myocardia
Diamond Member
- Jun 21, 2003
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That's actually a surpisingly good answer.
Being willing to accept low margins on the consoles has worked out for them well.
Arachnotronic
Lifer
- Mar 10, 2006
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I don't see how this was "risky" at all; high revenue at relatively low margins still brings in much-needed revenue/profit dollars.
Making a bet too low for other players to compete wasn't a risky move for AMD, but a risk mitigating behavior in order to really clinch the deal. Were AMD in a better financial situation they could have bartered for better margins, but with things as bad as they were at the time they were could not afford to not clinch this deal, and that meant offering margins other players were not willing to follow, thecrappy margins they have today.
I don't have a good answer to that question, but I would argue that within that industry not taking on risky ventures is a risky venture in its own right.
ShintaiDK
Lifer
- Apr 22, 2012
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AtenRa
Lifer
- Feb 2, 2009
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ShintaiDK
Lifer
- Apr 22, 2012
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And save 4-5 billion in the process. Billions that should have been spendt on improving products.
There is no excuse, the ATI buy simply destroyed both companies. And it took AMD 5 years before the first brutally bolted on GPU on a CPU was released. The ATI buy did absolutely nothing.
All AMD got left is consoles. But that wont last forever.
There is no excuse, the ATI buy simply destroyed both companies. And it took AMD 5 years before the first brutally bolted on GPU on a CPU was released. The ATI buy did absolutely nothing.
All AMD got left is consoles. But that wont last forever.
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AtenRa
Lifer
- Feb 2, 2009
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Minus 1B for the fail GPU and close to 10B trying to enter the mobile/tablet market, right.
At least AMD spend 4-5B but they have the better product and a lead of two years or more against Intel in iGPU.
AMD had no option. Without ATI they they couldn't have gone ahead with the APU plans, at least not with a successful iGPU part.
Bying ATI was the right thing to do. It's been other issues that have given AMD troubles. Just because AMD is in trouble doesn't mean the acquisition of ATI is the root cause of that.
ShintaiDK
Lifer
- Apr 22, 2012
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ShintaiDK
Lifer
- Apr 22, 2012
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They could easily have gone the APU route. Buying ATI was simply one of the prime moments of complete arrogance and incompetence at AMD. And again, 5 YEARS before the first APU. They gained nothing and they spilled every single chance of anything.
The history have shown what an epic disaster it was. Something most people already saw when they bought it. To even defend it as some kind of rational buy is completely out of touch with reality. In Q2 by the looks of it, AMD will drop below 1 billion $ revenue.
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X-Post from Video Cards forum:
AMD is in quite a lot of trouble because they are running out of cash, and need a way to get more. Accounting profits and losses as in this thread ("Earnings") are entirely irrelevant to whether a company can keep going.
AMD has had accounting losses for most of the last decade and is still here. However, the running out of cash thing is an actual real tangible problem that will actually mean they might go out of business.
They need money, but problem is that people probably won't lend them much more money to add to the debt pile, and they only have about 5 quarters of cash left at the most recent quarter's burn rate.
They do have a $500m revolving line of credit until 2020 which is only $130m drawn currently, so they have $370m available to draw, but that also makes the debt pile bigger so it just gives them some breathing room, but doesn't solve anything much.
They have $1.3b in current liabilities and $2.5b in current assets, with $300m in other assets plus $300m property, plant and equipment, and $2b of debt.
That's a total of $3.3b debt and other payables, and $2.9b "actual" assets.
(The $300m of "other assets" is $200m of software and tech licenses which probably don't have a sale value, plus some other stuff, so I removed the $200m from the actual assets above.)
There is zero stockholder equity, and the only thing AMD have to borrow against as a security is Goodwill. Which isn't something you can really securitise against.
The only other thing that you can borrow against is future earnings. Which is where the problem comes. If your earnings are tanking and you are making losses, you can't borrow much against those earnings.
AMD is at a situation where there is a real possibility of running out of cash in the near future.
Their credit rating is "Highly speculative", which is the second level of non-investment grade ratings.
Further, at year end the repayment balance on the debt was $2,025 (which is how much they would have to pay the lender) but the market value of the debt (effectively how much the lender could sell it for/how much they think they will get back of it) is only $1,858, so the market things AMD won't be able to fully repay its CURRENT debt, let alone any future debt it would need to keep cash flowing. At the end of 2013, the market value of the debt was higher than the repayment amount (because of the future interest payments), indicating there were no concerns over the repayment ability of AMD 15 months ago.
