 2/27/2007 3:53:53 PM , Rating: 2
Actually, the buyout will likely come from a private equity firm. There was a rumor about this a few weeks ago since AMD is having cash flow problems. I seriously doubt Intel has much interest in acquiring AMD/ATI, and there's a good chance it won't even be a tech. company doing the buyout.

The benefit of a buyout won't be the merging and consolidating of technologies and resources, it'll be more of a financial driven acquisition. The acquiring company will buy AMD, use its monetary resources to boost AMD until it gets its act together/recovers from the ATI merger, then sells it back out for a profit or hold if they think AMD will generate steady revenue for them.

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