If I were the CEO of AMD... (rate)

[mrmt]

Not at all. They are now able to use TSMC (part of the new Intel/AMD agreement). You may have not noticed, but AMD is slowly digging themselves out of the GloFo hole they've got themselves into.

No, they can't. The waiver that allowed manufacturing at TSMC is no longer, all CPU manufacturing will move to GLF, plus some GPU manufacturing too. AMD is more than ever buried in GLF.

In x86, I completely disagree with you. Don't forget AMD dictated how Intel proceeded when they copied DCA, and were forced to adopt AMD64, and also followed AMD's lead in multi core.

x64 was Microsoft's wish, not only AMD. If not for Microsoft adopting x64 then there would be no AMD extension to talk about.

What do you mean by Intel followed AMD lead in multicore CPU? Intel and AMD launched dual core processors in the same month in 2005.

And you are disregarding the differences at the time. In 2005 AMD had 25% of the x86 market, they had a more efficient architecture and their fabs were not that behind Intel's, and market had no problems in financing the company. AMD was both stronger and had a stronger market position at the time, and even that way they had trouble in making multi-core get traction. It was Conroe's 200-300 dual core chips that made the technology get traction, not AMD's $1000 chips that made.

In 2013 they are a shadow of their former self, no funds, no cash, inferior architecture and subpar foundry, do you really think they could lead something other than a new legal bankruptcy argument?

 

[Centauri]

-How would it get anywhere close to this much? The whole market cap of AMD is less than $2B...

I agree that AMD would have a hard time raising $4bn~ from anything, but nevertheless; market cap and asset value have absolutely nothing to do with each other. Market cap is a reflection of the company's perceived future performance relative to debt and assets.

 

[Deltaechoe]

Because AMD totally doesn't have large contracts with console manufacturers

 

[mrmt]

I agree that AMD would have a hard time raising $4bn~ from anything, but nevertheless; market cap and asset value have absolutely nothing to do with each other. Market cap is a reflection of the company's perceived future performance relative to debt and assets.

Oh, they *do* have *a lot* to do with each other. The balance sheet is the starting point of every valuation model out there.

A gross simplification is that the value of a company is:

Balance sheet + future income (DCF, EVA, Dividends, pick your metric).

 

[Centauri]

Oh, they *do* have *a lot* to do with each other. The balance sheet is the starting point of every valuation model out there.

A gross simplification is that the value of a company is:

Balance sheet + future income (DCF, EVA, Dividends, pick your metric).

No, they don't. If you have assets that you're selling off to a third party, their value is not in any way affected by the debt on your balance sheets. Value is intrinsic.

The only situation where the value of your assets in a sale is hindered by your debt level is during a liquidation. That is not what is being discussed here.

 

[mrmt]

No, they don't. If you have assets that you're selling off to a third party, their value is not in any way affected by the debt on your balance sheets. Value is intrinsic.

Oh, I see your point. I thought that you were saying that the asset values (reflected in the balance sheet) weren't part of the market cap of a company. They are.

In most cases it will be like you are saying, except that value isn't intrinsic, but let's not discuss this point here, please.

 

[Idontcare]

No, they don't. If you have assets that you're selling off to a third party, their value is not in any way affected by the debt on your balance sheets. Value is intrinsic.

The only situation where the value of your assets in a sale is hindered by your debt level is during a liquidation. That is not what is being discussed here.

You changed the discussion, I hope you can see why that would start to cause confusion at this point.

You started out by claiming market cap and asset value have nothing to do with each other.

I agree that AMD would have a hard time raising $4bn~ from anything, but nevertheless; market cap and asset value have absolutely nothing to do with each other. Market cap is a reflection of the company's perceived future performance relative to debt and assets.

And now you have redirected the discussion as if you were talking about the sale of an asset. Totally different discussion.

 

[jpiniero]

I just can't think of a single company that would benefit from buying AMD's graphics division. Can you?

Apple.

In 2005 AMD had 35% of the x86 market, they had a more efficient architecture and their fabs were not that behind Intel's, and market had no problems in financing the company

Desktops were also much more popular those days.

IMO, first thing I would do is kill off Big Core (if it isn't already killed off eventually) to save money. Jaguar is more or less the future of AMD; may as well roll with it. I realize that Jaguar isn't suitable for smartphones and only marginally for tablets, but it's all they have.

