AMD: on the verge of bankruptcy or on the turn of the corkscrew?
No matter how ungrateful it is to build forecasts or assumptions in the IT industry, sometimes the situation is very clear: not to write means to keep silent, to conceal, not to warn. That is why these reflections on the business prospects of one of the largest companies in the industry still saw the light. If this reinsurance is very good, it is better if it is not quite accurate to predict the possible development of the situation than a completely unforeseen thunderbolt. Moreover, interesting odious facts more than. So - let it be.
Only a year ago, AMD’s shares were worth about $ 30. A little later, at the time of ATI's takeover, the rate dropped to $ 20, and the current rate is about $ 14 with a little. Please note - a fall of more than two times in just one year. You can imagine how much money people lost. Investors have lost a lot of money, but, interestingly, 70% of all AMD shares are owned by institutional investors, and these are the same owners who own Intel shares. And only 30% of the shares are in the hands of little people.
Stocks can always be very cool to manipulate. Until the announcement of the financial results of AMD in the past, the second quarter, analysts predicted losses of about $ 250 million, but AMD announced losses of $ 620 million. And the company's shares rose. It is possible to laugh, but it is so: the effect of a very competent manipulation of the press and the market has worked - to announce and agree with investment funds in time so that they can play a course competently. Drop to the bottom and give banks the opportunity to buy and play on the rise of shares.
AMD ended its first quarter (2007Q1) with revenues of $ 1.2 billion, and, considering that they lost $ 611 million in the quarter, it was necessary to attract funding to continue their livelihoods. It was borrowed $ 2.2 billion from the company Lehman Brothers, which is interesting, from this amount immediately $ 300 million was paid to the commission - kickback, if you speak Russian. The loan was taken at 6% per annum. Of the remaining $ 1.9 billion, some of the previous loans received from Morgan Stanley for the purchase of ATI were repaid - so far they have agreed on $ 0.5 billion. Thus, the total return from this loan is $ 1.4 billion.
')
With the current state of affairs, this should be enough for a quarter and a half of life. Business graphics and processors - a phenomenon that is very tied to seasonality. Thus, in Russia, about 70% of sales are done during the Back-to-School - Christmas period (the beginning of the school year is New Year's celebrations). Then follows the stagnation of trade, if not to say, a huge fall.
With all its financial troubles, AMD got into the very period when sales were at their peak and products lagged behind. The corresponding financial indicators were not very good.
The situation is critical. If now something else unexpected happens for AMD - for example, the release of the Barcelona core or the new revision of the R610 / R630 graphics chips (Radeon 24002600) will be delayed, there can be very serious problems, even bankruptcy. Implicitly, according to rumors circulating on Computex`2007, this is not excluded.
AMD advert at Taipei
It is impossible to imagine what a collapse this will be for the IT market. And it can become a reality that we are only smiling about and shrugging our shoulders - “yes, they will be supported anyway, but this is not real, the antimonopoly committee will not allow it, it will still give money, the same Intel will intervene, because it is not interested in such events ... Nevertheless, rumors of bankruptcy continue to multiply, and what, strictly speaking, is the difference, how will the process of emergency rescue of a bankrupt proceed if everyone is interested in the possibility or impossibility of the onset of this fact?
Bankruptcy of a company should never be ruled out, even in the case of such giants as AMD. Everyone knows the example of Enron with a turnover of $ 100 billion, which was an example and one of the pillars of the American economy.
Who made money on an ATI deal?
But someone raised a lot of money in his pocket by selling ATI! Has a deal been made, including on the basis of one’s private interests? Intimate question. People who knew about the merger, most likely earned. The news that AMD is buying ATI has been in the press for quite a long time. The Inquirer was one of the first to announce this and the stock jumped to $ 18.
in the shadow of AMD
As a result of the transaction, ATI shareholders received more than 20% Premium (addition to the value of shares at the time of purchase). Key managers who had options, of course, also earned good money. A lot of people were interested in this deal. And it happened. For ATI shareholders at the time of the takeover, the deal was very profitable. For shareholders, AMD may not be so much - they had to pay 25% more than the shares on the market were worth.
