Advanced Micro Devices, Inc. to Offer $1.8 Billion of Conver

[SuperFly03]

AMD has a decent inventory turnover right now and is doing a moderate job in managing its level.

No so sure about that . . . AMD inventory is at its highest level since the *heydays* of 2005. Beyond question their sales have slowed. The question in my mind is just what that inventory consists of . . .

Inventory consists of Raw materials, work in process, and finished goods valued at the lower of cost or market.

Compute the ratio, AMD's turnover is better than Intel's. AMD does have higher inventory levels than normal, but they also took on ATI and 40% of their increase in inventory is 65nm chips. All the chip starts in FAB 30 (or is it 36? idk) are now 65nm, not 90nm.

They do not not need to piss away more cash and tying it up in inventory

How long do you think it takes to renovate a FAB facility ??? When taken in consideration with the **high inventory** AMD will not be sustainable making 90 nm Santa Ana's & Windsor's - when the Intel roadmap envisions 45nm in 2007 (and AMD's 45nm roadmap is mid-2008). Anyway you cut it that's 2X the die per wafer . . .

There is a difference between investing in capacity and investing in progress. I don't think AMD needs to invest that heavily in capacity, but more into progress. When did I ever say they should continue to make 90nm parts? Please show me where I would make such an egregious error. I have no idea how long it takes to renovate a FAB, do you?

. . . it is best kept in cash form for OpEx purposes and helping AMD weather the rough seas until they can get R600 and Barcelona (and its respective derivatives) out the door.

If they can't get the 65nm Brisbanes and Lima's out the door how will all that *operating cash* help get Barcelona out the door??? Do you not borrow money for physical plant??? FABS . . . man . . . FABS

and AMD + AMAT = FABS !!!



How will barcelona help them if they don't have the cash to pay current OpEx? They have to have both, my point was to avoid excess inventory and don't invest what little cash you have left poorly. You ride FABS as if they are the magic key to AMD's success, they aren't going to cure AMD's ill's if the product isn't there. This kind of over zealous CapEx will get AMD in more trouble than it is already in. Calm down already, there isn't a magic cure all pill. In order to dig themselves out they have to overhaul the entire organization not just one aspect which is what you are advocating and that kind of one-dimensional thinking is what bankrupts companies. Take a step back and look at a bigger picture.

Lay off the caffeine kid. 😀

 

[CaptRobertApril]

Voodoo Financing.

Now this is the best analysis I've seen.

When you read things like this, it is hard to wonder just how the investment bankers that came up with the deal were able to keep a straight face while trying to get the company to do it. More importantly, you have to wonder if the brokers selling this won't be hitting the mute button when they call clients so the clients can't hear them laughing.

This analyst deserves THG Forum honorary status! He's spot on! :lol:

 

[xpresso]

Voodoo Financing.

Now this is the best analysis I've seen.

When you read things like this, it is hard to wonder just how the investment bankers that came up with the deal were able to keep a straight face while trying to get the company to do it. More importantly, you have to wonder if the brokers selling this won't be hitting the mute button when they call clients so the clients can't hear them laughing.

This analyst deserves THG Forum honorary status! He's spot on! :lol:

I read that article earlier, it is scary, very creative accounting practices to follow next 8O

 

[CaptRobertApril]

I read that article earlier, it is scary, very creative accounting practices to follow next 8O

I love this quote from it too. This guy really calls it as he sees it!

What's the best thing to do when you are in the midst of losing a price war THAT YOU STARTED? Go convince Main Street that you can win what you have been losing if they will loan you more money to throw into the fire.... That is just what Advanced Micro Devices (AMD-NYSE) is doing, and if you believe after reading through this that it is a good financing then we have a bridge to sell you. The company is raising $1.8 Billion in convertible senior notes, and the convertible (strike) price will be at roughly 3-times the stock price and is planning a price cap on these, WITH YOUR MONEY.

I'm a fan! 😀

 

[SuperFly03]

Voodoo Financing.

Now this is the best analysis I've seen.

When you read things like this, it is hard to wonder just how the investment bankers that came up with the deal were able to keep a straight face while trying to get the company to do it. More importantly, you have to wonder if the brokers selling this won't be hitting the mute button when they call clients so the clients can't hear them laughing.

This analyst deserves THG Forum honorary status! He's spot on! :lol:

While he makes some good points, you have to realize that AMD needs cash. Period. They can't really raise it through equity (typical stock) because their stock is so depressed and 1/2 the proceeds would go to MS (not that isn't happening in the 1.8B issue). What I want to know is where he got the idea that the strike price will be 3x higher than the closing stock price? He pull that one out of his ass? I am not saying I know what the strike price will be but 3x seems a bit ridiculous.

