The scrappy chipmaker has plenty of life left – but mistakes have cost it dearly.
If you’d like to beat up on Advanced Micro Devices CEO Hector Ruiz, now would appear to be a good time. Ruiz has won praise for helping the chipmaker mature into a worthy challenger to industry heavyweight Intel, but as he prepares for a Thursday meeting with Wall Street analysts, AMD has the look of a well-used punching bag.
Its stock this year has dropped by half, and in recent weeks it has dipped below $10 per share for the first time since 2003. That price marks a disheartening throwback to the days when PC makers didn’t take AMD’s processors seriously and its market share was weaker at about 15 percent. There’s good reason for the share price collapse: though AMD landed a few good shots in recent years, Intel (INTC) has bounced back with a popular, competitively priced product lineup that’s grabbing back some market share and erasing its rival’s profits.
As a result, AMD (AMD) is bleeding cash — the company reported a loss of $396 million last quarter alone. That puts AMD in a tricky financial position. The company has more than $5 billion in debt, much of it from the acquisition of graphics chipmaker ATI, but it it needs cash both to finance future projects and to pay for earlier acquisitions. (The ATI purchase is still causing headaches; AMD today said it will take a significant writedown from the $5.4 billion transaction, a possible sign it overpaid.)