AMD restructures debt
By Ed Sperling, Editor in Chief -- EDN, August 9, 2007
AMD said today it will restructure some of its roughly $5 billion debt, floating $1.5 billion in convertible notes to repay a loan it had with Morgan Stanley.
The move is likely to produce extra money for AMD in the short term—something known as over-allotment—which the chip maker plans to use for general corporate expenses. And while the loan has generated lots of interest in the industry because of the amount of money involved, most analysts view it as normal debt restructuring.
Doug Freeman, analyst at American Technology Research, said the real issue for AMD is execution on its business plan, not the debt. AMR is maintaining a buy on the stock because AMD is now competitive with Intel in multiple markets, including mobile computers, whereas five years ago it was only competitive on the desktop.
“It’s an execution battle now [against Intel],” said Freeman. “Is AMD executing well? The answer is absolutely not.”
Freeman said that with Intel now focused on its Core Duo strategy and AMD offering a dual platform based upon its upcoming Bulldozer and Bobcat chips, AMD is more competitive than ever before across most of Intel’s markets. The challenge, he said, is whether AMD will be able to effectively tap into multiple niche markets to boost its overall profitability, a strategy that is potentially more costly but which will bring significant profits and get AMD out of a head-to-head price war with its larger rival.
“The key for AMD is flexibility,” he said. “There are hundreds of niche markets.”
