Doing the Limbo with AMD Stock: How Low Can You Go?

Paul Lilly

Shares of Advanced Micro Devices (AMD) have fallen below $2, dropping more than 3 percent to $1.86 by the end of the trading day on Thursday. That's not only a 52-week low for the Sunnyvale chip designer, but it's the first time the company's stock has dipped below $2 since 2008. A recent report indicating AMD had hired J.P. Morgan Chase to "explore options," including an outright sale of the company, sparked the downward spiral, and though AMD has denied claims it's shopping itself around, investors are understandably skittish.

We hate to say it, but AMD might be circling the drain. If not, it's at least uncomfortably close to the basin. Stacy Rasgon, an analyst with Bernstein Research, described AMD as "univestable" at this point.

"I use that world lightly," Rasgon told MarketWatch . "I'm terrified of the stock. Their competitive position does not look super, and they're burning cash."

AMD's revenue in the third quarter of 2012 was down 25 percent compared to one year prior, resulting in a net loss of $157 million and an operating loss of $131 million.

"The PC industry is going through a period of very significant change that is impacting both the ecosystem and AMD," AMD president and CEO, Rory Read, said in a statement when announcing the company's Q3 financial results. "It is clear that the trends we knew would re-shape the industry are happening at a much faster pace than we anticipated. As a result, we must accelerate our strategic initiatives to position AMD to take advantage of these shifts and put in place a lower cost business model."

As part of its restructuring plan to cut costs, AMD at the time announced another round of layoffs and site consolidations. But will it be enough to turn the company's fortunes around? Read seems to think so.

"Let me personally reinforce to you: we are not actively pursuing the sale of AMD or any of our significant assets. It's full steam ahead with our strategy ... we absolutely are on the right path," Rory stated in a memo to employes earlier this week.

Image Credit: Flickr (nayukim)

It wasn't always like this for AMD. Back when Intel was infatuated with its inefficient Netburst architecture and chasing increasingly faster clockspeeds, AMD stole the performance crown (part of it, anyway) with its Athlon 64 chips, kicking off the era of 64-bit computing on the consumer side. Not long after, it purchased ATI for $5.4 billion, and then in 2009, won a $1.25 billion settlement from Intel over anti-competitive charges.

Pinpointing what's gone wrong since then is no easy task. You could blame the ATI acquisition for AMD's financial struggles, its inability to hold onto key management figures, competition from Intel (especially after abandoning Netburst), the recession, a market place transition to mobile, and the list goes on. Let's hope AMD bounces back so historians never have to argue the issue of what ultimately went wrong.

Thumbnail Image Credit: Flickr (ultimaweaponx)

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