On the other hand, given the problems with the new AMD processor, if they had not bought ATI, the situation in the past quarter would have been even worse. The processor business brought less than a billion dollars, the rest comes from ATI products. When buying ATI, not only the XBOX 360 graphics production business was acquired, not only the almost complete hardware implementation of the DX10, but also the business graphics for mobile phones, where the margin significantly exceeds the notorious 40%. Many multimedia phones now have ATI graphics, often the chip is used not as a graphics processor, but as a bridge. The technology has already been debugged, it is so cheap that in this industry it has become de facto one of the standards.
If AMD still has the final financial problems, and it will be necessary to raise additional funding, they could easily sell part of their business to Texas Instruments, the leader of the DSP production. By the way, TI is much larger than AMD and more financially healthy. And if you take into account the friendly relations between the former ATI managers and the Texas management, then such an outcome is quite real and not excluded.
ATI R610 / R630 Graphics
An amazing situation occurred with the graphic market. ATI was the first company to promote DDR3, which began working with Microsoft on DX10 technology, again, the XBOX 360 collaboration, respectively, there people almost almost live together.
And what happened now? There were several revisions of R610 / R630 chips and the last revision that came out - the thirteenth, was to become the main product of ATI for the Middle and Low-end graphics market. Excellent architecture, performance, for the DX10 this chip was supposed to be the best ... but not supported by HDMI and there were problems with DVI.
Now we urgently had to prepare revision 14. There is a wiring of metal layers, there is a complete revision of silicon, although the prices of these operations vary greatly, almost 20 times. According to the experience of communicating with the Taiwanese contract manufacturer TSMC, a full audit of silicon costs about $ 10 million, and finishing the layers will cost another $ 0.5 million. It is not yet known what technology was ordered for the fourteenth version and how quickly it will be prepared.
Of the recent positive factors for AMD, it can be noted that DELL and HP have already ordered this product, all large OEM companies have been noted in the list of customers. And AMD claims that it has closed 70% of all OEM deals for the period before Back-to-School. Version 13 is already there, but large customers are not willing to get involved in possible problems and are awaiting a more streamlined Rev. chip. 14.
The eternal competitor, NVIDIA, raised the sales of the GeForce 8500/8600 very well - an amazing product with DX10 support, and they now have a very cheap product, 8400/8300, that is, the “trimming” 8500, which go on an enormous scale into OEM channels. It is clear that the price there is cheap, but large system integrators can honestly declare support for DX10 and Windows Vista.
Future of AMD / ATI
All the same, in the minds of the consumer, these two companies will never become one. Yes, they are united by common financial resources, but engineering personnel, research, marketing, production - all of this is spread across continents and poorly cooperates. And the complete merger of the company did not happen. It is not possible. And if AMD declares its possible bankruptcy in order to get rid of the growing debts, will it be possible to survive at least ATI?
We are not small children, and we must be aware that no one is interested in the collapse of AMD. Neither buyers, nor primarily Intel and lenders. AMD will keep afloat by all available means, but everything is possible. And if this happens, the trademarks will survive in any case - too recognizable brands, although their real value is small. How much is the combined AMD / ATI on the market now? About $ 15-20 billion. This is one twentieth of the cost of Intel. What scares, is the amount of debt that had to be shouldered, first to buy ATI, and then to support your business.
If we analyze the financial statements of AMD, then there is the latest column - the total amount of what the company has earned for its existence. For almost 30 years of their existence, they have earned ... $ 300 million dollars!
Breathe in, go, wash, tidy yourself up from tears of tenderness, and you can read further. I will not even comment and compare, what is this amount, what is its order for the industry. If you put money in a bank 30 years ago and don’t do anything else with them, you can still make more money than if you invested in AMD shares.
But do not worry, the same legendary 3dfx for all the years of its existence was profitable for only three months. But what a legacy and gratitude of descendants.
Doesn’t it seem like it was a big-big mistake - buying an ATI? At the time of the transaction it seemed that this was a very competent decision. Why? Companies have the same business culture, AMD needed a graphics partner with terrible force. Moreover, Intel has resumed its development of discrete graphics, work is well underway for a long time, and in about six months there will be a ready-made solution. This is no longer a secret to the public, and for the industry it did not become a secret at the time of the decision.
But the current situation on the market looks unsightly - after AMD aggressively squeezed ATI into the hard power position "we bought you, be silent for everyone." This is not a merger, this is a tough business takeover. "We are the main ones here."
