AMD slashes $880M from value of division

[Idontcare]

In a filing with the Securities and Exchange Commission, AMD said it recently discovered that its business units that make chips for cell phones and digital televisions, both acquired as part of the ATI transaction and considered "noncore" parts of AMD's operations, weren't performing up to expectations.

As a result, the company plans to write down the value of their goodwill, or intangible assets such as reputation, and take charges of $880 million in the latest quarter, which ended June 28.

AMD had previously written down ATI's overall value by $1.6 billion in January, in a staggering reassessment that indicated the perception of ATI in the market had slipped dramatically.

Taken together, AMD has effectively said that ATI is now worth 44 percent less as a company than when AMD bought it.

http://biz.yahoo.com/ap/080711/amd_writedown.html

Writedowns don't necessarily effect cashflow, if ever, so this doesn't mean AMD has any more or less cash reserves or cashflow but it does mean (continues to mean) that in hindsight AMD threw away a buttload of shareholder value by acquiring ATI at such an over-valuation in 2006.

Someone inside ATI had to be snickering the whole time during negotiations, snickering all the way to the bank that is.

 

[Phynaz]

That certainly explains what has been happening to their stock price the last two weeks. I guess the institutional investors knew what they were doing.

I wish somebody would pay me $15M to overpay $2.5B for something.

Bad time for me to be long on AMD

 

[Idontcare]

On the flip side you could say ATI's executive team were quite intelligent and played their cards well and close to the chest during the AMD courtship phase.

ATI management had to have known R600 wasn't going to be the monster needed to keep up with Nvidia's cadence of GPU's (of course we could say that about AMD and K10 vs. Clovertown) headed into the acquisition talks with AMD at the time and yet they still managed to snag an impressive amount of cash for their (ATI) shareholders from the negotiations provided the shareholders didn't hang onto their converted AMD shares.

For every entity that foolishly buys at the highs, there is some entity that struck gold by selling at the highs.

 

[Phynaz]

Unfortunatly I've been the former with both AMD and MOT.