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AMD will not go bust this year

by on27 January 2016


Waiting for Zen might be cunning

Last year, Kerrisdale Capital Investment warned that AMD would go bankrupt by 2020 and with Zen not appearing until the end of this year we were slightly concerned that the outfit did not have enough to survive what will be a dismal year.

Financial magazine Motley Fool has been looking at AMD’s figures and thinks the company has enough to survive this year provided it does not go out much and does not buy too many expensive ready-made meals.

Kerrisdale warned that AMD's dependence on the stagnant PC market, where it has repeatedly been marginalized by Intel and Nvidia, would doom the outfit. While AMD has diversified its business into new markets like virtual and augmented reality, but has failed to dominate a single market.

However it looks like AMD might be safe for now. The outfit's cash and equivalents dipped just 2.5 per cent annually to $785 million last quarter, and its total debt only rose 2.3 per cent to $2.26 billion.

It is unlikely that any new debt should come due until 2019. AMD's non-GAAP free cash flow fell from $94 million a year earlier to $21 million, but at least it remains in positive.

Certainly this means that AMD won't go bust before Zen appears although it does mean it can’t spend much money on R&D, marketing, or acquisitions to remain competitive. This could stuff it up when Zen actually arrives.
So it does mean that Kerrisdale’s dire prediction is still on the table. Unless Zen does as well as fanboys predict and actually takes some of Intel’s market share, people start buying PCs again, and AMD’s console business holds up.

Last modified on 27 January 2016
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