Does AMD/ATI have to sell at a loss?

[KidHorn]

I was perusing the financials of AMD, NVidia, and Intel and AMD's financials look horrible. They have over $5 billion in debt while NVidia has $25 million and Intel about $2 billion. AMD loses money every quarter. Their 3Q2009 losses were better than past quarters, but they made $66 million by buying back debt at below par. Basically, there were entities that loaned them money and agreed to retire it for less than what was owed because they would rather be paid now than risk not being paid in the future.

It looks like AMD gets about 75% of its revenue from CPU sales and 25% from ATI.

I know they're a good deal at the lower cost spectrum, but it seems they have to sell things at a loss to be competitive. I just can't see how they can survive with their debt load by selling CPUs for $87. They currently have about $2 billion in cash and lose about $1 billion a year, so if things don't improve or they don't find new investors, they'll likely go bankrupt in 2011.

 

[smoggy12345]

I wouldn't say they're being more aggressive than necisary but yeah i think they're taking advantage of being the only DX11 card maker and turning out a profit while they can. Not saying anything about nvidia's cards cuz *cough* fanboyism *cough* we dont know anything about their performance yet, do we smoggy? I didn't know you were an nvidia insider and you already have performance figures? Oh wait, sorry, i guess you dont.

**** me im sick of this, does everyone jus jump to conclusions on this forum!?

RE-READ THE POST....

See the words 'possibility' ??????

 

[uncfan_2563]

**** me im sick of this, does everyone jus jump to conclusions on this forum!?

RE-READ THE POST....

See the words 'possibility' ??????

that doesn't change anything tho. You have to still know something about a product to know if it does have a possibility. w/e, if theres anything that annoys me is getting into these flame wars. I'll give you the benefit of the doubt smoggy.

in any case, it's the same with CPUs. Intel's name sells and so does NVIDIA's. ATI has to get their name out to the public before everyone, not just enthusiasts and gamers, knows who they are and picks them out as a good brand.

 

[JAYDEEJOHN]

Saying a 100$ card is better than a brand new released card costing 3+ times as much is aggressive.Or overly so.
I dont think ATI is being overly aggressive, just extremely confident, as they know nVidia cant do anything currently, and their future looks to be very limited as well, trying to use 1 piece of HW to do 2 things, each of which requires its own silicon real estate

 

[uncfan_2563]

Saying a 100$ card is better than a brand new released card costing 3+ times as much is aggressive.Or overly so.
I dont think ATI is being overly aggressive, just extremely confident, as they know nVidia cant do anything currently, and their future looks to be very limited as well, trying to use 1 piece of HW to do 2 things, each of which requires its own silicon real estate

and considering nvidia's chips are also already bigger than ati's, thats going to make them bigger

 

[randomizer]

AMD are just taking advantage of a market position they haven't been in for a long time.

 

[brockh]

I don't believe some people in this thread know how financials work. There's a difference between being in debt and going bankrupt. Also, whatever "financials" you're looking into (I'm going to assume via stocks or some type of "worth" to fit your statement) you clearly have no grasp on the concept. There's a lot more to debt than you're plainly looking at. All three of companies you mentioned are in debt (And Intel for $2 billion), do you really think it matters? No one seems to be worrying about paying off debt these days anyways, just look at the government. Regardless, I wouldn't be suprised if AMD wasn't on their way to some healthy books by 2011; not to say they'll be out of debt. Second of all, why the heck are we posting this here? Total flamebait.

 

[JAYDEEJOHN]

Companies go into debt all the time, as is most often the case, the companies monies are worth more than than what can be borrowed.
The company needs/uses thier profits for R&D/peoduction etc, with a profit ranging in whatever their margins are, say, 20%.
Borrowing money for some things often only costs 4-5%, and that can still be turned into a 15% profit to the company, even with debt paid.
Simple, if one thinks about it

 

[Ehsan w]

thank you Jaydeejohn for starting this thread 😛
it ended up pretty amusing

 

[KidHorn]

I don't believe some people in this thread know how financials work. There's a difference between being in debt and going bankrupt. Also, whatever "financials" you're looking into (I'm going to assume via stocks or some type of "worth" to fit your statement) you clearly have no grasp on the concept. There's a lot more to debt than you're plainly looking at. All three of companies you mentioned are in debt (And Intel for $2 billion), do you really think it matters? No one seems to be worrying about paying off debt these days anyways, just look at the government. Regardless, I wouldn't be suprised if AMD wasn't on their way to some healthy books by 2011; not to say they'll be out of debt. Second of all, why the heck are we posting this here? Total flamebait.