Many ATI employees, even at the highest level, felt not very comfortable in the new conditions of the bureaucratic structure of a huge company. And frankly it was shared. Non-standard fast gestures are excluded, or are fine limited. It is like a guerrilla war (ATI) and an army (AMD). In the army, everything is standard and strictly regulated. Step left, step right - shooting. People accustomed to instant response, non-standard solutions, creative people accustomed to adapt to the market in a more flexible way, AMD does not survive in the army. There is no air, freedom and spaciousness. In AMD, everything is done according to the rules, in ATI - on a whim and at breakfast.
Where is the money, Zin?
After talking with Computex partners AMD / ATI, you start to perceive with horror the current situation in the market. The understanding comes that the situation is very complicated. The common vector is a negative attitude towards AMD. The Barcelona chip will be released; it will be taken by the manufacturers of servers and workstations and computers; a good percentage of the OEM market will be received. But, I must say, the whole world does not converge on the OEM. To competently work in this market, you must clearly work with the channel. Channel sales - this is where the main margin is made. But the seller needs to know the dates, volumes, forecast the market, have a warehouse with the goods - after all, there must be a flexible pricing policy and marketing support.
As a manufacturer, you can close 100% of the business of DELL, but this will not give you enough margin to invest in the development of new products. The main profit is made in the channel, on channel sales through partners. They give products in retail, in distribution, distribute on smaller manufacturers of computers. OEM standard is 20% margin. In the channel - 40-50%. This is when it comes to graphics, you need to earn more for the CPU market.
There is a good indicator of the health of the company, called Gross Margin - “dirty”, or gross margin, that is, the difference between sales revenue and cost of sales. At Intel, this figure is more than 50%, and it is for this money that they can contain and move the entire industry. AMD announced in its latest report on the level of Gross Margin only ... 30%.
In the graphics business, to invest in the development of new chips without having their semiconductor factories, the dirty margin should be at least 35%, it should be higher in the CPU - there are factories there, more personnel and higher R & D costs.
The general, if I may say so, diagnosis is the following: at the moment, the financial side of AMD business is not very healthy. What is it - the eve of bankruptcy, another round of corkscrew? Such questions are now reeling the entire industry.
TAKEN by copy-paste method from www.3dnews.ru
Only a year ago, AMD’s shares were worth about $ 30. A little later, at the time of ATI's takeover, the rate dropped to $ 20, and the current rate is about $ 14 with a little. Please note - a fall of more than two times in just one year. You can imagine how much money people lost. Investors have lost a lot of money, but, interestingly, 70% of all AMD shares are owned by institutional investors, and these are the same owners who own Intel shares. And only 30% of the shares are in the hands of little people.
Stocks can always be very cool to manipulate. Until the announcement of the financial results of AMD in the past, the second quarter, analysts predicted losses of about $ 250 million, but AMD announced losses of $ 620 million. And the company's shares rose. It is possible to laugh, but it is so: the effect of a very competent manipulation of the press and the market has worked - to announce and agree with investment funds in time so that they can play a course competently. Drop to the bottom and give banks the opportunity to buy and play on the rise of shares.
AMD ended its first quarter (2007Q1) with revenues of $ 1.2 billion, and, considering that they lost $ 611 million in the quarter, it was necessary to attract funding to continue their livelihoods. It was borrowed $ 2.2 billion from the company Lehman Brothers, which is interesting, from this amount immediately $ 300 million was paid to the commission - kickback, if you speak Russian. The loan was taken at 6% per annum. Of the remaining $ 1.9 billion, some of the previous loans received from Morgan Stanley for the purchase of ATI were repaid - so far they have agreed on $ 0.5 billion. Thus, the total return from this loan is $ 1.4 billion.
')
With the current state of affairs, this should be enough for a quarter and a half of life. Business graphics and processors - a phenomenon that is very tied to seasonality. Thus, in Russia, about 70% of sales are done during the Back-to-School - Christmas period (the beginning of the school year is New Year's celebrations). Then follows the stagnation of trade, if not to say, a huge fall.
With all its financial troubles, AMD got into the very period when sales were at their peak and products lagged behind. The corresponding financial indicators were not very good.
