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AMD q3 earnings - 23% yoy

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zinfamous

No Lifer
Jul 12, 2006
103,539
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Spider Mastermind, dude!! If you have NOT played the game from which I hail (Doom/Doom II), I highly recommend DROPPING WHATEVER YOU'RE DOING NOW, picking up a copy of Doom and Doom II on Steam, and playing both games until you have killed every last bad guy :)
Heh, I never could get into Doom. I remember way back when it was new and was all the rage, my computer buddy was extolling its virtues. I played it for maybe 5 minutes, was bored, and demanded we load up Quest for Glory again. :D To this day, I just don't like the FPS genre outside of one or two games. :\
 

krumme

Diamond Member
Oct 9, 2009
5,898
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I don't really know, but I would imagine there would be a much slower recovery and possibly a real negative reaction from investors. PC sales reports have hurt both Intel and AMD, so larger market issues, and with AMD having low expectations for this Q4, such a further dilution would go against them. If they were do do it again, they may wait until a higher price.

But, at the same time, this was largely a debt sale to Mubadala, I think? selling another ~$Billion in shares to the same entity would be a bad idea. I don't know the exact details of how that sale happened and the percentage of those shares that actually went over to Mubadala, but I know they were able to grab a nice chunk of AMD.
The debt they got rid of was

1. high interest. Now they have very cheap i think like 2%. For a company like amd that is dirt cheap for them. I mean i wouldnt lend them money for 2% :)
So its a huge burden lifted that more than outweighs the dilution.

2. Due in the bext 2-3 years. Now they have stability for like 4 years at least. The result is it minimizes the risk of the stock and thereby raises the value.

3. And then yes some of the money goes to mubadala and gf. But aparently it is seen from investors as a good tradeoff because if minimizes risk of beeing dependant on gf and get the uplift of using tsmc if needed.

All together the effect is so positive it looks like basicly getting free money.

This is brilliant business. Its not only the CFO that is good but its a result of tight integration to operations and market opportunitues.

This is very different from prior situations when they diluted the stock. And looking at point 1 to 3 its obvious they just cant do it again. The opportunity was there and they took it.
 
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zinfamous

No Lifer
Jul 12, 2006
103,539
18,099
136
The debt they got rid of was

1. high interest. Now they have very cheap i think like 2%. For a company like amd that is dirt cheap for them. I mean i wouldnt lend them money for 2% :)
So its a huge burden lifted that more than outweighs the dilution.

2. Due in the bext 2-3 years. Now they have stability for like 4 years at least. The result is it minimizes the risk of the stock and thereby raises the value.

3. And then yes some of the money goes to mubadala and gf. But aparently it is seen from investors as a good tradeoff because if minimizes risk of beeing dependant on gf and get the uplift of using tsmc if needed.

All together the effect is so positive it looks like basicly getting free money.

This is brilliant business. Its not only the CFO that is good but its a result of tight integration to operations and market opportunitues.

This is very different from prior situations when they diluted the stock. And looking at point 1 to 3 its obvious they just cant do it again. The opportunity was there and they took it.
Now, what if they simply release another x ~million shares of common stock to the general public, instead of using dilution to shift debt over to shares? Currently, they are back up to the ~$7.50 value where the stock closed on the day they announced the new offering. That's pretty crazy.

Of course, I have no idea how this works, but I imagine that they don't want to release common stock in such a way because that would be a far, far, far greater risk to valuation? You aren't selling them at an agreed-price to an entity at an agreed allotment, but allowing the market to decide value in the wild. That...would probably be a disaster, no?
 

krumme

Diamond Member
Oct 9, 2009
5,898
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Yeaa i guess so but i have little knowledge into how stockmarket works. Think of it this way. Would the company be more worth if more debt is shifted to common stock?
I cant see why it should be that? Probably even less as the balance seems right now. Add it would be a hit on confidence so the value would take a hit greater than debt reduction.
 

zinfamous

No Lifer
Jul 12, 2006
103,539
18,099
136
Yeaa i guess so but i have little knowledge into how stockmarket works. Think of it this way. Would the company be more worth if more debt is shifted to common stock?
I cant see why it should be that? Probably even less as the balance seems right now. Add it would be a hit on confidence so the value would take a hit greater than debt reduction.
well, that's not what they did (if I understand things correctly) and not what I'm suggesting. With the offer a few weeks ago, They portioned a specific set of shares at something like $700 million value directly to GLoFo in an exchange of debt, right? Shave off 700mill that debt, here's $700 worth of shares...I think. Another $300 million of common stock was created for sale...I think. So, not all of this offering was available for sale and exposed to market forces, so the dilution probably wasn't as bad for valuation as it would have been if all were exposed to market antics.

Now, assuming it is easy enough to just make another offering (I assume it isn't), but all of it common stock for joe schmo (you and me) to just buy, I would assume that would be a far greater hit to share value--suddenly $1 billion more assumed value in shares out there to be portioned out with the current value of held shares. ...or something. I have no idea how this works so maybe I am just talking out of my ass.
 

jpiniero

Diamond Member
Oct 1, 2010
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I thought it was $700M in new shares and $300M in new bonds.

Yeaa i guess so but i have little knowledge into how stockmarket works. Think of it this way. Would the company be more worth if more debt is shifted to common stock?
I cant see why it should be that? Probably even less as the balance seems right now. Add it would be a hit on confidence so the value would take a hit greater than debt reduction.
If AMD has any doubt about Zen, they should do the second hit. If Zen is a flop then the stock will go down anyway, so may as well take advantage of the day traders and wipe out most of the debt.
 

krumme

Diamond Member
Oct 9, 2009
5,898
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136
From cfo commentary slides

"Executed two capital markets transactions in Q3 2016, raising ~$1.4B via a $690M equity offering ( including the exercise of a 15% equity underwriters’ option) and $700M convertible senior notes due in 2026 offering. "

Granted there is still a total of 800M of expensive debt at aprox 7% due in 2022 and 2024 so perhaps they will take another hit at it. But its not urgent like before and therefore not the same value.

But note that the new debt is 2.25%. Damn its a cost change.
 

krumme

Diamond Member
Oct 9, 2009
5,898
1,524
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I guess everybody expects Zen to do well?

From the earnings call:

"
Chris Hemmelgarn of Barclays :
“With Summit Ridge launching in Q1 of 2017, I guess how would you expect the channel to ramp that? Do you see it ramping pretty fully in the first couple of quarters of the year, or are you looking for more normal PC seasonality?”

President & CEO Dr. Lisa Su :
“You know, I would expect that there will be a relatively good initial demand for Summit Ridge that may be you know, not quite at the seasonal patterns. From where we see, Summit Ridge is playing in a space in the high-end desktop that we currently aren’t offering a product. So we believe we’ll be competitive certainly with Core I5 as well as Core I7 and we will be launching in those areas.”
"
Via guru3d.

I guess its more pointing to AMD polaris post about clock and ipc level beeing right.
https://forums.anandtech.com/threads/new-zen-microarchitecture-details.2465645/page-132#post-38535254

If - thats a huge possitive imo and perhaps thats making stock go up.
 
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