AMD shares rise on buyout chatter
- Thread starter LittleNemoNES
- Start date
They're an *amazing* stock to buy right now, even at 5% up.
At first glance I thought intel was buying them or something.
I've never heard of a bunch of private investors ganging up and buying out a company like that, it's interesting.
At first glance I thought intel was buying them or something.
I've never heard of a bunch of private investors ganging up and buying out a company like that, it's interesting.
Originally posted by: SickBeast
They're an *amazing* stock to buy right now, even at 5% up.
At first glance I thought intel was buying them or something.
I've never heard of a bunch of private investors ganging up and buying out a company like that, it's interesting.
maybe ex-Intel employees?
No that's silly. It's a bunch of large investment firms. They probably realize how great a buy they are right now.Originally posted by: gersson
Originally posted by: SickBeast
They're an *amazing* stock to buy right now, even at 5% up.
At first glance I thought intel was buying them or something.
I've never heard of a bunch of private investors ganging up and buying out a company like that, it's interesting.
maybe ex-Intel employees?
This is normally VERY BAD for the products of the company. AMD balance sheet sucks, which means the private equity firms buying them see a way they can improve the balance sheet. They will do what they can to fix the balance sheet, then dump the company ASAP. It's like flipping a house... buy a beater, fix it cosmetically, and dump it for a profit.
Sad to say but he is right. One thing the left out is the company would most likely be split up to sell alot easier. AMD production facility alone is worth the stock price. Then AMD and ATI patents catalog is pretty large. The company is worth a lot more in parts then as a whole. Now if ADM price had not fallen by %65 ove the course of the year is would not a great buy.
The private equity firm will not have the ability to break up AMD, just because that would create unfair competition in favor of Intel. It really depends on what the investment group sees as the best potential for making the company appear better on paper.
Investment groups typically have very little experience in an engineering sense when it comes to the product, they are business experts who will look to streamline the company. My best guess as to what they will do is... can a lot of people, and push resources into the most profitable parts of the company.
That said... this could mean all the money goes into older more 'efficient' processes, or it could mean they sell off all the older fabrication lines to focus on new technologies.
Don't panic yet, it could potentially be good. The majority of the time it is not though.
EDIT: In reading more, this could be really positive for AMD as well, cash rich private equity could be just the source of resources AMD needs to get through their cash crisis... its a long shot
I think AMD needs this type of 'purge' to make them a more viable company. They've always had money problems, and this may fix whatever has been ailing them over the years.
In reality I think these are just some smart investors with some inside information on AMD and intel's future product lines. They probably forsee AMD doing very well over the next few years and want in on the gravy train.
Another variable about this situation has to do with AMD's x86 license. I've heard that they could relinquish their license if they were to be bought out.
I always figured I would try the waters of the stock market one day, but not this soon :Q. Ever since Core 2 Duo I've been seeing this scenario build itself up where Intel has the better product + AMD buys out ATI, so AMD stocks drop, until they release K8L (or K10 for some of you) and R600. Would DTX form factor being released mean a profit for AMD too?
Now they have dropped from $42 and I just kept watching it drop, and drop, and drop.... to $14.53 or something and I've had my investing account ready for months now. I've been waiting for it to start going back up once we started hearing rumors of R600 and K8L/K10, especially the latter. This seemed like the comotion I've been waiting for, so I finally dropped whatever money on it I could afford risking (not that it's a lot).
Did I make a sound choice?
Now they have dropped from $42 and I just kept watching it drop, and drop, and drop.... to $14.53 or something and I've had my investing account ready for months now. I've been waiting for it to start going back up once we started hearing rumors of R600 and K8L/K10, especially the latter. This seemed like the comotion I've been waiting for, so I finally dropped whatever money on it I could afford risking (not that it's a lot
).Did I make a sound choice?
That's not always the case, and I don't believe it is here.
IF Barcelona comes out as advertised, there really is nothing to stop AMD from getting back into the $40 range again...and that's a very tempting proposition for an Equity investor.
