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What next at new look AMD?

by Scott Bicheno on 15 October 2008, 09:08

Tags: AMD (NYSE:AMD)

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Debt

Fundamentally the reason for creating TFC is to improve AMD's balance sheet. Its Asset Smart strategy is essentially about selling off some assets to free up some cash and attend to AMD's not inconsiderable debts - incurred mainly from the ATI acquisition.

HEXUS.channel: How much debt this does this deal still leave AMD with and how is it going to pay that off?

 AMD: "AMD plans to announce its quarterly earnings this week and cannot comment beyond what has already been said. As a result of the transactions, AMD will strengthen its financial position and focus on the design and marketing of innovative computing and graphics solutions.

"AMD will improve its liquidity through The Foundry Company's assumption of approximately $1.2 billion in debt, ATIC's $700 million payment to AMD for ownership interests in The Foundry Company and Mubadala's $314 million paid to AMD for 58 million newly issued AMD shares and warrants for 30 million additional shares."

A look at the balance sheet in AMD's last quarterly earnings report  shows debts in excess of five billion dollars, so while this injection of around $2.2 billion will make a difference there's still a way to go until AMD's bank account is back in the black.

On the positive side, perhaps this move could at least enable AMD to report a quarterly profit for the first time in two years. Again, AMD was unable to comment on the likelihood of this due to the ‘quiet period' it is legally obliged to observe in the two weeks prior to an earnings announcement. Giving AMD the benefit of the doubt, let's assume this obligation also accounts for the brevity (or lack of) of the answers to the rest of our questions.