| Author |
AMD makeover moves show limited choices in slump. |
Fatal Rocko Willis
Fleet Admiral
Fatal Squadron
Joined: March 01, 2003
Posts: 1336
From: Kentucky
|  Posted: 2008-11-14 11:25
Many of the problems facing Advanced Micro Devices Inc. are of its own making. But the limited choices the chip maker has for solving its troubles are symptoms of an affliction sweeping through Silicon Valley.
Slumping sales, big layoffs and devastated stock prices are becoming the norm, resurrecting memories of the malaise that gripped the Valley for years after the dot-com meltdown in 2000.
Chip makers delivered the latest installment this week in what is becoming a litany of bad news from the technology sector. Intel Corp. and National Semiconductor Corp. both slashed their sales guidance, and National Semiconductor and Applied Materials Inc. said they will cut a combined 2,130 jobs. Intel imposed a hiring freeze.
Semiconductor companies' fortunes say a lot about the health of other tech industries, because slowdowns in chip sales can reflect slumping demand for everything from personal computers to cell phones.
Meanwhile, Silicon Valley icons Yahoo Inc. and Google Inc. are also suffering. Shares of Yahoo, which is cutting 1,500 jobs, are trading around $11 per share, a third of the price that Microsoft Corp. was willing to pay to buy the company last May. Google's shares sunk to a 52-week low of $287.76 this week after trading above $700 a year ago.
Poor execution and a heavy debt load at AMD have allowed Intel to inflict severe damage on its smaller rival since 2006. The world's No. 2 maker of microprocessors, AMD has lost $5.6 billion over the past eight quarters.
AMD's story about how it plans to reverse course offers a look at the drastic moves other struggling companies might have to consider if their problems worsen, from hacking off parts of the business in an effort to save costs to re-pricing employee stock options that are now worthless.
"We've had enough of losing money," the company's new CEO, Dirk Meyer, told financial analysts Thursday at the company's Sunnyvale headquarters. Executives were unveiling new server chips and outlining AMD's plans for financial recovery.
The company has already changed CEOs, announced 2,100 layoffs this year and is cutting back on expenses. Travel is scrutinized more and even cell phone and computer upgrades for employees are being delayed. Ironically, scaled-back spending on computer upgrades at other companies is a big reason chip makers are struggling in the downturn.
AMD is also banking on some unusual strategies, highlighting the contortions that other deeply wounded companies might have to undertake in order to find funding and survive.
With the credit crunch strangling lending in the U.S., AMD has gone abroad looking for an emergency cash infusion and partners for a spin-off of its factories.
AMD is joining with government-controlled investment firms in the Persian Gulf state of Abu Dhabi to create a new company that will absorb AMD's manufacturing operations and some of its debt. The deals will also add $1 billion in cash to AMD's treasury.
Other companies have entered similar arrangements. In July General Electric Co. agreed to a joint venture with one of the companies involved in the AMD deals to pump $4 billion into GE's weakened commercial finance business.
AMD's new partnerships give the company desperately needed cash. They also relieve some of the burden of maintaining its chip-making factories, which need multibillion-dollar upgrades every few years. AMD executives believe their complex arrangements will give the company the boost it needs to return to profitability.
AMD didn't offer new financial guidance Thursday. Bob Rivet, AMD's acting chief financial officer, said it's too early to know how the economy will affect the company this quarter.
"It's stormy out there. There is no debate, we all know it, we all would like to forget October," he said. "It's going to pass. It always has ... so we have to figure out, where do we want to bet?"
AMD's falling stock price has also forced the company into an awkward position when it comes to employee morale.
AMD shares are trading just above $2 a share. They gained 13 cents, or 5.1 percent, to close at $2.70 on Thursday. The stock was trading above $40 per share at the beginning of 2006.
The astonishing fall has rendered many employees' stock-option awards worthless. AMD says 99 percent of its stock options are "underwater," which means they can only be redeemed for prices above where AMD's stock is currently trading.
AMD is taking the rare step of asking shareholders to approve a plan to exchange those options and issue new ones at a lower exercise price. AMD argues it's critical to retaining talented employees, who might leave because a key part of their compensation now has no value.
Investors might balk. Cashing in options dilutes the value of other investors' holdings in the company because more stock is floating around in the market. But many other companies are likely considering similar plans, so AMD could find itself leading that trend.
_________________
|
Ship-Of-Fools
2nd Rear Admiral
Angry Mob
Joined: June 10, 2004
Posts: 415
From: USA
| Posted: 2008-12-18 20:13
i bought some stock after reading this post, bought it at 1.78 a share, and later sold it for 2.60, so i is happy
what the article dosnt mention is that their stock split , that drove the stock down before the late market conditions
_________________
|
BackSlash
Marshal
Galactic Navy
Joined: March 23, 2003
Posts: 11183
From: Bristol, England
| Posted: 2008-12-18 20:16
Source?
_________________
|
English
Deutsch
Nederlands
)
