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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: All I can come up with is this?
By Mitch101 on 2/27/2007 4:08:15 PM , Rating: -1
Back again.

IBM - Hmm. I dont think they have the guts to cross Intel like that. But they are proably the only company that can compete with Intel on die shrinks. They are not nearly as smart as Intel when it comes to die shrinks being brought to production but maybe they have something for 45 and 32 nm they could deliver early enough to take AMD to be a competitor. Doubtfull. IBM needs Intel and I dont see them doing this but AMD does share an office with IBM in Fishkill NY. IBM did own Cyrix at one point? Power 6. This could be the best match but I just doubt it.

DELL - Hmmm. Intel would lose a large stream of revenue here but it couldnt be done quickly. Too much at risk

HP - Too in bed with Intel on Itanic but would they double cross Intel to be their own CPU company again?

I only come back to Microsoft as being one big enough to take on the cash flow issue and being able to throw enough money behind getting AMD to at least on par with die shrinks. They have the money to do it but is their enough of a need for Microsoft to own a CPU/GPU company? I think its possible but unlikely. Sony certainly couldnt compete with Microsoft if they did do this.

Microsoft has bought companies before to block competition.

Sony? You think Sony could buy AMD? Gaming is a billion dollar buisness? Might make sense if a gaming company bought them? But at such a cost is it worth the long term savings?

RE: All I can come up with is this?
By bobdelt on 2/27/2007 4:14:10 PM , Rating: 1
Can you read?

A tech company wouldnt buy AMD because of its poor B\S. A private equity firm would have the resources to clear up some of the debt, fix amd's cash flows problems, and then sell it off again.

Why is dailytech posting this? This article belongs on a financial news site, not a tech news site. This isnt tech news.

RE: All I can come up with is this?
By Mitch101 on 2/27/07, Rating: -1
RE: All I can come up with is this?
By cochy on 2/27/2007 4:37:06 PM , Rating: 3
You're off your rocker. There were tons ATI buyout rumors by AMD. IBM screws stuff up? What are you talking about?
Plus the article talks of rumors of a private buyout. Every company you've mentioned is public.

RE: All I can come up with is this?
By gramboh on 2/27/2007 5:06:44 PM , Rating: 3
No offense mitch but all your guesses about potential buyers are hilarious.

Do you know what a private equity firm is?

By Mitch101 on 2/27/2007 5:29:40 PM , Rating: 1
Yes I just hashed out scenarios of Tech companies instead. I dont think it was worth a few people getting their panties in a bunch. From a tech standpoint I again will state I dont think anyone would be interested in AMD but it was fun to think about it.

Private Equity firms are not the only rumor floating around on this.

Their has been a rumor floating around about a tech company looking to buy AMD since before they aquired ATI and the rumor of AMD was approached by Transmeta for a merger also.

As for IBM lets see, OS2 Warp, Domino, Cyrix, Tivoli, I think Word Perfect was in there also. The list goes on.

IBM=I Blame Microsoft.

By deeznuts on 2/27/2007 7:40:31 PM , Rating: 2
Why is dailytech posting this? This article belongs on a financial news site, not a tech news site. This isnt tech news.
Despite the very financial subject matter, it does concern ATI, one of the most recognizable names in consumer tech. It has its place on both types of sites.

By MrBungle123 on 2/27/2007 6:40:53 PM , Rating: 3
OK, I admit it... its me... maxing out all my credit cards on cash advances and buying controling interest in AMD.

soon the company name will be:

Mr Bungle's Brand(tm) Advanced Micro Devices.

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