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.
quote: AMD is for sale at less than 1/3 their stock price
quote: They ate ATI and choking on it