 

[Centauri]

You changed the discussion, I hope you can see why that would start to cause confusion at this point.

You started out by claiming market cap and asset value have nothing to do with each other.



And now you have redirected the discussion as if you were talking about the sale of an asset. Totally different discussion.

The OP discussed selling assets to raise capital. I responded to a post made in response to that suggestion which asserted that a company couldn't possibly have assets worth more than their market cap, which isn't true; all it means is that their debt levels are silly high relative to their expected income growth and liquid assets.

ie; the value of say, a fab, has nothing to do with the balance sheet of the company selling it. It's a fab.

How did I change the topic?

 

[Ajay]

A company? No. But ATI might suit private equity or venture funds.

I've seen this happen with a company I used to work for. They transitioned the company to what I can only describe as 'super lean' work-force wise. Chose a specialty niche in Networking (in terms of hardware/software) and vastly improved customer service and marketing. Now they have re-emerged as a successful, but slow growth company (perhaps only because of the international economy over the past few years). Clearly, they must have a long term outlook, hoping, I imagine, to take the company public again one day.

Is this how private equity firms typically operate? I can see 'ATI' getting very lean and also mean in it's marketing and customer service. It it hard for me to see what sort of growth potential they would have - particularly when being squeezed by Intel on one end and Nvidia on the other. In other words, where is the 'niche' but profitable market for ATI products?

 

[Vesku]

Their GPU+CPU efforts are just starting to pay off and you want them to bail? I think they should have stripped major costs out of the FX line, i.e. fewer models and less marketing dollars spent, and focused on getting out Kaveri sooner, imo.

 

[Centauri]

In 2005 AMD had 35% of the x86 market...

AMD's market share peaked in 2007, and it was at 25%.

 

[Ferzerp]

And then core 2.......

 

[mrmt]

The OP discussed selling assets to raise capital. I responded to a post made in response to that suggestion which asserted that a company couldn't possibly have assets worth more than their market cap, which isn't true; all it means is that their debt levels are silly high relative to their expected income growth and liquid assets.

You wrote that balance sheet has nothing to do with market cap, as quoted by IDC.

I got the point once you explained the second post. Your choice of words in the first post simply wasn't suitable:

- On the first post you say that market cap has nothing to do with balance sheet, which isn't correct.

- On the second, that the value of an asset has nothing to do with debt, which is somehow correct.

So yes, there is some noise in what you were trying to say.

 

[mrmt]

Is this how private equity firms typically operate? I can see 'ATI' getting very lean and also mean in it's marketing and customer service. It it hard for me to see what sort of growth potential they would have - particularly when being squeezed by Intel on one end and Nvidia on the other. In other words, where is the 'niche' but profitable market for ATI products?

I've seen some cases here and there. Some PE companies invest a lot on the new acquisitions, others downsize, others buy and fold, others invest and keep taking just dividends... There is no recipe here, it depends on who will get to ATi's helm.

As for a profitable market for the company, Pablo is very bullish about the prospects, I do think they have a shot but it won't be an easy one, but I do think they have potential. There is nothing preventing ARM manufacturers from adopting ATi graphics, or someone with pockets big enough to put ATi to fight with Nvidia (far cheaper than put AMD to fight against Intel). The possibility is there.

 

[Centauri]

You wrote that balance sheet has nothing to do with market cap, as quoted by IDC.

I got the point once you explained the second post. Your choice of words in the first post simply wasn't suitable:

- On the first post you say that market cap has nothing to do with balance sheet, which isn't correct.

- On the second, that the value of an asset has nothing to do with debt, which is somehow correct.

So yes, there is some noise in what you were trying to say.

I never said anything about 'balance sheet' in my first post. I said "market cap and asset value have absolutely nothing to do with each other."

The only thing I could have written differently was "...an asset's value...", but it doesn't change what I said; the market valuation of a company and the value of the company's assets in a private sale have nothing to do with each other. The debt load of the company does not in any way lower the value of the company's assets in a 3rd party sale.

 

[pablo87]

Well everyone it looks like the OP (that's me) is taking a beating.

OP sad. OP takes a timeout from his thread now.