Can you explain to me how financials work? I would love to know how.

I thought in every case, when a company files for bankruptcy protection, they were asking the court to protect them from suits files by their debtors.

I agree that being in debt doesn't automatically mean you're in trouble, but in this case it appears AMD is in trouble. I really don't see any conceivable way out for them. Why else would their debtors be willing to collect less than par on their debts? If you want to see what kind of shape a company is truly in, look at their bonds. People who loan money tend to look very closely at the financials of who their lending to.

AMD can't win a war of attrition with Intel or NVidia. They have to pay $600 million dollars a year in interest while the others don't. All NVidia or Intel have to do is lower their prices and it's lights out for AMD. They can survive much longer.

The thing that no one on this thread seems to be able to grasp is going bankrupt does not mean they stop producing product. They would likely wipe out existing equity holders and bond holders would probably end up owning the company after emerging from bankruptcy. Plus, whoever funded debtor in possession financing would likely get a decent chunk of the new company. The bottom line is AMD would emerge a new company without a lot of debt and would be much better positioned to compete. Filing for bankruptcy would probably be the best thing for them in the long run.

 

[purplefire]

I wonder if Nvidia would ever consider buying out ATi outright. I think if you merged the brains of both companies, you'd end up with some tight products.

 

[JAYDEEJOHN]

In such a closed market, theres much more leniancy, due to the overall size/importance, and the few players involved.
Its not as if AMD isnt paying their bills, they are, and they are coming closer to breaking even.
That said, it doesnt mean theyre out of the woods or going under.
What we have to watch for is in a couple years when certain debts have to be paid off, and whether they get further help down the road.
Its been going better for them, and BullDozer needs to come thru for them, as well as their gpgpu capability.
Their partners may help spring them, if they keep pace, and BD is a good product.
The fact that nVidia is coming in late with their own product, and its geared for gpgpu usage and DT gfx, will help margins, as I dont see G300 as being a cheap alternative, and some performance will suffer per cost because of this.
That too will help down the road, as 1 of the major competitors of AMD struggles to find its own future, ATI is free to run in the DT gfx market.
This in itself shows that ATI is doing consumers a good thing by keeping their cards lower priced, tho again, like Ive said before, those prices may not come down quickly like weve seen in the past

 

[Harrisson]

I wonder if Nvidia would ever consider buying out ATi outright. I think if you merged the brains of both companies, you'd end up with some tight products.

AMD considered merging with Nvidia instead of buying ATI, but JHH ego got in the way. AMD shares droped but still Nvidia couldnt buy AMD now even if they wanted to. Plus merging ATI with nvidia would be pretty bad for us, monopoly means higher prices and slower progress.

 

[hallowed_dragon]

This in itself shows that ATI is doing consumers a good thing by keeping their cards lower priced, tho again, like Ive said before, those prices may not come down quickly like weve seen in the past

Even if the prices don't come down for awhile the cards still offer good price/performance ratio. Seeing the prices of the 5850/5870 cards makes me think ATI is making good profit out of each unit sold.

Some guesstimates (be gentle 😀) :

- initial price of 4870 - 300$
- current price of 4870 (10$ profit?) - 150$ ==> 140$ production cost

- 5870 (cheaper manufacturing process)~2x4870 - 100$ (guess) ==> 180$ production cost.
- initial price of 5870 ~ 380 ==> 200$ profit/unit sold.

 

[JAYDEEJOHN]

I cant remember, someone had guesstimated the total costs, but what those costs relay to with their parthers (Sapphire,XFX etc) and shipping etc, plus retails markup, who knows?

 

[KidHorn]

I wonder if Nvidia would ever consider buying out ATi outright. I think if you merged the brains of both companies, you'd end up with some tight products.

This would help AMD. At least in the short run. They need cash and this would be a way to raise it.

I doubt the merger would be approved. It would give NVidia too much market share. Even if it were approved, it would likely take years and cost a lot of money.

 

[apostate]

Apparently, that's not true. They're losing money hand over fist.

I totally agree with you.