AMD had to raise cash somehow and this is probably about the best they could wiggle without being bought out, because we all know 1/2 the AMD management would be fired on the spot if a PE firm took over. This financing deal is a bit messed up, but it has been done before and with AMD backed into a corner I am not sure I see too many ways out.

What happens if AMD goes under chapter 11 and gets to shed 1/2 the debt? Bankers are hosed, they have to believe there is a reasonable possibility that they will get their money back and AMD clearly sold them on the idea. Who ends up being right.... that I can't say, only time will tell.

 

[SuperFly03]

Voodoo Financing.

Now this is the best analysis I've seen.

When you read things like this, it is hard to wonder just how the investment bankers that came up with the deal were able to keep a straight face while trying to get the company to do it. More importantly, you have to wonder if the brokers selling this won't be hitting the mute button when they call clients so the clients can't hear them laughing.

This analyst deserves THG Forum honorary status! He's spot on! :lol:

I read that article earlier, it is scary, very creative accounting practices to follow next 8O

Actually this isn't all that creative. Very simple accounting actually. You get debt, cash, then pay out cash, reserve a portion of your cash and then account for the possibility of conversion in your EPS calculation. Nothing off the wall about it.

There are a few more details to the transaction, but in essence that is what is happening. With over 160 statements, hundreds of EITF issues, interpretations, board rulings and SEC rules, there isn't as much wiggle room as you might think.

 

[xpresso]

yup, but it is the truth now isn't it? it was Hector after all who started the war with Intel. Hector was a Motorola fab manufacturing manager back in the days and he's always had a bad thing for Intel...anyhow he's somewhat overrated, not a complete idiot but not so smart either. He is Open mouth - Stick foot type of talker at AMD's earnings conference calls you'd think they'd make him shut up during these events :?

 

[CaptRobertApril]

Can't comment on the 3x as it's too late to pore over financial boilerplate until my eyes cross.

It's just that the way it looks to me is that AMD got a high ratio first mortgage on a house from Morgan Stanley and now they're running around trying to get a second mortgage that overlaps the equity of the first. It would be nice if we could all do that, and even nicer if we didn't have to pay any of it back! :lol:

 

[xpresso]

Actually this isn't all that creative. Very simple accounting actually. You get debt, cash, then pay out cash, reserve a portion of your cash and then account for the possibility of conversion in your EPS calculation. Nothing off the wall about it.

There are a few more details to the transaction, but in essence that is what is happening. With over 160 statements, hundreds of EITF issues, interpretations, board rulings and SEC rules, there isn't as much wiggle room as you might think.

Super I agree, what I am hinting to is AMD's accounting practices are about to get creative with taking on more debt to pay down debt (been there with another company, that's another story)...it's just getting a bit hairy for them :?

 

[SuperFly03]

Can't comment on the 3x as it's too late to pore over financial boilerplate until my eyes cross.

It's just that the way it looks to me is that AMD got a high ratio first mortgage on a house from Morgan Stanley and now they're running around trying to get a second mortgage that overlaps the equity of the first. It would be nice if we could all do that, and even nicer if we didn't have to pay any of it back! :lol:

I'd love to know how you are going to examine that 3x figure.

I realize how bad it looks, and it is bad, but don't get all up in arms and condemn them to hell. I am really trying to temper people's repsonses and shed some light on this. I don't have all the answers, but there are 1000 outcomes that could happen and we can speculate all day, but sending them straight to the recycle bin is about a 1 in a billion chance, so let's try and figure out what they are going to do to stay afloat and why. 😀

 

[SuperFly03]

Actually this isn't all that creative. Very simple accounting actually. You get debt, cash, then pay out cash, reserve a portion of your cash and then account for the possibility of conversion in your EPS calculation. Nothing off the wall about it.

There are a few more details to the transaction, but in essence that is what is happening. With over 160 statements, hundreds of EITF issues, interpretations, board rulings and SEC rules, there isn't as much wiggle room as you might think.

Super I agree, what I am hinting to is AMD's accounting practices are about to get creative with taking on more debt to pay down debt (been there with another company, that's another story)...it's just getting a bit hairy for them :?

Well that isn't accounting... that is financing, two entirely different animals. The accounting which is what records the financing deal is pretty cut and dry (for the most part), the financing side is what is ugly. Debt on top of debt with convertible features, capped calls, and all that crap is financing.

