The Story Behind AMD's new round of financing

Rilla927 · Aug 10, 2007

Letter of the week

I've studied the MS term loan (100+ pages, and written in legal/financial gobbly-****). I wrote to a few analysts a couple of weeks ago that AMD
would likely be in violation of the term loan at the end of Q3 (clause 7.16), and needed to do another round of financing. The current balance of
the loan is about $1.6B. Here is what I wrote those same analysts today.

---------------------------------

Well, looks like I was right on a couple of counts. AMD was going to be in
violation of their MS term loan at the end of Q3, and thus, needed to get
the financing done soon (optimally, before IDF, and perhaps before Sept.
10th launch of Barcelona) to pay off the MS term loan.

In April, rumors were about Barcelona being better than expected, and was
demoed at 2.9Ghz. They got the $2.2B convertible done, and a month later in Taiwan, Barcelona at <2Ghz was shown. Last week, we get rumors about Barcelona being at 3+ghz by December, and this week, we get a new round of financing (a new $1.5B convertible).

If AMD was confident about 3Ghz Barcelona in December, it would have made more sense for them to wait until Sept. 10th, put 3Ghz on their official roadmap, and announce the financing then. Also, if they though initial Barcelona's were going to be good, wouldn't they release independent benchmark results, before doing the new financing?

This new round will not be enough for AMD. But by monetizing their other assets (selling rest of Spansion, selling the Austin office buildings and
leasing them back, and selling 200mm equipment in Fab 30), they should be able to get by for the next 6-9 months; in other words, enough time to fix
Barcelona, which may get them to cash-flow neutral for a short time. Sometime along then, they will need to raise more cash. I suspect that will
involve equity.

-fred
______________________________________________________

SUNNYVALE, Calif.
-- August 8, 2007 --Advanced Micro Devices, Inc. (NYSE:
AMD) today announced its intention to offer, subject to market and other
conditions, $1.5 billion aggregate principal amount of convertible senior
notes in a private offering to qualified institutional buyers pursuant to
Rule 144A under the Securities Act of 1933, as amended. AMD expects to grant
to the initial purchaser a 30-day option to purchase up to $225 million
aggregate principal amount of additional notes to cover over allotments.

AMD expects to use the net proceeds of the offering, together with available
cash, to repay in full the outstanding balance of the term loan AMD entered
into with Morgan Stanley Senior Funding, Inc. in October 2006. If the
initial purchaser exercises its over-allotment option, AMD expects to use
the additional net proceeds for general corporate purposes, including
working capital and capital expenditures.

http://www.fudzilla.com/index.php?option=com_content&task=view&id=2388&Itemid=1

Rilla927 · Aug 10, 2007

NVIDIA Reports Record Revenue

http://www.dailytech.com/NVIDIA+Reports+Record+Revenue/article8371.htm

NVIDIA reports a 36 percent increase from last quarter

NVIDIA today reports increased revenue for its second fiscal quarter of 2008. The company claims this is a quarter-over-quarter 36 percent increase for a record $935.3 million in revenue, up from $687.5 million. Net income for the second fiscal quarter was $172.7 million, computed by the generally accepted accounting principles, or GAAP. The company claims a non-GAAP net income of $198.1 million.

"NVIDIA delivered an outstanding quarter, with record revenue, record gross margin, and record net income. These results reflect the growing importance of the GPU as well as great execution across the company," said Jen-Hsun Huang, president and CEO of NVIDIA.

NVIDIA continues to maintain a market share lead, according to the latest Mercury Research numbers. The latest research shows NVIDIA claiming a 66 percent share of the standalone market and 65 percent of the total desktop standalone market. The company also holds a 64 percent share of the DirectX 9 and 75% of the DirectX 10 market, although AMD only recently launched DirectX 10 products last May and did not ship mainstream parts until the June-July timeframe. Additionally, the company claims a 68 percent market share in notebook markets.

The company attributes its market share growth to the growing size of the GPU market, the Vista experience is better with a GPU, DirectX 10 applications taxing systems and the advent of Blu-ray and high definition video, according to Huang during the Q2 2008 earnings conference call.

“Our mainstream DX10 GPUs entered the market a solid one-two quarters ahead,” Huang said. “The momentum is very strong. The market share data reflects that.”

NVIDIA declined to comment on its next-generation graphics processor. However, the company remains committed to the usual launch rhythm, which usually has a high-end part in the fall and mainstream parts to follow in the spring.

The fabs used by NVIDIA are at capacity, according to the company. “We would like more wafers, so there is a limitation there,” Huang said. However, the company does not plan on qualifying new foundry partners at this time.

I'm sorry, can a mod please move this to it correct spot. I got a head of myself.

TechSpot

The Story Behind AMD's new round of financing

Rilla927 Newcomer, in training

Rilla927 Newcomer, in training