Monday, April 30th 2007
AMD’s debt piling up
Chip maker AMD is struggling financially at present, largely due to the $5.4 billion acquisition of ATI last year. The company had already reported a net loss of $611 million for the quarter ending March 31st, but it has now been forced to raise finance by offering Convertible Senior Notes to investors. These differ from stocks because AMD will have to pay back the money it has raised once its stocks hit a price of $42.12 (the current price is at $14) which is essentially plunging the firm further into debt. Analysts are now worried that AMD could run out of cash by the forth quarter of this year if it doesn't borrow more money, with an estimated figure of just $1.1 billion in the bank. Meanwhile, AMD's closest rival Intel is in it's strongest market position since 2005, with profits of $1.6 billion in the first quarter of 2007. AMD will be banking on the new Barcelona core and the R600 series of graphics cards to help it back onto its feet.
Source:
DailyTech
94 Comments on AMD’s debt piling up
The reason AMD are having financial difficulties is because creating and manufacturing processors is an extremely expensive business. Unlike Intel who have huge assets behind them, AMD have had to go to the next level with their processors with far less money for the research. No wonder they're behind. But more importantly it shows just how abominable Intel was with the Pentium 4.
Now GPU's, although not needing quite so much money are still ludicrously expensive to manufacture, hence the high prices for gfx cards. You get what you pay for. Now NVidia also have larger assets behind them than ATi, thus they released the 8800's before ATi could get a word in edgeways.
High profits + Large assets -->More money --> more research --> GPU/CPU technology arrives faster.
AMD probably bought ATi because they want to completely amalgamate some areas of the two companies. Hence the AMD/ATi integrated chipsets on motherboards of the future. Also they probably needed an edge over Inetl. With two technologies instead of one things can only be better for them (in theory - financially in the short term its tough if you've not got a lot of money backing you).
Conclusion: AMD and ATi are not screwing us around, they're doing the best they can against far richer opposition. I for one didn't get an ATi card because for the budget I was on, needed a 7600GT or an X1650 pro (£65). Otherwise I would have support the much smaller company, and partly why I decided to get an AMD cpu.
For example
-ATI's Net income in 2005: $16.9 million (approx)
-NVidia's Net income in 2005: $450 million (just a bit below that I believe)
-AMD's Net income 2005: $575 million (approx)
-Intel's Net income 2005: around $5 billion
I always cheer for the underdog, so I am anxiously awaiting their next move. AMD/ATI needs to keep the pressure on Nvidia and Intel... as others have said, competition is great for us (the consumers.) :)
GT still beats the XT, but not much...
Wasn't there a discussion about this though? About how AMD was behind a few years back but then leaped ahead of Intel with the K8's? I think it's pretty much the same idea here... AMD will lose lots of money until the K10's come out, at which point they will bouce back to owning the market share they had before the Conroes came out. I think I'll stock up on some Conroes just in case though <_<
I've always heard it this way. Its like medicine you have the name brand "Intel" and the off brand "AMD".
AMD kicked Intel's butt for a few years and awoke the sleeping giant. AMD took advantage of their success and dug in deep with new fabs and partnerships, because they know the next few years are going to be brutal. If AMD bankrupts it will be because Wall Street is so danged short-sighted.
remmber, amd and ati are not stupid companys, and both where excited about the prospect, because they each have things the other needs, and hell, eventuly amd will beable to use their own fabs to make the video chips, bringing everything under their own umbrella(still having IBM and others make some chips im sure due to demand.)
amd's cpu devision lost $ for years, they made money in other markets, i would guess thats still true now, their cpu/video/chipset devision is hurting, but hey, i watched a guy i worked for spend over 135k to upgrade 4 machiens on the floor, it put the company in debt for 9 months, BUT production and quility went WAY UP, also there was less waist because the upgraded machiens had more automation and checked stuff b4 they started cutting/molding, the old ones would break tools by jamping them into the part they where trying to cut because it was 1/8 in to long!!!!!!
bah ........... i will jsut buy an r600 to support ati . ;)