The type of LBO you are talking about is something Gordon Gecko...someone buys out the company and sells it for parts at a large profit. That really can't happen here as the market for those parts is almost non-existent.
Also, just fixing the balance sheet wouldn't make AMD an attractive company for flipping...investors for that kind of sale would be more concerned about long term stability and profit.
I did say "normally".
The changes of a LBO leading to parting out the company are very slim, because of the creation of monopolistic competition, to say there is no market for the parts is an incorrect statement. The chip making industry is a very, very large and competitive industry and believe it or not there are many very cash rich smaller fabrication companies that could easily benefit from buying into AMD supply chain or acquiring AMD's 90/60/45nm 200mm and 300mm fabs.
From reading into it more, here are a couple scenarios starting with the most likely:
Scenario 1: This is just a rumor, AMD posts its 10-K (financial report) in the upcoming weeks, the rumor was generated to give the stock a kick in the ass. When AMD posts its 10-K, and shows a greater than expected loss, all of those guys buying put-options are going to get rich because of this rumor. (This is an incredible time to buy 'over-under' options on the stock...or was Monday)
Scenario 2: Private equity is really looking to fund AMD, they will buy a solid portion of shares, this will drive up the stock price temporarily. Then that PE firm will either attempt to streamline the company or give it cash to build a new 45nm/300mm fabrication plant and give AMD a better fighting chance. (This is very risky though because PE firms hate to invest like this, unless it is a sure thing)
Scenario 3: The PE firms are rumored to represent IBM or Motorola, but why the hell would IBM buy back into the semiconductor industry? This is madness. Motorola on the otherhand I would say is a much more likely candidate. Motorola is under a lot of pressure from Charles Icahn who is attempting to get on the board by buying up 12-16% of the company so that he can force them to use all of their cash to buy back stock and drive up the price. Through purchasing AMD, motorola would be adding another link in their supply chain and dumping the cash that is making them so attractive to Icahn.
To answer you KingstonU, I think you may be all set in the long run. The short run is going to be scary though. This stock has been constantly downgraded over the last few months. Some people think AMD is way undervalued, but truthfully they're not. Their products are currently inferior and their profit margins are much lower than intel's because AMD can only compete by having reduced prices. Your best hope is that ATI / AMD's next generation products can compete. BTW all of this effects Intel's margins... if AMD fades out of this race Intel faces HUGE penalties...
EDIT: btw, by all this I mean, hold onto the stock. A tip for next time, when you're looking at a stock you know is in the midst of a major change, buy options. Put-options are a bet that the stock is going to go down, Call-options are a bet the stock will go up. They are typically they best way to make 'quick' money, whenever you buy common stock it should be for the long term unless you are a very experienced day trader.
Scenario 4: maybe intel is looking to prop AMD up
The changes of a LBO leading to parting out the company are very slim, because of the creation of monopolistic competition, to say there is no market for the parts is an incorrect statement. The chip making industry is a very, very large and competitive industry and believe it or not there are many very cash rich smaller fabrication companies that could easily benefit from buying into AMD supply chain or acquiring AMD's 90/60/45nm 200mm and 300mm fabs.
From reading into it more, here are a couple scenarios starting with the most likely:
Scenario 1: This is just a rumor, AMD posts its 10-K (financial report) in the upcoming weeks, the rumor was generated to give the stock a kick in the ass. When AMD posts its 10-K, and shows a greater than expected loss, all of those guys buying put-options are going to get rich because of this rumor. (This is an incredible time to buy 'over-under' options on the stock...or was Monday)
Scenario 2: Private equity is really looking to fund AMD, they will buy a solid portion of shares, this will drive up the stock price temporarily. Then that PE firm will either attempt to streamline the company or give it cash to build a new 45nm/300mm fabrication plant and give AMD a better fighting chance. (This is very risky though because PE firms hate to invest like this, unless it is a sure thing)
Scenario 3: The PE firms are rumored to represent IBM or Motorola, but why the hell would IBM buy back into the semiconductor industry? This is madness. Motorola on the otherhand I would say is a much more likely candidate. Motorola is under a lot of pressure from Charles Icahn who is attempting to get on the board by buying up 12-16% of the company so that he can force them to use all of their cash to buy back stock and drive up the price. Through purchasing AMD, motorola would be adding another link in their supply chain and dumping the cash that is making them so attractive to Icahn.