 

[SuperFly03]

When did their credit rating get downgraded, I missed that one:

However news of the offering comes after Standard & Poor's downgraded AMD's credit rating Monday to "B," its fifth-highest junk rating, making the additional debt more expensive.

http://www.forbes.com/2007/04/23/AMD-debt-offering-tech--intel-cx_bc_0423techamd.html?partner=msn

I think it was downgraded to the highest level of junk rating after their press release. I am pretty sure S&P that their finger poised to down grade it and were just waiting for a deb announcement to do. I am not entirely surprised. :?

I bet the interest rate on this debt gets very close to 10%...

Wow, this would be tough.... you are talking of millions each quarter just in interest.

It depends on how they structure the deal. AMD's 2.5Billion in debt only requires 6M to be paid each quarter, that is only .2% of the principal. You are right the interest will be huge and it will add up, but the question is when is it payable? That is the big thing AMD is concerned about, when does the cash have to go out the door?

 

[CaptRobertApril]

I'd love to know how you are going to examine that 3x figure.

I realize how bad it looks, and it is bad, but don't get all up in arms and condemn them to hell. I am really trying to temper people's repsonses and shed some light on this. I don't have all the answers, but there are 1000 outcomes that could happen and we can speculate all day, but sending them straight to the recycle bin is about a 1 in a billion chance, so let's try and figure out what they are going to do to stay afloat and why. 😀

The 3x figure is relatively simple to deduce. Three is equivalent to the number of Hector's functioning brain cells. :lol:

Yes, you're absolutely right that there are many different outcomes to all this, but you really have to wonder if Morgan Stanley is going to be extremely happy at this apparent "workaround" and if the Street is gonna accept it. If you're right and the interest is gonna be around 10%, that would translate to about $60M a quarter just in vigorish. And that's if they can get any takers on this. But we'll see!

 

[SuperFly03]

The 3x figure is relatively simple to deduce. Three is equivalent to the number of Hector's functioning brain cells. :lol:

That is generous... 8O

I can only guess that the strike price is probably the sum of about 250 factors, 100 assumptions, and 50% guess in their financial models.... what I wouldn't give to get my hands on their software.

 

[CaptRobertApril]

what I wouldn't give to get my hands on their software.

I've often said that of the Raiderettes. :lol:

 

[SuperFly03]

what I wouldn't give to get my hands on their software.

I've often said that of the Raiderettes. :lol:

Live in Oakland do we? 8)

 

[CaptRobertApril]

what I wouldn't give to get my hands on their software.

I've often said that of the Raiderettes. :lol:

Live in Oakland do we? 8)

Nah. Hangover from when they were the LA Raiders and I had season tix in the Black Hole at the Coliseum. I never forgave them for going back up north.

To try to get back on track...

The stock price lost half a buck in overnight trading. What do you think that the next couple of days will bring, especially in light of the apparent fact that nothing may very well surface outta Tunisia until May 14?

 

[SuperFly03]

In the next few days we are going to see investment firms plug this debt into their uber super computer financial projections and see what it spits out. I think they will get a hold of K10 benchies just because of the size of Tunsia. I am not saying they will leak, but I wouldn't be surprised if the big boys didn't have someone there. I would expect AMD stock to hit ~$12.75 before it rebounds any.

I have no data for this guess. It is just instinct and observation, so take it with a carton of salt lol.

 

[piesquared]

I wonder if this would be an opportunity for Microsoft to step in with a couple billion. IMO, they've got alot riding on AMD's survival.

 

[SuperFly03]

I wonder if this would be an opportunity for Microsoft to step in with a couple billion. IMO, they've got alot riding on AMD's survival.

How'd you come to that conclusion? I am curious.

There is a possibility they could use AMD/ATI for their next gen console... hmm. Interesting.

 

[CaptRobertApril]

I wonder if this would be an opportunity for Microsoft to step in with a couple billion. IMO, they've got alot riding on AMD's survival.

How'd you come to that conclusion? I am curious.

There is a possibility they could use AMD/ATI for their next gen console... hmm. Interesting.

I've been saying for months that at this bargain basement price, AMD is a natural buy for Satan Gates. What's seven and a half B to the big guy? He must have spent close to that for his underground bunker of a house.

Just think of how it would turn the computing world upside down if Microsoft announced that all of its software including OS would only run on AMD CPUs.

OUCH!

Plus, I know that it's been beaten to death, mostly by me, but I find it rather curious that on such a newsworthy day, THG has no mention of AMD in its front page, but it does include:

Have you Ever Wanted a VW Beetle Inspired MP3 Player?
Hot Water Saver is Eco-Friendly and Saves Money

:roll:

But no, I've already said more than my piece and I'm not gonna start bashing THG again...

