Originally posted by: Idontcare
[Please don't take this dialogue as your typical anti-AMD schtik. This is quite educational and I enjoy the conversation.]
I do as well...carry on!
I freely admit that my education on the AMD/Abu Dhabi deal came by way of media snippets and sound-bites on MSNBC Squawk Box. I was under the impression that the BOD constructed the dilution deal without the shareholders knowledge, and when it was announced there wasn't a vote by the shareholders but more of an "executive decision" made by the BOD to take the money.
Is this perception of the Abu Dhabi deal in grave error? What was the deal then. With the scenario laid out above I cannot rationalize why the BOD cannot continue to treat the shareholders as they have thus far. Wasn't there a rather nasty Q4/06 analyst meeting afterwhich AMD showed their hand in Q1/07 and devastated the folks who bankrolled the ATI acquisition?
My point here is that AMD's BOD has certainly been portrayed by mainstream financial media as rolling over the top of the shareholders for many quarters now, so what substantiates the faith at this point that such behavior is suddenly going to stop going forward?
The media snipets are what's leading you astray...The BOD asked for and received permission for the dilution at the shareholder's meeting back in May, though they didn't specify as to why.
It's not legal for them to dilute the shares without permission...
Originally posted by: Viditor
3. With ASPs, GM, and Marketshare all increasing, I don't see any near term cash problems for AMD (which would be the ONLY reason to sell now at these prices). In fact, this last quarter they came within a hair of breakeven...
It was quite encouraging. The enthusiast in me has no problem accepting that somewhere out there is a balance for AMD to make money dominating the high-volume lower-end market segments. The proof is that Via is doing this with C7.
Taking this bit by bit, remember what we're talking about here. The definition of ASP is Average Selling Price...if it increases, then the
types of sales are changing to the higher end sales.
In this case, AMD informed us that much of the ASP increase was due to Phenom and Barcelona sales. Keep in mind that there are a huge number of Opteron custormers that would dearly love to upgrade from their dual cores to quad cores. These are not new systems, they are upgrades of older systems.
The personal issue I have is that knowing the process node technology as intimately as I do, I just don't see a viable path for AMD to return to the glory days of K8 vs. Prescot. THe IBM fab club is clearly the only option for AMD to get to 32nm node, but just look at the severly lagging timeline for 45nm and consider the quality of the node (no MG) and the question of 32nm just makes me pale with concern for my AMD engineer friends.
AFAIK, AMD is still shipping 45nm by mid 08...and they have been working with HKMG for over a year now (though the Nov 45nm samples were not HKMG). AMD and IBM have been working on 32nm and 22nm together at East Fishkill for at least a year now (they've renewed their joint venture 4 times).
In fact I know for a fact that Bruno La Fontaine developed a prototype EUV phase shift mask last year for AMD.
Originally posted by: Viditor
4. While I agree that near term market activity says the pricing is much lower than $30, I have never ever seen a company sold based only on near-term numbers (unless they were about to go under, which obviously AMD is not). For example, during the RJR/Nabisco deal, the price for the starting bid was based on the all-time high. That's a fairly common starting place...
Sure, but reaching for the extreme case of the world's absolute best-case scenario in historical buy-out deals is not exactly building a substantive case for the valuation of AMD. There is nothing special about AMD, so I would expect nothing better than your average 1.5X current stock price multipier on a buy-out bid. In fact it is not good for AMD's buy-out potential that there is question marks over x86 license rights transfer and the fact their market segment has an 800lb gorilla in it.
Firstly, that initial offering at RJR was only an average case. The reason it was so famous was because the total amount of the LBO was so large, not because it was a large PPS offer...
There really are absolutely no question marks about x86. Nemesis' arguments are completely spurious, and if you carefully read through the posts you will see what I mean.
Originally posted by: Viditor
5. In April 09, the anti-trust case goes to court...even as a pure crap-shoot (and almost everyone thinks the odds are well into AMD's favour), the potential of a $4-30 Billion award or settlement drives the value of the shares well into the $30 range. $5 Billion would make AMD completely debt free and would pay off all of their Fabs as well...
Trust me I have been waiting for this since the days of original K7 Athlon trying to break into Intel-only suppliers.
BUT I must admit I am becomming deeply troubled by the more and more "SCO like" attitude that seems to be replacing the AMD business "make money selling chips" and becoming "our lawyers and pending litigation will save the day". SCO has been telling investors this line for years, and it did not go well for them.
The 2 cases are apples and oranges...the only similarity is that they both have lawyers involved.
With SCO (and RMBS for that matter), we have a company claiming that they own the IP of something...
AMD's is an anti-trust and comes with some far more serious reprucussions for Intel.
Forgetting the dollar amount for the moment, if AMD is indeed able to prove their case even a little bit, then it's not only possible but probable that the DOJ will end up filing a suit of their own.
At the moment, all of the discovery in the case is still in the hands of AMD and Intel...but once the case goes to court, it becomes part of the public domain and can be analysed by the DOJ.
I fully expect Intel to settle this out of court in the next year, simply because they can't afford to let it get made public. This was not the case for either SCO or RMBS
This lawsuit deal is kinda of like the same effect that the allure of lotteries have on the poor. They get all pie-in-the-sky dreamy about what they are gonna do with their lottery winnings and proceed to spend $5 on lottery tickets instead of spending the money on something that helps them out of their plight (like a dental plan). (I am speaking from a LOT of experience here)
AMD is drunk with hope if their business plan going forward is factoring in even 1% of the "hoped for" gains from the settlement. Focus on making money the old-fashioned way.
To be clear, the suit isn't part of the business plan, but it certainly will be part of the share price going forward...
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