To answer you KingstonU, I think you may be all set in the long run. The short run is going to be scary though. This stock has been constantly downgraded over the last few months. Some people think AMD is way undervalued, but truthfully they're not. Their products are currently inferior and their profit margins are much lower than intel's because AMD can only compete by having reduced prices. Your best hope is that ATI / AMD's next generation products can compete. BTW all of this effects Intel's margins... if AMD fades out of this race Intel faces HUGE penalties...
EDIT: btw, by all this I mean, hold onto the stock. A tip for next time, when you're looking at a stock you know is in the midst of a major change, buy options. Put-options are a bet that the stock is going to go down, Call-options are a bet the stock will go up. They are typically they best way to make 'quick' money, whenever you buy common stock it should be for the long term unless you are a very experienced day trader.
Scenario 4: maybe intel is looking to prop AMD up
Haven't heard the name Gorden Gecko since the Oliver Stone movie "Wall street", or this is a different GG?
Oh, you can be SURE that any equity firm that buys out AMD/ATI could most certainly sell any or all of the pieces of the company. Even more certain is that they will do that. These people are not long-term holders like a Warren Buffet, they are "in" to turn a profit on their $ and for no other reason. They will split companies up, kick pension funds to the curb (aka the Govt.), and any other thing they can to turn a dollar, then they will rid themselves of the whole affair and move on to their next target. Of course, that's IF somebody really does step in on AMD/ATI.
Anybody that thinks this can't/won't happen need look no further than the US investment market/mob and in turn its effect on the US economy and jobs.
US economy and AMD/ATI -----> Stick a fork in the both of them, they're both "done".
Anybody that thinks this can't/won't happen need look no further than the US investment market/mob and in turn its effect on the US economy and jobs.
US economy and AMD/ATI -----> Stick a fork in the both of them, they're both "done".
Fabs aren't really interchangeable...if they were, then AMD would have been producing ATI chips at Fab 36 right away. So the market for AMD's Fabs (even though they are state of the art) is EXTREMELY limited.
Ummm...that would be fine if it weren't highly illegal. As the puts generate a paper trail, I can't see this as a very likely scenario.
Along those lines, AMD has been showing the Barcelona to PE firms very quietly for a couple of weeks now. The big showing is due on Monday with GS.
An interesting thought...if a firm was very excited about AMD's chances with Barcelona (and possibly other upcoming tech from AMD), they actually couldn't invest in the stock until the info was made public (insider trading...even though it was a presentation, it was a private one), but they COULD buy the company and sell it for a profit down the road.
I agree...I don't think there's a chance in H3ll it's IBM, but if there is a tech company out there who really could use (and afford) a company like AMD, it's Motorola! Not to mention that Hector comes from there and AMD has had several deals with them in the past. Plus, Motorola desperately needs a Fab!
Why on Earth would they want to do that???
It's still cheaper to buy a fab than start over.
It is highly illegal, but it happens more frequently than you'd think. Citing put-options was silly on my part, usually there are much larger gains to be made in other ways.
Governmental regulation of competition does not always work in favor of the consumer. In many cases keeping competition *closer* helps keep the better company more profitable. A perfect example was Microsoft past interest in buying large chunks of apple shares.
Yes but anyone who would buy AMD Fabs would have to gut them and install all new lines (the vast majority of the price). While the building itself is worth a fair bit, it's a small fraction of the cost. For your theory to be viable, AMD's price/book would have to be well under 1...
I know it happens, but the risks have been increasing dramatically since Enron and Spitzer's crusade have occured...the chances are really, really small on this...
The difference is that apple customers were and are one of Microsoft's biggest clients. MS sells a huge amount of Office software (to name just one product) to Apple customers.
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