 

[SuperFly03]

Interesting point. Gates would do it too...

*rant*

As for THG, I've been noticing the MEGA EXCESSIVE amounts of f***ing useless info on cars on the homepage. I can't stand this shit. I really wish THG would stop expanding into areas they know nothing about and that cause them lose their reputation across the world as computing experts. I think the world basically mochs THG behind their back. I would. Their saving grace is they have the best forum I have seen.

Xtremesystem, anandtech, and other sites have weak forums and some great threads but it isn't a helping community. It is a community of extreme projects here and there. THG has thousands of threads per day with users from all over the world and constantly adding value to the community. It is a great place to start learning and then you branch out to Xtremesystem for ridiculous projects and anandtech for real articles.

/rant.

Edit: 2007 posts. :tongue:

 

[piesquared]

I wonder if this would be an opportunity for Microsoft to step in with a couple billion. IMO, they've got alot riding on AMD's survival.

How'd you come to that conclusion? I am curious.

There is a possibility they could use AMD/ATI for their next gen console... hmm. Interesting.

Well i'm of the opinion that Intel is aligning itself with Apple and NV. Call it a gut feeling I guess, as well as some indications of it around the web. Given the huge critisism MS has been recieving (especially recently with Vista), and that just seems to me to be the way things are lining up. Also microsoft invested a huge amount of money in their 64 bit OS' to which Intel isn't all that interested in supporting, and I just think a little more populariy in OSX and Intel would back it wholeheartedly.
And most importantly, DX10. They need a healthy dose of competition for the Gaming for Windows initiative, and ATI is a major player in that. I believe more than anything they need R600 to flourish. The thing that is stalling Vista adoption the most is the lack of DX10 games. Once they start to ship, I think Vista will start to catch on with enthusiasts. The current problem is that not very many are happy with NV's midrange and affordable DX10 capable cards, and it's starting to look like AMD has a real winner here. IMO

 

[ruler]

 

[SuperFly03]

I wonder if this would be an opportunity for Microsoft to step in with a couple billion. IMO, they've got alot riding on AMD's survival.

How'd you come to that conclusion? I am curious.

There is a possibility they could use AMD/ATI for their next gen console... hmm. Interesting.

Well i'm of the opinion that Intel is aligning itself with Apple and NV. Call it a gut feeling I guess, as well as some indications of it around the web. Given the huge critisism MS has been recieving (especially recently with Vista), and that just seems to me to be the way things are lining up. Also microsoft invested a huge amount of money in their 64 bit OS' to which Intel isn't all that interested in supporting, and I just think a little more populariy in OSX and Intel would back it wholeheartedly.
And most importantly, DX10. They need a healthy dose of competition for the Gaming for Windows initiative, and ATI is a major player in that. I believe more than anything they need R600 to flourish. The thing that is stalling Vista adoption the most is the lack of DX10 games. Once they start to ship, I think Vista will start to catch on with enthusiasts. The current problem is that not very many are happy with NV's midrange and affordable DX10 capable cards, and it's starting to look like AMD has a real winner here. IMO

Well M$ always gets flack for their OS, no matter what it is. This is a recurring theme. They have to design an OS to work on 85%+ of the market, so the bugs are bound to creep up. I am not saying Vista doesn't have issues, because it does, but overall it works fairly well for an initial release with a complete rewrite of the kernel.

Related to 64 bit, it is a tough push. To be honest, I wasn't around for the 16 bit to 32 bit change over, so I can only guess that it was a tough road to get started because you have to not only sell the idea to consumers, but to software designers, hardware builders and then it all actually has to work. Is 64 bit necessary? Yes, if only to break the 4GB limit for now, but in time we will need it. I have no idea when, but I'd say with in the next 5 years you will see it gain real traction, so while Intel may not really care... it still has to make sure their chips work well with it.

The reason OSX has done so well is because it is so simple. Honestly, it is a noobs best friend, bar none. However, it doesn't have the power Windows does. It doesn't have the power to be a server/desktop/ws/tweaker friendly and easy to use all in one. Also, gaming blows, you just can't do it and don't even get me started on the freakin 1 button mouse/laptop clicker, it is retarded. Yes it is easily solvable but still very annoying. OSX has some great features, but until I see a more fundamental shift towards gaming/enthusiasts I will never use it.

Related to DX10, it is hurting Vista and it is hurting ATI for now. The games are coming, the hardware is close at hand, they just need to push it down to the mass market level which won't be easy until generation 2 of the DX10 cards hit. You are right, NV doesn't have great offering in the midrange right now, hopefully ATI can fill the gap. Time will tell.