The debt starts to mature in 2019, so anyone looking at giving AMD more money would need to consider the likelihood of AMD repaying its current debt in 5 years time.
AMD is at the point where I would think that in 2 years time it's unlikely to still be able to function, maybe sooner, since there doesn't seem to be much sign of their situation improving. Not saying that as an investor, but as a consumer. The chances of longer term (>3 year) support of anything bought right now doesn't seem to be strong. That would then potentially also lead to even lower sales, accelerating the downfall.
AMD is in quite a lot of trouble because they are running out of cash, and need a way to get more. Accounting profits and losses as in this thread ("Earnings") are entirely irrelevant to whether a company can keep going.
AMD has had accounting losses for most of the last decade and is still here. However, the running out of cash thing is an actual real tangible problem that will actually mean they might go out of business.
They need money, but problem is that people probably won't lend them much more money to add to the debt pile, and they only have about 5 quarters of cash left at the most recent quarter's burn rate.
They do have a $500m revolving line of credit until 2020 which is only $130m drawn currently, so they have $370m available to draw, but that also makes the debt pile bigger so it just gives them some breathing room, but doesn't solve anything much.
They have $1.3b in current liabilities and $2.5b in current assets, with $300m in other assets plus $300m property, plant and equipment, and $2b of debt.
That's a total of $3.3b debt and other payables, and $2.9b "actual" assets.
(The $300m of "other assets" is $200m of software and tech licenses which probably don't have a sale value, plus some other stuff, so I removed the $200m from the actual assets above.)
There is zero stockholder equity, and the only thing AMD have to borrow against as a security is Goodwill. Which isn't something you can really securitise against.
The only other thing that you can borrow against is future earnings. Which is where the problem comes. If your earnings are tanking and you are making losses, you can't borrow much against those earnings.
AMD is at a situation where there is a real possibility of running out of cash in the near future.
Their credit rating is "Highly speculative", which is the second level of non-investment grade ratings.
Further, at year end the repayment balance on the debt was $2,025 (which is how much they would have to pay the lender) but the market value of the debt (effectively how much the lender could sell it for/how much they think they will get back of it) is only $1,858, so the market things AMD won't be able to fully repay its CURRENT debt, let alone any future debt it would need to keep cash flowing. At the end of 2013, the market value of the debt was higher than the repayment amount (because of the future interest payments), indicating there were no concerns over the repayment ability of AMD 15 months ago.
The debt starts to mature in 2019, so anyone looking at giving AMD more money would need to consider the likelihood of AMD repaying its current debt in 5 years time.
AMD is at the point where I would think that in 2 years time it's unlikely to still be able to function, maybe sooner, since there doesn't seem to be much sign of their situation improving. Not saying that as an investor, but as a consumer. The chances of longer term (>3 year) support of anything bought right now doesn't seem to be strong. That would then potentially also lead to even lower sales, accelerating the downfall.
frozentundra123456
Lifer
- Aug 11, 2008
- 10,451
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What do they have now? A combined company with a value of only about 70% of what they paid for ATI, and historically low market share in both cpus and dgpus. I call it the reverse midas touch.
Again - what option did they have?
* Skip the APU track and produce pure CPUs without iGPU? -No way, most people buy APUs these days and don't add discrete GFX cards.
* Start their own GPU division from scratch? -Look how well that has turned out for Intel.
ShintaiDK
Lifer
- Apr 22, 2012
- 20,378
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Again - what option did they have?
* Skip the APU track and produce pure CPUs without iGPU? -No way, most people buy APUs these days and don't add discrete GFX cards.
* Start their own GPU division from scratch? -Look how well that has turned out for Intel.
License the tech for a fraction. Just like most CPU makers with integrated IGP does.
ShintaiDK
Lifer
- Apr 22, 2012
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frozentundra123456
Lifer
- Aug 11, 2008
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I was giving them a generous estimate, but I did not count for inflation, so you could be right.
Then why don't you flame Intel for not doing so? Their iGPU adventure has turned out even worse.
Phynaz
Lifer
- Mar 13, 2006
- 10,140
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Phynaz
Lifer
- Mar 13, 2006
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ShintaiDK
Lifer
- Apr 22, 2012
- 20,378
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I had forgotten inflation. Inflation adjusted AMD is now worth 30% of the ATI purchase.
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