Contact Center Solutions Industry News

TMCNet:  With new direction, AMD has 'fighting chance,' analysts say

[November 26, 2012]

With new direction, AMD has 'fighting chance,' analysts say

Nov 25, 2012 (Austin American-Statesman - McClatchy-Tribune Information Services via COMTEX) -- This just in: Advanced Micro Devices Inc. has enough financial resources and support to make it through the next few challenging quarters as it tries to build a viable future for itself, according to financial analysts who have talked with management.

Bankruptcy or a sale of the company does not look likely to analysts, despite AMD's depressed stock price -- less than $2 a share last week -- and despite reports that AMD officials have discussed future financing options with a Wall Street investment bank. That raised questions about whether the company was about to put itself up for sale. The company said it "is not actively pursuing a sale of the company or significant assets at this time." Even though the chipmaker burned through an estimated $240 million in cash in the latest quarter, AMD has the resources and the plan to cut costs while it attempts to reinvent itself, said analyst Cody Acree with Williams Financial Group.

AMD's largest investor, the sovereign wealth fund for the government of oil-rich Abu Dhabi, gives the company a financial big brother to rely on if things get tight.

"That gives them a lot of financial backstop," Acree said, "while AMD is putting together its strategy of how they want to get from here to there." What "there" looks like remains uncertain.

Right now, the company is talking about dramatically increasing its sales of chips to makers of video game consoles. It also wants to become a leading maker of low-power server chips by leveraging the technology it acquired in March from SeaMicro Inc. Analysts believe the company has a shot at winning business in new Windows compatible tablets.

AMD's future prospects have an influence on Austin's tech industry. Even after a recent downsizing cut about 400 local jobs, the company still employs 2,000 people here in one of its key engineering and administrative centers.

Analyst Vijay Rakesh with Sterne Agee wrote recently that sales to game console makers could expand to 20 percent of AMD's revenue next year, up from the present level of about 5 percent. He also sees promise in AMD's tighter alliance with ARM Holdings Ltd. to create new kinds of low-power "dense servers" with dozens or hundreds of processors packed tightly together.

Rakesh estimates the company will return to profitability in the third quarter of next year at a sharply reduced revenue level. He estimates AMD's annual revenue will fall from $6.6 billion last year to $4.9 billion next year, before starting to grow again in 2014.

If the global economy picks up and the personal computer market strengthens, AMD could see its business improve, analysts say.

None of this means AMD is exiting the personal computer market. PC processors will remain its cash cow for some time to come. It's just that the PC no longer appears to be the company's primary focus for future growth.

"This is probably as much of a clean slate (redirection) at AMD as we have ever seen," Acree said.

AMD isn't the only PC-related company getting squeezed this year. Even arch-rival Intel Corp., the largest and most profitable chip company, is facing pressures because the PC industry seems to have lost its forward momentum. That was made clear last week when CEO Paul Otellini announced he would retire next May in a surprise move. Andrew Bryant, Intel's chief financial officer, said the chip giant will have to adjust to a new world where smartphones and tablets have supplanted the PC as must-have personal technology products.

"We don't see that PC category going away, but we see that the market has changed," Bryant told the New York Times. "We need to figure out what the market wants." Part of the pain at AMD, analysts acknowledge, is that a revised vision for the company means it must let go of its old self-image as the valiant underdog fighting gamely against Intel for a profitable and secure place as a key supplier to the PC industry. That image sustained the company in good times and bad for the past two decades, analysts said, and it inspired a generation of AMD workers.

Company co-founder and longtime CEO W.J. "Jerry" Sanders cultivated AMD's dashing image of being part of a glorious fight. In the mid 1990s, the company commissioned a faux movie poster of Sanders in Indiana Jones garb holding a bullwhip. The slogan of the poster was: "AMD: The Incredible Adventure Continues." These days, the adventure doesn't seem quite so incredible, not after the elimination of 3,000 jobs in the past year.

But analyst Patrick Moorhead says that the company's new management appears to be making a classic Jerry Sanders-style high-stakes bet by launching the company in a new direction.

"With any major changes like this, there are only two endings -- it's either an amazing success story or a tragic downfall," Moorhead said. "It only ends in one of two ways. In that sense, they have burned their bridges. This is a pretty big Jerry Sanders move here. They are taking the heat off their PC products and putting it on what they believe will be these next-generation big markets.

"And they have a fighting chance." ___ (c)2012 Austin American-Statesman, Texas Visit Austin American-Statesman, Texas at www.statesman.com Distributed by MCT Information Services

[ Back To Contact Center Solutions's Homepage ]

Subscribe here for your FREE Contact
Center Solutions
enewslettter.

Events

Weekly Live Demo
Contact Center Solutions

Register Today!


Weekly Live Demo
CaaS Small Center

Register Today!