A few months back I expressed concerns that AMD was in trouble on several fronts. I went as far as saying that the outlook was gloomy. Now an analyst has expressed what he describes as "increasing concern" that AMD is heading for a cash-flow crisis.
Oddly enough, investors still seem confident because of rumors that a private equity company may be interested in buying part of or even the whole of AMD.
American Technology Research analyst Doug Freeman told AMD's investors: "We were surprised to see AMD shares rally yesterday given what we believe to be increasing concerns about cash flow at the company. We think management will be forced to come to the capital markets for operating cash before the end of the summer." Freeman rates AMD stock as sell.
Freeman went on to say: "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. We advise investors to limit their exposure to AMD shares until cash is raised and new product benchmarks are made available." This has to be the kind of news that Intel has been waiting for and I wouldn't be surprised if Intel hammers AMD with more price cuts.
Cash-flow problems for AMD could be devastating. They're already out-gunned by Intel on the desktop front and Intel is catching up fast on the server side of things too. At the same time they're locked in a price war that seems to have no end and trying desperately to carve out a high-end (but low volume) market for the QuadFX platform.
What's the future hold for AMD?