2timer, the world is full of peanut gallery opiners, and short of originals. So don't feel bad, its par for the course.

Fact of the matter is, x86 is losing the client - IDC says the market is down 8% but what they don't tell you is the share losses are greater in more mature, more fickle markets meaning is that decline will only accelerate. Plus the PC is much less competitive and more monopoly/oligopoly than the tablet and smartphone FF. So the next 10 year battle is beyond x86.

Secondly, there are now many GPU companies/licensors ( of which AMD/ATI is one) but only 1 ARM (and 1.1 x86), and 1 company that dominates most everything else - Samsung. The opportunity: an alternative to ARM - to your point.

 

[pablo87]

The problem with an ATI spin-off is the opportunity is being seized by others while AMD dithers..

 

[Ajay]

I've seen some cases here and there. Some PE companies invest a lot on the new acquisitions, others downsize, others buy and fold, others invest and keep taking just dividends... There is no recipe here, it depends on who will get to ATi's helm.

Good point.

As for a profitable market for the company, Pablo is very bullish about the prospects, I do think they have a shot but it won't be an easy one, but I do think they have potential. There is nothing preventing ARM manufacturers from adopting ATi graphics, or someone with pockets big enough to put ATi to fight with Nvidia (far cheaper than put AMD to fight against Intel). The possibility is there.

I can see the latter. With proper management, product focus and marketing, it is possible a new ATI to attack Nvidia consumer grade discrete graphics (and high performance mobile). This, in turn, would erode Nvidia's R&D base that helps support production of their compute platforms. With Nvidia under the strain of building up it's ARM SoC business, this could be a damaging attack and force Nvidia to make some tough choices.

The timing could be very good for just such a move, given AMD graphic's strength in the soon to be released consoles. If this happens, it needs to happen now, or never. Interesting...

 

[Idontcare]

I never said anything about 'balance sheet' in my first post. I said "market cap and asset value have absolutely nothing to do with each other."

The only thing I could have written differently was "...an asset's value...", but it doesn't change what I said; the market valuation of a company and the value of the company's assets in a private sale have nothing to do with each other. The debt load of the company does not in any way lower the value of the company's assets in a 3rd party sale.

The market cap of a company very much incorporates the asset valuation of the company's holdings.

I don't see how you could believe this to be untrue. I also don't see how you cannot realize that your post, as written, communicates that you don't believe it is true, which is silly.

Do you really think the market cap of Intel has absolutely nothing to do with Intel's assets (and the value thereof)? Do you really think there market cap would be the exact same if someone donated a $100B real-estate asset to them tomorrow? Do you think Intel's market cap would be the same if they announced tomorrow that their assets are now worth 10 cents on the dollar owing to some unfortunate turn of events like the discovery of a superfund site under every fab or some such?

Asset valuation is very much a factor in the determination of a company's market cap. It is not the only factor, but to say it has nothing to do with it is simply false.

 

[Centauri]

The market cap of a company very much incorporates the asset valuation of the company's holdings.

I don't see how you could believe this to be untrue. I also don't see how you cannot realize that your post, as written, communicates that you don't believe it is true, which is silly.

Do you really think the market cap of Intel has absolutely nothing to do with Intel's assets (and the value thereof)? Do you really think there market cap would be the exact same if someone donated a $100B real-estate asset to them tomorrow? Do you think Intel's market cap would be the same if they announced tomorrow that their assets are now worth 10 cents on the dollar owing to some unfortunate turn of events like the discovery of a superfund site under every fab or some such?

Asset valuation is very much a factor in the determination of a company's market cap. It is not the only factor, but to say it has nothing to do with it is simply false.

*sigh*

Okay, let me explain this yet another way;

Say I'm drowning in debt - I'm under water on my mortgage, I've missed a car payment, and I'm only making the minimum on my credit card. My credit score (market cap/valuation), accordingly, is crap.

In order to take care of basic finances through the next month, I sell a few things on Craigslist; my stereo, my TV, some old clothing... whatever.

At no point during those Craigslist transactions is a potential buyer going to say to me "Hey, I'm interested in that 37" HD TV you have for sale, but I would like to ask how your personal finances are? Because if you're indebted, I'm only going to offer $20 for the TV you're asking $200 for because I think you're shady." And do you know why they're not going to say that? Because my FICO score has nothing to do with the value of my bedroom television.