The situation is critical. If now something else unexpected happens for AMD - for example, the release of the Barcelona core or the new revision of the R610 / R630 graphics chips (Radeon 24002600) will be delayed, there can be very serious problems, even bankruptcy. Implicitly, according to rumors circulating on Computex`2007, this is not excluded.
AMD advert at Taipei
It is impossible to imagine what a collapse this will be for the IT market. And it can become a reality that we are only smiling about and shrugging our shoulders - “yes, they will be supported anyway, but this is not real, the antimonopoly committee will not allow it, it will still give money, the same Intel will intervene, because it is not interested in such events ... Nevertheless, rumors of bankruptcy continue to multiply, and what, strictly speaking, is the difference, how will the process of emergency rescue of a bankrupt proceed if everyone is interested in the possibility or impossibility of the onset of this fact?
Bankruptcy of a company should never be ruled out, even in the case of such giants as AMD. Everyone knows the example of Enron with a turnover of $ 100 billion, which was an example and one of the pillars of the American economy.
Who made money on an ATI deal?
But someone raised a lot of money in his pocket by selling ATI! Has a deal been made, including on the basis of one’s private interests? Intimate question. People who knew about the merger, most likely earned. The news that AMD is buying ATI has been in the press for quite a long time. The Inquirer was one of the first to announce this and the stock jumped to $ 18.
in the shadow of AMD
As a result of the transaction, ATI shareholders received more than 20% Premium (addition to the value of shares at the time of purchase). Key managers who had options, of course, also earned good money. A lot of people were interested in this deal. And it happened. For ATI shareholders at the time of the takeover, the deal was very profitable. For shareholders, AMD may not be so much - they had to pay 25% more than the shares on the market were worth.
On the other hand, given the problems with the new AMD processor, if they had not bought ATI, the situation in the past quarter would have been even worse. The processor business brought less than a billion dollars, the rest comes from ATI products. When buying ATI, not only the XBOX 360 graphics production business was acquired, not only the almost complete hardware implementation of the DX10, but also the business graphics for mobile phones, where the margin significantly exceeds the notorious 40%. Many multimedia phones now have ATI graphics, often the chip is used not as a graphics processor, but as a bridge. The technology has already been debugged, it is so cheap that in this industry it has become de facto one of the standards.
If AMD still has the final financial problems, and it will be necessary to raise additional funding, they could easily sell part of their business to Texas Instruments, the leader of the DSP production. By the way, TI is much larger than AMD and more financially healthy. And if you take into account the friendly relations between the former ATI managers and the Texas management, then such an outcome is quite real and not excluded.
ATI R610 / R630 Graphics
An amazing situation occurred with the graphic market. ATI was the first company to promote DDR3, which began working with Microsoft on DX10 technology, again, the XBOX 360 collaboration, respectively, there people almost almost live together.
And what happened now? There were several revisions of R610 / R630 chips and the last revision that came out - the thirteenth, was to become the main product of ATI for the Middle and Low-end graphics market. Excellent architecture, performance, for the DX10 this chip was supposed to be the best ... but not supported by HDMI and there were problems with DVI.
Now we urgently had to prepare revision 14. There is a wiring of metal layers, there is a complete revision of silicon, although the prices of these operations vary greatly, almost 20 times. According to the experience of communicating with the Taiwanese contract manufacturer TSMC, a full audit of silicon costs about $ 10 million, and finishing the layers will cost another $ 0.5 million. It is not yet known what technology was ordered for the fourteenth version and how quickly it will be prepared.
Of the recent positive factors for AMD, it can be noted that DELL and HP have already ordered this product, all large OEM companies have been noted in the list of customers. And AMD claims that it has closed 70% of all OEM deals for the period before Back-to-School. Version 13 is already there, but large customers are not willing to get involved in possible problems and are awaiting a more streamlined Rev. chip. 14.
The eternal competitor, NVIDIA, raised the sales of the GeForce 8500/8600 very well - an amazing product with DX10 support, and they now have a very cheap product, 8400/8300, that is, the “trimming” 8500, which go on an enormous scale into OEM channels. It is clear that the price there is cheap, but large system integrators can honestly declare support for DX10 and Windows Vista.
