AMD's stock fell by as much as 7 percent today following news the company would take a total of $948 million in charges in the second quarter. Most of the charges will come from a continuing deterioration in the goodwill value of its former ATI handheld and DTV units. For those who slept through economics class, a goodwill value is an intangible asset representing the difference between the purchase price of an asset and its fair market value based on reputation, established client base, and profitability.
Despite ATI's recent success in the graphics market, the $5.4 billion acquisition continues to cost AMD in write-downs since it was purchased in 2006. Last year, AMD took a massive $1.6 billion write-down for ATI's declining goodwill, just one of many financial and executive woes AMD has suffered since purchasing the graphics company.
A comparatively small portion ($32 million) of the total charges is going towards restructuring, mostly the result of severance payments paid in the second quarter that will continue through the rest of the year. The rest are being attributed to a declining value in other investments the company has made.
Will AMD ever return to profitability?
Image Credit: Investspro.com and AMD