I never ever seen these kind of comments about AMD. Even when it was performing worse this this, analysts were ready to support it but now every one has given up. It will be difficult for AMD to survive as a stand alone business.
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2:34 PM
AMD Falls 16%: FBR, Bernstein Cut to Hold; ‘Uninvestable’?
By Tiernan Ray
Shares of Advanced Micro Devices (AMD) are down 43 cents, or 16%, at $2.20 after the company last night reported Q3 revenue and earnings per share that missed analysts’ estimates and said it would commence a restructuring involving a 15% cut in staff to save $190 million next year in operating costs.
On a conference call with analysts after the report, CEO Rory Read told the assembled that because of macroeconomic weakness, and a cautious attitude by PC makers in advance of the introduction of Microsoft‘s (MSFT) Windows 8 a week from today, “We face a very challenging selling environment, especially in the lower end of the consumer client space.”
Not only must AMD “build a more efficient operating model,” he said, but “we must diversify behind the traditional PC market and become a leader in fast-growing and adjacent markets where we can differentiate and create leadership.”
Those areas, said Read, include “cloud computing” infrastructure, video game machines, embedded chip applications, and tablets and a “new breed of entry-level notebooks” that can benefit from AMD’s energy-efficient processors.
The Street today is not exactly heartened by those words. The stock today received two downgrades, that I can see, with Bernstein Research‘s Stacy Rasgon cutting the shares from Outperform to Market Perform, and FBR Capital‘s Craig Berger doing the same.
The language is fairly blunt from both analysts. Rasgaon writes that “Our last tiny bit of conviction is, at long last, depleted,” while Berger is “throwing in the towel.”
Writes Rasgon, “We have no further confidence that any aspect of our prior structural thesis (margin accretion, cash flow, and balance sheet deleveraging) will play out in the foreseeable future.”
“Indeed, we now see the prospect for structurally lower margins, as well as cash burn [...] Frankly, the most common adjective that comes up when we discuss the company with clients is, simply, ‘un-investable.’ We are now believers.”
Rasgon cut his 2013 estimates to $4.87 billion in revenue and a 41-cent loss per share from a prior estimate for $5.54 billion and a profit of 14 cents.
Berger writes that management has mis-executed, raising the company’s potential burn rate, and the laying off of engineers doesn’t help:
We now have less confidence in go-forward cash burn given rapidly declining ASPs and management’s new refusal to provide gross margin guidance. Thus, we worry about the magnitude of intended pricing cuts and gross margin impacts as AMD’s cash bleed could intensify. Further, while we previously assessed cash to be sufficient for the next year, we now see scenarios where AMD may raise cash sooner, particularly with pending GlobalFoundries payments and with 4Q12 sales down a whopping 33% YOY. Further, management’s ongoing misexecution in our opinion seems to be contributing too (building too much inventory, firing top operational managers, channel misalignment, withdrawing from broad swaths of the market). Finally, the firm announced 15% head-count reductions, which will make it more
difficult to engineer and sell competitive products.
