Discussion AMD Reports Fourth Quarter and Full Year 2020 Financial Results

[scannall]

Paying down debt and more R&D would be far better than stock buybacks. This Xilinx acquisition has the potential to be a real game changer, and would be a great target for increased research.

 

[Vattila]

Paying down debt and more R&D would be far better than stock buybacks.

Interestingly, due to the nature of the remaining debt, paying it down ahead of time vs stock buyback may amount to pretty much the same thing. Some of the long-term debt is in the form of convertible warrants, which may be converted to stock at $8 per share, under certain agreed conditions. Currently the stock is at ~$86. So the effective fair value of these warrants is far higher than the principal amount of debt given on the balance sheet. I think AMD does account for the conversion of these warrants when projecting the number of shares outstanding going forward. For the accurate details, check out the annual report and company filings.

PS. Incidentally, AMD warns that these warrants ("2.125% Notes") may cause downwards pressure on the stock this quarter:

"The conversion of the 2.125% Notes may dilute the ownership interest of our existing stockholders, or may otherwise depress the price of our common stock. The conversion of some or all of the 2.125% Notes may dilute the ownership interests of our existing stockholders. The 2.125% Notes will mature on September 1, 2026, unless earlier redeemed or repurchased by us or converted. During the fourth calendar quarter of 2020, the sale price of our common stock for conversion was satisfied as of December 31, 2020 and as a result, the 2.125% Notes are eligible for conversion during the first calendar quarter of 2021. Any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the 2.125% Notes may encourage short selling by market participants because the conversion thereof could be used to satisfy short positions, or the anticipated conversion of the 2.125% Notes into cash and/or shares of our common stock could depress the price of our common stock."

https://ir.amd.com/sec-filings/filter/annual-filings/content/0001628280-21-001185/0001628280-21-001185.pdf

 

[VirtualLarry]

I can't handle the swings. Zen 3 will be my last and final PC build for 3 or 4 years. Zen 3 CPU shortages and paying extortion prices for GPU's is unbearable. With the advent of DDR5, I feel that is the wall that will take 1-2 years to level off. Besides, I have a good inventory of DDR4 memory right now.

To be fair, this situation in the market today is NOT "AMD's fault". Not even sure why you're bringing it up in this thread, unless to throw dirt on AMD.

I think that they're doing pretty great, all things considered. Could they have more supply available in the retail DIY channel? (Where's retail Renoir, AMD?) Perhaps. But overall, I'm mostly happy with them. Then again, I haven't been looking for a Zen3 CPU.

 

[DrMrLordX]

Insider trading is not legal, thus the wink smiley. Stock buybacks essentially have to be announced in advance, so the kind of timing I alluded to is not possible with it either.

https://www.fool.com/investing/2018/06/15/revisiting-intel-ceo-brian-krzanichs-huge-stock-sa.aspx

BK followed all the rules and never received punishment, but we all reasonably suspect he was trading on insider information anyway. It's how they play the game. Follow the rules or don't. Timing this kind of a buyback for AMD would be tricky, since they would have had to announce the buyback in advance, but it can be done.

 

[moinmoin]

https://www.fool.com/investing/2018/06/15/revisiting-intel-ceo-brian-krzanichs-huge-stock-sa.aspx

BK followed all the rules and never received punishment, but we all reasonably suspect he was trading on insider information anyway. It's how they play the game. Follow the rules or don't. Timing this kind of a buyback for AMD would be tricky, since they would have had to announce the buyback in advance, but it can be done.

We already knew Intel is good at financial engineering, but I prefer AMD (and Intel for that matter) to excel at node and design engineering instead, thank you very much.

 

[DrMrLordX]

We already knew Intel is good at financial engineering, but I prefer AMD (and Intel for that matter) to excel at node and design engineering instead, thank you very much.

Yeah I know. I agree there. But the subject of stock buybacks was brought up, so . . . that was the only scenario I could think of where a buyback would work for the company.