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Advanced Micro Devices, one of the world’s Top 10 suppliers of semiconductors who sells microprocessors, graphics processors, chipsets and chips for various consumer electronics, may be acquired by a private equity group, according to a market rumour. The current position of AMD is pretty hard: its microprocessors are facing tough competition by Intel Corp., while its graphics chip group struggles to release its new product.

“We were surprised to see AMD shares rally yesterday given what we believe to be increasing concerns about cash flow at the company. When we polled clients as to the reason behind the strength we were told that private equity rumors were circulating,” analyst Doug Freedman of American Technology Research wrote in a report on Thursday, EETimes web-site reports.

Private equity groups made two notable acquisitions of semiconductor firms last year: a consortium of investors bought Philips Semiconductor in August, whereas another group of investors acquired Freescale in September. Both semiconductor companies had bright prospects in various industries and it is undeniable that the need for chips will continue to grow rapidly in the future, which may mean that private equities may be looking forward other semiconductor firms as well.

“While we do not doubt that private equity is sitting on cash it needs to put to work, we have a hard time seeing how it would get involved in AMD at the present valuation,” Mr. Freedman wrote in his report.

The times for AMD are pretty tough these days, still, it does not mean there is no way out.

The company lost $574 million on sales of $1.77 billion in the fourth quarter of its fiscal 2006. AMD has to decrease pricing of its desktop and server processors to sustain its market share under the pressure of Intel’s processors based on the Core 2 micro-architecture that outperform AMD’s offerings in a number of benchmarks. AMD’s next-generation code-named K8L microprocessors will emerge in mid-2007 and shortly after may face serious competition from Intel’s revamped Core 2 chips with higher clock-speeds. ATI, AMD’s graphics products group, is trying hard to release its DirectX 10-supporting code-named R600 graphics processing unit and a family of its derivatives in order to regain market share.

On the other hand, AMD’s losses in Q4 include ATI acquisition related charges of 550 million. The company is ramping up manufacturing using 65nm process technology, which allows it to make them more cost-efficient and decrease pricing without sacrificing margins. The company continues to gain market share in desktop and mobile segments and hopes to recapture its positions in the server market with new quad-core chips. In addition, the firm plans to launch 45nm process technology online in mid-2008 and present its Fusion processors that combine x86 and graphics processors in 2009. Still, in order to accomplish all its goals, AMD may need additional cash.

Officials for AMD did not comment on the news-story.

Discussion

Comments currently: 14
Discussion started: 02/16/07 06:09:07 AM
Latest comment: 02/19/07 12:44:54 AM
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1. 
AMD should not have bought ATI, that was a huge mistake. They are going to go downhill from here, they're done.
0 0 [Posted by:  | Date: 02/16/07 08:49:30 PM]
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I guess the poster name says it all "Idiot" ;)

Its called planning ahead.. they are most probably planning to merge GPU & CPU in the future.
0 0 [Posted by:  | Date: 02/17/07 03:15:06 AM]
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2. 
I would place a doubt on the claim that AMD is in a tough situation.
Even though it has lost it's performance crown and is lowering it's prices to compete with intel, it has still a huge market share compared to the previous year.
In 2006 Dell, and other computer manufacturers started offering AMD based machines. Regular consumers have no clue about performance and will still buy AMD.
Also I think AMD has better low end processors than Intel. The mobile and desktop Sempron offer 64 bit, have vertualization technology, and have a power saving mode.
AMD has a good P.R. marketing position with regular consumer, so I think that it will survive quite a bit longer.

By the way, it's engineers must be cranking away at a new and much improved architecture. Just think about Intel and how not so long ago(less than half a year), it was completely losing to AMD in performance. People thought that it was dead in the water. Then it released the Core 2 duo.
0 0 [Posted by:  | Date: 02/16/07 09:33:37 PM]
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3. 
AMD as bought Ati with some proposes.
Those proposes have delayed what Ati was doing and AMD it self. Just wait another 6 months and they are back on track.

Aother important thing is that NVIDIA have released the G80, but drivers suck.
VISTA still not working well, so ATI is not that late.

Intel is facing pressure also:
http://www.dell.com/content/topics/topic.aspx/global/products/dimen/topics/en/dh s_cpu_landing?c=us&cs=19&l=en&s=dhs

The X2 5600+ and 6000+ are not in the chart, if they where i bet that we would see them near the E6600 and E6700.
Not bad for an old processor design VS a brand new one on steroids.
0 0 [Posted by:  | Date: 02/17/07 04:40:37 AM]
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