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Old 03-13-2007, 04:05 PM   #1
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Question AMD Dieing?

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Originally Posted by By JORDAN ROBERTSON, AP Technology Writer Sun Mar 11, 7:32 AM ET
SAN JOSE, Calif. - The high-flying Advanced Micro Devices Inc. of 2006 has given way to a company in financial peril, saddled with debt and bleeding from a brutal price battle with its larger and suddenly resurgent Silicon Valley archrival, Intel Corp.

AMD finds itself the subject of rumors of a possible takeover or private-equity cash infusion. While it wasn't long ago that AMD was stealing a big slice of the microprocessor market and emerging as a long-term threat to Intel, those very gains may have left AMD's well running dry.

Though the price competition has cut into both chip makers' profits, Wall Street has punished AMD's stock particularly hard.

Its shares have plunged more than 60 percent over the past year on fears about the company's ability to continue gaining share without hurting profit margins. Meanwhile, Intel's stock is down just 4 percent.

Investors are concerned AMD is spending too heavily to keep up with Intel's aggressive transition to next-generation manufacturing technology.

AMD's fall has wiped out about $10 billion in shareholder wealth. Analysts say the exodus will likely continue until the company rolls out its new chips this year and resolves fears about its dwindling cash reserves and high capital expenditures.

The shifting fortunes highlight the challenges facing AMD as it squares off against a company with seven times its annual revenue and a history of spending heavily on breakthrough technologies.

"AMD, as a company, has enough strong parts that it will survive, but I think it's going to be a rough couple of years for this organization," said Stephen Kleynhans, a research vice president at Gartner Inc. "They've got some very solid technology, but technology can be very fleeting. A technology lead today can just disappear in just a matter of quarters."

Both Intel and AMD are adept at weathering the boom-and-bust cycles of the volatile semiconductor industry. But they are still adjusting to AMD's newfound competitiveness across a range of products, from desktops to laptops to servers.

AMD stole about 4 percent of the overall processor market from Intel in 2006, according to Mercury Research. AMD scored a particularly big victory by partnering with Dell Inc., once an exclusive Intel client.

But Intel, which still controls about three-quarters of the total market, has roared back with a lineup of powerful and energy-efficient processors that appears to be slowing AMD's offensive.

While AMD continues to gain market share in desktops and laptops, its growth in the lucrative server market has stalled. In 2006, AMD siphoned about 5 percent of the server market from Intel, but leveled out at 22 percent share during the second half, according to Mercury Research.

Last month, Intel scored a high-profile victory of its own, announcing an alliance with server and software maker Sun Microsystems Inc. The partnership will put Intel chips back in Sun servers and workstations after several years of AMD exclusivity.

AMD is banking on regaining momentum with the mid-2007 launch of its new server chip, code-named Barcelona, which has four computing engines and an updated design. The company acknowledges that Intel beat it to market with four-core chips that launched in November. But AMD insists its design for getting the cores to communicate with each other will serve as a key advantage.

"Five years ago no one knew who we were in the server space, now we're a player," said Mario Rivas, AMD's executive vice president for the computing products group. "This will allow us to be a serious contender in the server space and regain the performance crown. There is a halo effect that goes with that."

But analysts are not optimistic about a quick turnaround for AMD.

The company swung to a $166 million loss for fiscal 2006 and disappointed investors by offering little clarity on how it intended to differentiate its products from Intel's and improve profitability.

This week, AMD warned it was unlikely to meet its first-quarter revenue guidance of $1.6 billion to $1.7 billion.

"Our view is that this will get worse before it gets better," said Christopher Caso, a senior analyst with Friedman Billings Ramsey. "This quarter's performance is evidence that it did get worse."

Wall Street is worried that AMD is in dire need of cash after its $5.6 billion acquisition of graphics chip maker ATI Technologies Inc. and heavy spending on factory upgrades. AMD bought ATI last year under the philosophy that combining traditional processing chores with graphics capabilities in one chip would give AMD a long-term advantage over Intel.

But the deal reverberated through AMD's finances. At the end of 2006, AMD was sitting on $1.5 billion in cash but had $3.8 billion in debt, including $2.2 billion associated with the ATI acquisition. In 2005, AMD had $1.8 billion in cash and a total debt load of $1.4 billion.

AMD said in its annual report that the big debt may crimp its ability to borrow more money and pay for $2.5 billion in capital expenditures planned in 2007.

"It's a dilemma we believe AMD needs to spend the money to build the fabs (chip factories), but they may have to find some additional financing to achieve those goals," said analyst John Lau of investment bank Jefferies & Co. "We believe investors need to see some resolution of these issues before they start to get back into the stock again."

Intel ended 2006 in a healthier financial position: $10 billion in cash and $2 billion in total debt. Intel's net income dropped 42 percent last year hurt by price-cutting and extensive factory upgrades but analysts are bullish the company is quickly recouping its investments and improving profitability.

