AMD Loses $1.2 Billion and Its CEO

Barence writes to mention that after seeing almost $1.2 billion in second quarter losses, AMD's CEO has resigned. Stepping up to fill his shoes will be Dirk Meyer, previous company president and COO. "Only two years ago, the company held a processor performance lead and was making serious inroads into Intel's market. However, AMD failed to keep pace with Intel's Core technology, and it once again surrendered its performance crown at the dawn of the multicore era. Those problems were exacerbated by the bungled launch of the Barcelona processors, which prompted Ruiz to make a frank public apology last December."

Comments

Stocks fall

[Drakin020]

It appears their stocks have dropped 12% on this news.

http://finance.google.com/finance?client=ob&q=NYSE:AMD

Re:Stocks fall

[TubeSteak]

Remember, there is no way to properly value this company, the proper valuation is NEGATIVE because that's what profits are.

That's one of the dumber things I've heard today and it only holds true if you assume AMD is going to keep losing money until they have to sell off their desk chairs & keyboards in a bankruptcy auction.

There is a lot more to valuing a company than "omg they lost GigaBucks this quarter!!1"

The two basic numbers to work with are:
A) whatever investors think it's worth
B) what the company's assets and fundamentals represent

A lot of times A is less than B.
The attempted Microsoft buyout of Yahoo is a good recent example.
Yahoo shares were/are trading in the low $20s even though MS offered in the low $30s

Re:Stocks fall

[IronWilliamCash]

Remember, there is no way to properly value this company, the proper valuation is NEGATIVE because that's what profits are

You sir could not less understand what you are talking about by making that kind of statement. Losing money during one quarter means nothing, even during one year, giving this company a negative stock value like your saying, would make them have to pay you to get stocks. Meaning the company would be worth a negative amount with all it's assests combined. If that was the case they would be bankrupt long ago because no one would invest in that kind of company.

Re:Stocks fall

[Anonymous Coward]

>I thought $0 would be the bottom for any stock.

Not for a company that has any liquid assets whatsoever.
Long before the stock reaches zero, the auction value of
their stuff plus the amount of cash on hand becomes part
of the value, and even if the company is deep in debt, its
creditors have some interest in the sustainability of the
company so that they can be repaid.

Re:Stocks fall

[CodeBuster]

Thus there is no bottom limit to what the stock will reach

It cannot go lower than zero, that is why loses are limited when selling put options and theoretically unlimited when selling short (i.e. the share price could theoretically rise to infinity). Now obviously loses (negative profits) and the prospect of more to come in the future does not bolster expectations about the future value of the company, but when valuing a company one must look not only a short term results, but at what value might be obtained from either liquidating the assets OR taking valuable assets and putting them to more productive work thereby returning the company to profitability. This is what private equity firms and other big investors (like Carl Ichan) specialize in doing, buying losing firms at an attractive price and either turning them around for resale or efficiently liquidating the assets and winding down the operation.

Re:Stocks fall

[alexander_686]

Not true. A zero [or near zero] just means that the people who hold the equity have nothing left at stake. The company can have assets [liablities are normally higher at this point], employees, IP, product, etc. At this point the shareholders are pushed out and the bondholders take over. Take a look at K-Mart [now Sears] as an example. K-Mart went bust, bondholders took over [and became equity holders] and then they bought Sears.

Re:Stocks fall

[Thelasko]

B) what the company's assets and fundamentals represent

I would replace the word asset with equity. AMD as a lot of assets ($11.2 billion) but they also have a lot of liabilities, or debt that has to be repaid ($8.6 billion). The liabilities must be paid before stock holders receive any money. Therefore, picking stocks based solely on the fact that the company has huge assets is a terrible idea.

The stock price of a company that is not making money and carries quite a bit of debt is most likely determined by what people are willing to pay for it. Not based on assets. People are willing to pay for it because they think it will make money in the future. I doubt the equity is large enough to make a difference in the price.

Re:Stocks fall

[Crazyswedishguy]

What I originally said is true

Let me quote what you said:

Remember, there is no way to properly value this company, the proper valuation is NEGATIVE because that's what profits are.

The point that everyone above has made is that just because you have negative profits over a certain time period does not mean your valuation is negative.

There are many ways to value a company, and although some companies trade at a multiple of their EBITDA, the most commonly used valuation tool in investment banks or consulting firms is the discounted cash flow analysis. Discounted cash flow analysis is technically the sum of all future cash flows of the company, discounted over time. This means that if you can show that profits are not going to remain negative, the valuation could very well be positive.
A very simple example of this is that most new companies and startups have negative EBITDA in the first few years. Obviously this isn't the case of AMD (not a new company), but it doesn't mean they can't turn it around or don't already have solid strategic plans to do so, with new products in the pipeline, etc.

