AMD to help pay for ATI with $1.8B in new debt
Advanced Micro Devices plans to raise up to $1.8 billion through a debt offering, in part to pay for its acquisition of ATI and to keep its business operating during a rough stretch.
At least $500 million from the sale of the new senior notes, announced after the close of the stock market Monday, will be used to pay off a term loan with Morgan Stanley connected to the purchase of ATI, AMD said in a press release. The rest will be used to finance AMD's day-to-day operations and to hedge against the dilution of its stock.
Following another subpar quarter, analysts had been concerned that AMD was running out of cash. This deal will buy the company some additional flexibility, but AMD's long-term debt is rising. Before this deal, its long-term debt was $3.6 billion. By contrast, Intel's long-term debt is $1.8 billion.
AMD also received a downgrade in its credit rating earlier on Monday from Standard & Poor's. AMD lost $611 million in its first quarter as chip prices fell and Intel's Core lineup of chips improved its competitiveness against AMD's Opteron and Athlon 64 chips.
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Also, the 2 companies have a cross licensing agreement. So AMD can use Intel technologies and vice versa. With separate but similarly talented R&D labs the companies have been able to borrow ideas from each other and set a pace that makes it nearly impossible for another company to step in as a 3rd player.
Also, currently Intel has a market cap of 126.68 billion dollars and 31 billion dollars in cash.
AMD?s market cap is only 7.72 billion, if the SEC would allow it Intel could just buy AMD/ATI with cash alone.
The biggest mistake I see AMD making right now is the attempt to convert ATI's products to the AMD brand name. They should be treating ATI mostly like a separate company with a partnership and cross licensing agreement.
It seems like only a bad outlook scenario of events for AMD. (I am a coolaide drinker, I was a commodore kid and hoped they would live forever)...(NO ONE BUT INTEL STOCK HOLDERS STAND TO GAIN IF AMD GOES AWAY!)
The acquisition of ATI at a time when more conservative financing should have been called for? is a little puzzling. What I mean essentially is, the word was already out on how much better all around the C2Duos were going to be. AMD needed to be pouring every bit of free capital, loans, resources, etc. into making a smaller/faster/more efficient cpu processor. Not is taking a huge gamble.
At first I thought this was going to result in a super colaborative process between the two companies, & they could still have some rabbits up their sleeves; but it doesn't look likely. You know, some processes of combining cpu & gpu technologies to make a faster system ??? or things I can't even yet imagine.
But things don't look that promising, right now. I have yet to hear any more about the lawsuit filed by AMD against Intel. (But it reminds me of the whole Kodak stealing Polaroid ideas)...Polaroid won their lawsuit, but the damage/destruction was done already and Kodak prevailed; at least back then. Before digital pictures.
Anyway, it hasn't gone without notice that AMD has never had more affordable CPU offerings. I saw the X2 5200+ for sub $150. AMD can remain solvent and can still be the WONDERFUL force that they have been for so long now. They have taken the right approach. By cutting prices they are really making themselves a real competitor again.
C2Duo's long awaited price drops for the 6000's 4000's that began last Friday, will again draw more AMD blood and force another price drop. But if they can weather this storm by securing themselves as a real fast system on a budget Meanwhile do what they have done so many times before in the lab, their is hope.
If I was a billionare, I'd give em a million to keep the fight alive! Consumers will be the real losers if they go Chapter up! Intel will gut us all $$$$.