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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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Missing the boat
By staypuff69 on 2/28/2007 4:26:51 AM , Rating: 3
Well here we are talking about someone taking over AMD. Here's a little hint for you all. Don't believe everything you read. There is a cash flow problem. Is this due to lagging sales of AMD procs. No it isn't. Large companies especially tech ones rely on up to date R&D and manufacturing processes to stay competitive.

AMD's cash flow is due to them trying to compete with Intel on up to the minute high end procs and pushing huge amounts of money into labs creating procs that only 10% of the population buys. Throw $2 billion into a facility and see what happens to your cash flow.

Instead AMD should consider providing affordable cpu's that people require in day to day purchases. This is what they excelled at. Instead they've tried to compete with Intel in producing "enthusiast" processors. I don't know about anyone else here but here in Canada the vast majority of computers sold are from large retail stores in which AMD constitutes 85% of the sales. AMD should stick to this plan and spend their money on "sure thing" architectures. All of us sit here and lament the fact of faster and more yet don't realize we only are 15% of the purchasing force for these companies.

On the note of latest and greatest..... what if Barcelona is what AMD is claiming it is? Suddenly we have a shift like only a year ago and AMD is now the best on the block. Not only are they the best proc but also sell the most as well. Look into what exactly it means to be cash poor in a large corporation first. AMD is simply going about things the wrong way. One shift in perspective and suddenly Intel is the loser.

Oh and if you all want a company that may purchase AMD how about the one that has 80% of their comps hooked up with one of their procs........ HP ftw

"Nowadays, security guys break the Mac every single day. Every single day, they come out with a total exploit, your machine can be taken over totally. I dare anybody to do that once a month on the Windows machine." -- Bill Gates

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