So no, "the proper valuation is NEGATIVE because that's what profits are" is not a true statement.

If you don't believe me, take a look at companies like GM, which had negative operating income for several quarters in a row.

Re:i hope they keep up

[mrchaotica]

I don't want to see AMD fail either, but remember: we'll always have ARM.

Re:Don't let the door hit you Hector

[Anonymous Coward]

RTFA:

"Ruiz will remain with the company as executive chairman."

Re:Harder, Better, Faster, Stronger

[John Jamieson]

Sure, but you are part of the 3% that buys leading edge products.(right?) As long as you are in the mainstream BOTH have strengths and weaknesses.

As long as you are buying a low-mid priced system, AMD competes with intel. If you are a gamer, all that really counts is the Video Card anyway.

And don't get me started on the Intel Chipsets... remember when they were king? Well, my Core2Duo Centrino laptop chipset has so many bugs... The video performance under Vista and Linux STINKS big time. (WinXP is decent, but not near AMD/ATI's level with the 780g chipset, that chipset rocks )

AMD is a bit weaker on Laptops now, they have new silicon coming that will change that.

 

Re:For me, it's all about the graphics.

[Dan93]

CPU != GPU

He was probably talking about the Intel GPU.

Timing is everything

[buddhaunderthetree]

Hmmm, perhaps just a coincidence but the EU has just expanded it's anti-trust investigation into Intel.

http://arstechnica.com/news.ars/post/20080716-report-eu-to-expand-intel-antitrust-investigation.html

Re:Don't invest in AMD...

[smooth wombat]

I have no idea why every shareholder of every company out there isn't forcing the companies to put in performance clawbacks.

Because it is the Boards of these companies that set pay policies, not shareholders. Further, it is all but impossible to get a measure on the proxy vote to force the Boards to change pay policy. The best one can hope for is to make a 'recommendation' to the Board to change pay policy.

Unless is it is specifically stated somewhere in the corporate bylaws, the final decision as to executive compensation rests with the Board, not the shareholders.

Re:The beginning of the end for AMD

[Spatial]

I guess when a mediocre CPU manufacturer merges with a mediocre GPU manufacturer this is what you get.

At the moment AMD's GPUs are the best value you can get. The Radeon HD4850 and 4870 are exceptional cards while Nvidia seems to have botched their latest line - although they're faster, they're hideously expensive for only moderate performance gains above AMD's parts, and have very large power needs. And just for the record, every GPU I've bought has been an Nvidia one. I'm no AMD/ATI fanboy.

Re:For me, it's all about the graphics.

[serviscope_minor]

I didn't even know Intel made graphics cards!

Only integrated graphics, as far as I know.

The Intel integrated graphics is Crap. This is well documented. Not only is the hardware somewhat anemic, Intel does not give the engineers time to workaround all the bugs, so the drivers never mature to the state they should be in.

The hardware is low-end (and low power, which is good). The drivers ahve always proven rock-solid to me. And all the features work out of the box with no tweaking. There was a bug related to screens larger than 2048x2048 for 800 series chips. This is well documented in xorg, and is unlikely to be fixed. What awful bugs are there in the 900 series? I've never had a graphics related crash from any Intel GPUs.

Re:Fix it!

[Anne_Nonymous]

R&D Spending FY2007

INTC $5.755 billion
AMD $1.847 billion

Re:Doomsday?

[EastCoastSurfer]

What's with all the doom and gloom predictions and massive stock declines every time one of the 'underdog' companies (AMD, Apple, etc.) has a rough year?

70%+ of all stock trades are now done by a computer making a decision. These computers aren't trained to look at the long or even medium term. The look at the day to day, week to week trends and trade accordingly. Knowing this, when companies slip up and drop, it can represent buying opportunities. If you think AMD is going to comeback and have another Athlon type performance then this is a great time to buy them.

Personally, I've seen this coming for years. Prior to the Athlon I did a research/write up comparison on Intel vs. AMD. I concluded that AMD would eventually fail so I wouldn't own their stock, bonds or lend them money. Obviously I would have missed the Athlon runup, but it was something that just wasn't sustainable. For all of Intels screw ups, it's their manufacturing methods that have kept them grounded. Their yields are unbelievable. Their scale gives them advantages AMD could never achieve at their size. In the end, it's AMD who got lucky with the Athlon. All it did was delay the inevitable.

Re:For me, it's all about the graphics.

[k-zed]

Haven't experienced a crash yet? Then try a dual monitor setup with an intel 945 (even when it works, it actually often draws garbage all over the screen... I haven't seen something like that since the DOS days).