Intel is known for its heavy research-and-development spending even during lean times. In 2006, the company said it was eliminating 10,500 positions in a massive restructuring. But it still spent $5.9 billion on R&D about 17 percent of overall revenue up from $5.1 billion in fiscal 2005.

By comparison, AMD plowed $1.2 billion more than 21 percent of its revenue into R&D last year.

The expenditures have helped Intel pull ahead of AMD by at least a year in producing chips based on 65-nanometer and 45-nanometer technology, which shrinks chip circuitry to 65- and 45-billionths of a meter. The smaller scale allows more transistors to be crammed onto the same piece of silicon.

AMD said it is closing the gap with Intel and believes its partnership with IBM Corp. makes rolling out the technology more cost-efficient.

"We believe we're putting the right capacity in at the right time, and we're immediately getting the benefits," said Tom Sonderman, AMD's director of manufacturing technology.

Industry analysts said both companies are suffering from the need to balance the near-term goals of shareholders and the huge expenditures required to stay competitive.

"What this comes down to is the companies are playing a long-term game," said Dean McCarron, principal analyst at Mercury Research. "The financial people would be delighted to hear AMD would not be investing in any factories. They would be delighted if Intel would not compete on price to gain market share and would focus on margins. That's great for the next three quarters, but a train wreck for both companies."

Perhaps one lifeline for AMD will come from none other than Intel itself.

AMD is suing Intel for antitrust violations, claiming that Intel undercut AMD by forcing customers into exclusive deals and offering secret rebates. Trial isn't due to begin for two more years, but there's precedent for a settlement. In the mid-1990s, AMD and Intel agreed to resolve several legal claims against each other, and one result was that AMD won the right to keep producing chips on the x86 design architecture which both companies still use today.
Take a look at this graph it shows AMD vs. Intels stock values. A 60% decrease in vales from AMD...

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Old 03-13-2007, 04:13 PM   #2
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Default Re: AMD Dieing?

Wow, that sure does look bad for AMD. I guess the new Intel processors like the Core 2 really did them in.

I myself have a AMD 3700+.
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Old 03-13-2007, 04:49 PM   #3
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Default Re: AMD Dieing?

Its a shame, AMD have always offered much cheaper CPU's and often much better performance than Intel, or at least at such a reduced price, small performance loss isnt such a problem. I could only ever afford AMD, now however, and i didnt think i'd ever say this cos im an AMD fan, i'd like to get a Core Duo.
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Old 03-13-2007, 05:05 PM   #4
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Default Re: AMD Dieing?

I'm sure they will come up with something.
Seems like they are going down and fast, but that's just because of core 2 duo. Once amd gets some of their new (hopefully good) stuff out they should get back in the game.
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Old 03-13-2007, 05:10 PM   #5
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Default Re: AMD Dieing?

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Originally Posted by mammikoura
I'm sure they will come up with something.
Seems like they are going down and fast, but that's just because of core 2 duo. Once amd gets some of their new (hopefully good) stuff out they should get back in the game.
yea. a lot of the laptops and even desktops ive seen recently all have core 2's in. no amd anywhere.
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Old 03-13-2007, 05:25 PM   #6
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Default Re: AMD Dieing?

What AMD needs is a product that can recreate confidence in the consumer and the average stock holder but there is nothing about that which is easy. The most unfortunate part of such a decline in stock values is that it causes shareholders and consumers to lose faith in a comeback from AMD and so with fear of a pending bankruptcy on AMD's part there seems little motivation to invest in the company. What I do know, however, is that the N. American market economy does not favour a monopoly (especially on an industry as large as computing technology) so I would be surprised if a collapse from AMD will actually happen. The economy does not want to see Intel as having that much influence. With that in mind I feel that the government will step in before anything serious happens.
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Old 03-13-2007, 05:32 PM   #7
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Default Re: AMD Dieing?

If AMD does go down a new company will sprout back up in its place so I don't think theres going to be a monopoly. Maybe motorola cpu will become the next best thing or power pc processors you never know
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Old 03-13-2007, 05:41 PM   #8
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Default Re: AMD Dieing?

Well, that just means it's time to buy AMD stock!! I'm sure they'll release a new product line soon, and values will increase a bit.

Sorry to be picky, but it's dying, not dieing.
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Old 03-13-2007, 05:43 PM   #9
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Default Re: AMD Dieing?

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Originally Posted by freestyler105
Sorry to be picky, but it's dying, not dieing.
oh well I wasn't sure but after trying to decide what it was I was like lol it doesn't matter people will know what I mean
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Old 03-13-2007, 05:51 PM   #10
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Default Re: AMD Dieing?

I love AMD. I just want them to come out with a Core 2 Duop counterpart or KILLER!!1!! I want to own an AMD, but Core 2 Duos are better and that is what I am gonna get for now.
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