A few posts ago I had commented that AMD would have to get used to being a sub 20$ stock again. At which point I was corrected by S that the real number would be $10. I must now bow to S's presience.
Two things happened this weekend to drive this:
1. AMD again pre-announced that it would miss it's Q1 numbers:
http://biz.yahoo.com/ap/070305/amd_warning.html?.v=8
http://www.forbes.com/2007/03/05/amd-guidance-lower-markets-equity-cx_af_0305markets06.html
2. AMD has filed a motion to increase the outstanding common stock from 750 million to 1.5 billion shares. While the Inquirer reported this first, I've also provided the link to the filing:
http://www.theinquirer.net/default.aspx?article=37982
http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?FilingID=5007928&Type=HTML
The phrasing of the filing interestingly says it is not intended to discourage potential buyers of AMD...and existing shareholders must vote against in order to stop the motion from passing...abstaining will mean support for the motion.
Basically, the rumours of AMD being acquired by a private equity firm coupled with their need to secure more cash as they start to lose money has sucked the wind out of Hector and team.
Either the AMD management is displaying serial incompetence or they are consistently not revealing all the facts. Starting with sticking behind their Q4 numbers on Dec 14th...even as they were hitting the banks up for cash, to mis-calling their Q1, to Hector's interview with CRN below where some of the things he said were just unbelievable. All that's left I can think of is for Barcelona to slip or not be as good as AMD has been saying it is. I suspect when Q1 is reported, AMD's margins will not recover as Bob Rivet had predicted and any credibility this management team has will be hosed.
I repeat my predictions of layoffs at AMD within the next 6 months and the New York fab commission decision pushed to 2008. Further, AMD will be forced to raise capital again and should they continue to mis-call or mis-represent the true state of affairs, like ATI they will be facing a class action suit from disgruntled stock-holders. I also expect any institutional investors with a large AMD position to try and stop AMD from pushing the additional 750 million share proposal from going to vote.
Once again, AMD has not only had the GAAP loss I predicted, it is heading to an operational loss within the next 6 months. AMD's stock price is now trading below it's 52 week low.
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4 comments:
Seems like the rumor I mentioned about Dell scaling back on AMD orders significantly was dead on.
http://roborat64.blogspot.com/2007/02/amds-gargantuan-distribution-problem.html
Hector mentions solving the channel problem but last time i heard, demand for AMD system in this part of the market is quite poor.
As for the LBO, its highly unlikely at the moment with 2 consecutive losses and no visibility on profitability. Low volume Barcelone is not enough assuming its even as good as AMD says.
Once again I think the best thing that could have happened for Intel was AMD getting some of Dell's business, despite several notable AMD fanboys saying this is what will "break the monopoly":
1) Intel no longer has to give preferential pricing to Dell, of course this may have happened due to the lawsuit anyway.
2) AMD likely had to give better than normal pricing for their products to win the Dell business(lower margin)
3) Other AMD customers may have noticed Dell's aggressive pricing on AMD-based computers and may have also tried to negotiate better pricing.
4) Dell severely restricted AMD's manufacturing flexibility.
5) If AMD wises up and realizes they can get better pricing from the channel (and have more flexibility), then Dell will have t ocome back with hat in hand and no longer have the "we'll use AMD" beat stick on Intel! If I were Intel I would say "Go ahead, I dare you!"
And finally - AMD was selling all they could make BEFORE they won the Dell business. Either they were realizing Core2 would eat into their business and thought they had to create new demand, or they vastly overestimated what their capacity would be. If you're selling everything out with healthy margins and a growing business why go to a customer who skews you product mix to low end parts and asks for better pricing due to volume? I mean if they had excess capacity - sure, but keep in mind they also were in process of acquiring ATI, so even if they projected extra capacity they could have used it for graphics parts!
I'll repeat this move was about a year too early... AMD would have slightly less volume share now, but their revenue share (and margin) would be better, which would give them more money for expansion so they could eventually feed the Dell monster.
http://biz.yahoo.com/ap/070308/analyst_note_advanced_micro_devices.html?.v=1
It's looking very bad for AMD. Now the Analysts are predicting $10 levels for AMD stock too.
I am just amused by how quiet Dr. Sharikou's blog recently has been.
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