The xorg intel drivers suck - but "luckily", they can't possibly suck as much as the ATI drivers... which are still, after all the open sourcing and linux support and whatnot, completely unusable. (At my company, we do some end-user linux OpenGL devel, and after a few weeks experimentation, we now shamefully have a company-wide "buy nvidia only" policy. We honestly just couldn't get the ATI drivers to work (on dual monitor setups; with a single monitor they're somewhat better). How does that work out for the corporation bottom line, guys?)

Re:The beginning of the end for AMD

[Anonymous Coward]

Just for the record AMD/ATI technically have the fastest single board Video card on the market smashing nvidia on pure raw power 2.4TFLOPS admittedly their is some creative thinking behind it but it is the king

http://www.hexus.net/content/item.php?item=14178&page=1

 

It's all about the architecture

[jdb2]

Back in 2003, when rumors were circulating about an AMD "K9" processor, everyone thought that a new, revolutionary, designed from the ground up processor architecture was in the works. Actually, it was. AMD was designing an *8-issue superscalar OoOE* 64-bit x86 processor. Basically the Alpha EV8 reincarnated in the form of an x86 chip. ( remember that AMD inherited a substantial portion of the Alpha design team after DEC was swalloed up by Compaq )

Unfortunately, as usual, management could only see 6-months ahead and the chip was canceled in favour of a 64-bit processor that was cheaper and easier to design and consequently would increase short-term revenue.

The processor that was hailed as a "revolutionary" x86 design, the Opteron, was, in fact, *directly* based off of the *K7* design. It was basically a K7 with a beefed up datapath, support for SSE2 and other miscellany, an on-board memory controller, and a high speed serial point-to-point interconnect as a replacement for the front side bus ( Hypertransport ) bolted on.

Now, you would think that the new Barcelona architecture was a great innovation, but not so much. It, like the Opteron, is a heavily leveraged design based off of the previous processor generation, namely the K8.

To get to the point, the fact is that AMD never truly created a new processor architecture -- they never truly innovated beyond bolting new crap onto old designs. In fact, the basic architecture of AMD's latest design, when you boil it down, is the same as the *K7*. Barcelona is just a ( very ) beefed up K7.

When you keep designing architectures like this you eventually hit a wall and start to stagnate due to the law of diminishing returns. So, while AMD basically did nothing essentially new with their architecture over the years, it gave Intel ample time to design, *from the ground up*, 5 new processor architectures : The Pentium-M, Core, Core 2, Nehalem, and Atom.

AMD's worst mistake was the cancellation of the Alpha EV8 inspired "K9" in 2003. Now they are paying for it.

jdb2

Re:i hope they keep up

[Anonymous Coward]

For full disclosure, Dedazo, you should make your sig "I work at Microsoft".
At least for the weasely comments like this one.

Re:i hope they keep up

[Cocoshimmy]

um...there is a 64bit version of windows, XP64, which Microsoft developed specifically for AMD's 64bit processors since at that time Intel was still pushing Itanium. This was available for public consumption not too long after AMD's processors were released and at that time only ran on AMD processors since they were the only producer of 64bit x86 processors. There is also a 64bit version of Vista available which runs on both Intel and AMD CPUs.

Re:For me, it's all about the graphics.

[Anonymous Coward]

Its probably the chipset. The low-power chipset for atom was delayed so they are using one targetting Core that draws more power.

Re:i hope they keep up

[0100010001010011]

PPC has gone the way of the dodo more or less

PPC is everywhere. Wii, PS3, XBOX360. IBM's big iron is all PPC. Power5, Power6

If you want a desktop PC look at what YellowDog Linux has to offer. Here's all of the hardware they support.

Hell even look under the Wiki entry for PPC will show all the current Power/RISC hardware, PPC being one such implementation.

Re:i hope they keep up

[Jorophose]

ATI purchase was a phenomenal mistake?

You've got to be kidding me. What was AMD to do against Nehalem then, pray tell? Merge with nVidia? Remember nVidia's outrageous terms for merger? Yeah. Like they're going to do that. Instead they swallowed ATI, albeit now they've got a stomach ache, and produced (possibly, I'm wondering about workstation cards) the greatest video card ever, the HD4870 X2. The best chipsets are also AMD/ATI, like the 780G and its sister chipsets.

Not to mention although Puma and Fusion can't take Intel's CPUs head-on, the entire platform is so much better.

No my friend, the ATI purchase was necessary. Else today AMD would be bunk.

Re:EU Antitrust Charges. Don't blame the Victim.

[PetoskeyGuy]

Now if you search correctly with quotes...

Google Search:
Results 1 - 10 of about 4,570 for "linux failure"

Not that either search means much. But lets at least compare similar items.