The assertion to which I responded was that debt affects the value of assets. That is patently untrue. Moreover, the assertion was that a company couldn't possibly possess salable assets worth in excess of their market valuation - of course they could, because the values of those salable assets, like fabs and IP, are completely unaffected by the company's debt level. The value of an asset would only be affected by the owner's debt load were the buyer to inherit debts related to that asset; like taking over a car loan.

The only entity to whom debt level would factor in determining the value of a salable asset would be a creditor. But I'm not selling my TV to MasterCard, I'm selling it to some dude named Joe who wants a used TV.

Or; Even though the value of my personal possessions is $20,000, American Express, upon assessment, will only approve me for a $500 credit card because I also have $100,000 in debt. That does not mean, however, that I could not possibly raise more than $500 by selling stuff from around the house.

Why are you guys having such a hard time understanding this?

 

[Idontcare]

*sigh*

Okay, let me explain this yet another way;

Say I'm drowning in debt - I'm under water on my mortgage, I've missed a car payment, and I'm only making the minimum on my credit card. My credit score (market cap/valuation), accordingly, is crap.

In order to take care of basic finances through the next month, I sell a few things on Craigslist; my stereo, my TV, some old clothing... whatever.

At no point during those Craigslist transactions is a potential buyer going to say to me "Hey, I'm interested in that 37" HD TV you have for sale, but I would like to ask how your personal finances are? Because if you're indebted, I'm only going to offer $20 for the TV you're asking $200 for because I think you're shady." And do you know why they're not going to say that? Because my FICA score has nothing to do with the value of my bedroom television.

The assertion to which I responded was that debt affects the value of assets. That is patently untrue. Moreover, the assertion was that a company couldn't possibly possess salable assets worth in excess of their market valuation - of course they could, because the values of those salable assets, like fabs and IP, are completely unaffected by the company's debt level. The value of an asset would only be affected by the owner's debt load were the buyer to inherit debts related to that asset; like taking over a car loan.

The only entity to whom debt level would factor in determining the value of a salable asset would be a creditor. But I'm not selling my TV to MasterCard, I'm selling it to some dude named Joe who wants a used TV.

Why are you having such a hard time understanding this?

I see what you are saying now.

FWIW though I personally do factor in as many things as I can about the seller when I buy something from them. It is a gauge of fraud and item history.

Do you buy a "nearly new" used xbox from some dude with a history of going to jail for theft, or do you buy it from the guy on ebay who has >30k ratings with a very high overall rating?

I set purchase price on the basis of anticipated fraud, of me getting scammed. Maybe HP ought to have done the same

HP Alleges Fraud In Autonomy Deal; Takes $8.8B Charge; Shrs At 10-Year Low

 

[Centauri]

Well, the open market still seems to tend to itself in that way. An asset being sold by AMD, and being sold solely because the company is in a bind, would wind up fetching less than an identical asset being sold by Intel - if only because AMD would be more open to entertaining offers to close a sale quickly and guarantee themselves and creditors the capital. Intel would dangle it from whatever height they want until somebody else decides to bite at it, because they can.

This entire conversation is pretty moot though because AMD has already emptied out the closets. If they wanna sell anything else, it will literally be a limb.

 

[Idontcare]

Well, the open market still seems to tend to itself in that way. An asset being sold by AMD solely because the company itself is in a bind would wind up fetching less than an identical asset being sold by Intel, if only because AMD would be more open to entertaining offers to close a sale quickly and guarantee themselves and creditors the capital. Intel would dangle it from whatever height they want until somebody else decides to bite at it, because they can.

Isn't that what happened to AMD when they sold off some of their IP to Qualcomm a few years back? Didn't they sell a business unit for something like $65m that was viewed as being worth a few multiples of that, but Dirk was desperate to raise cash to fund bulldozer development at the time? (motivated seller situation)

I don't remember the specifics, so that could be completely wrong.

 

[Centauri]

The inverse being the ATi purchase; AMD bit like a pit bull onto the idea of becoming an overnight GPU player and wound up paying through the nose because of it. They could have still had ATi and had it for much less had they not pursued the purchase with tunnel vision.

Never go to the grocery store hungry.