Corporate Finance

AMD’s First-Quarter Earnings Fuel Bankruptcy Fears

Advanced Micro Devices misses target, and its future looks bleaker than ever.
Matthew HellerApril 27, 2015
AMD’s First-Quarter Earnings Fuel Bankruptcy Fears

The latest earnings report from Advanced Micro Devices has fueled concerns that the chip maker is headed eventually for bankruptcy.

For the first quarter, AMD reported a loss of nine cents per share on revenues of $1.03 billion. Analysts polled by Yahoo Finance had expected a loss of five cents per share on revenues of $1.05 billion.

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AMD headquarters in Sunnyvale, Calif.

AMD headquarters in Sunnyvale, Calif.

AMD’s own guidance for the second quarter doesn’t suggest an imminent turnaround. The company forecast that revenues could decline as much as 6% from the first quarter. Consensus analyst estimates for the quarter ahead are a loss of one cent per share on $1.13 billion in revenues.

“Under the backdrop of a challenging PC environment, we are focused on improving our near-term financial results and delivering a stronger second half of the year based on completing our work to rebalance channel inventories and shipping strong new products,” AMD CEO Dr. Lisa Su said in a statement.

In an analysis of the first-quarter results, The Motley Fool said there was no real threat of AMD going bankrupt in the next few years, noting that it still had about $900 million in cash and investments at the end of the first quarter.

AMD also “has until 2019 before it has to repay any significant portion of its outstanding debt, with $600 million worth of notes maturing that year,” The Motley Fool reported. “This buys AMD some time to turn things around before it needs to refinance that debt.”

According to the analysis, AMD’s problem is that the deterioration of its business doesn’t seem to be slowing down, and delays “are starting to plague the company, not surprising given that research and development spending has been slashed continually over the past few years.”

The launch of the much-anticipated 64-bit ARM server chips has been pushed back to the second half of 2015, one year later than initially planned.

“By the time 2019 rolls around, AMD’s financial position will likely be even more precarious than it is today,” The Motley Fool predicted.

Photo: Coolcaesar, GFDL-en, CC BY-3.0