Future of AMD / ATI
All the same, in the minds of the consumer, these two companies will never become one. Yes, they are united by common financial resources, but engineering personnel, research, marketing, production - all of this is spread across continents and poorly cooperates. And the complete merger of the company did not happen. It is not possible. And if AMD declares its possible bankruptcy in order to get rid of the growing debts, will it be possible to survive at least ATI?
We are not small children, and we must be aware that no one is interested in the collapse of AMD. Neither buyers, nor primarily Intel and lenders. AMD will keep afloat by all available means, but everything is possible. And if this happens, the trademarks will survive in any case - too recognizable brands, although their real value is small. How much is the combined AMD / ATI on the market now? About $ 15-20 billion. This is one twentieth of the cost of Intel. What scares, is the amount of debt that had to be shouldered, first to buy ATI, and then to support your business.
If we analyze the financial statements of AMD, then there is the latest column - the total amount of what the company has earned for its existence. For almost 30 years of their existence, they have earned ... $ 300 million dollars!
Breathe in, go, wash, tidy yourself up from tears of tenderness, and you can read further. I will not even comment and compare, what is this amount, what is its order for the industry. If you put money in a bank 30 years ago and don’t do anything else with them, you can still make more money than if you invested in AMD shares.
But do not worry, the same legendary 3dfx for all the years of its existence was profitable for only three months. But what a legacy and gratitude of descendants.
Doesn’t it seem like it was a big-big mistake - buying an ATI? At the time of the transaction it seemed that this was a very competent decision. Why? Companies have the same business culture, AMD needed a graphics partner with terrible force. Moreover, Intel has resumed its development of discrete graphics, work is well underway for a long time, and in about six months there will be a ready-made solution. This is no longer a secret to the public, and for the industry it did not become a secret at the time of the decision.
But the current situation on the market looks unsightly - after AMD aggressively squeezed ATI into the hard power position "we bought you, be silent for everyone." This is not a merger, this is a tough business takeover. "We are the main ones here."
Many ATI employees, even at the highest level, felt not very comfortable in the new conditions of the bureaucratic structure of a huge company. And frankly it was shared. Non-standard fast gestures are excluded, or are fine limited. It is like a guerrilla war (ATI) and an army (AMD). In the army, everything is standard and strictly regulated. Step left, step right - shooting. People accustomed to instant response, non-standard solutions, creative people accustomed to adapt to the market in a more flexible way, AMD does not survive in the army. There is no air, freedom and spaciousness. In AMD, everything is done according to the rules, in ATI - on a whim and at breakfast.
Where is the money, Zin?
After talking with Computex partners AMD / ATI, you start to perceive with horror the current situation in the market. The understanding comes that the situation is very complicated. The common vector is a negative attitude towards AMD. The Barcelona chip will be released; it will be taken by the manufacturers of servers and workstations and computers; a good percentage of the OEM market will be received. But, I must say, the whole world does not converge on the OEM. To competently work in this market, you must clearly work with the channel. Channel sales - this is where the main margin is made. But the seller needs to know the dates, volumes, forecast the market, have a warehouse with the goods - after all, there must be a flexible pricing policy and marketing support.
As a manufacturer, you can close 100% of the business of DELL, but this will not give you enough margin to invest in the development of new products. The main profit is made in the channel, on channel sales through partners. They give products in retail, in distribution, distribute on smaller manufacturers of computers. OEM standard is 20% margin. In the channel - 40-50%. This is when it comes to graphics, you need to earn more for the CPU market.
There is a good indicator of the health of the company, called Gross Margin - “dirty”, or gross margin, that is, the difference between sales revenue and cost of sales. At Intel, this figure is more than 50%, and it is for this money that they can contain and move the entire industry. AMD announced in its latest report on the level of Gross Margin only ... 30%.
In the graphics business, to invest in the development of new chips without having their semiconductor factories, the dirty margin should be at least 35%, it should be higher in the CPU - there are factories there, more personnel and higher R & D costs.
The general, if I may say so, diagnosis is the following: at the moment, the financial side of AMD business is not very healthy. What is it - the eve of bankruptcy, another round of corkscrew? Such questions are now reeling the entire industry.
TAKEN by copy-paste method from www.3dnews.ru
Source: https://habr.com/ru/post/12306/
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