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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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Looks like AMD ate ATI and choked
By DallasTexas on 2/27/2007 8:56:58 PM , Rating: 1
My, how things change. Just 14 months ago Hector was buying full pagers on Wall Street Journal challenging Intel to a Netburst vs Opteron bake-off. Effectively, kicking sand on the sleepy giant.

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

Key learning: Don't get too cocky, too fast. Don't eat so fast. Don't pick a fight with someone 10x bigger than you.




By Viditor on 2/27/2007 9:39:55 PM , Rating: 3
quote:
AMD is for sale at less than 1/3 their stock price


Huh? Do you mean 1/3 of their all time high? Because that won't happen either...if an LBO is officially announced, I can assure you that we'll see the price well into the high 20s within the day.

quote:
They ate ATI and choking on it

They're doing fine with ATI...
People who don't understand investing are similar to those who don't understand semiconductors. Just as it takes years to bring a CPU to market, it also takes years to fully incorporate a synergistic acquisition.
Just as Intel is close to 1/4 of their own all time high (split adjusted $75.83 in Aug 2000), AMD is also at a low point at the moment...
It doesn't mean that ATI is choking anything...it means that during a price war, stock value drops!


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