An Advanced Micro Devices (AMD) Bankruptcy?

"We cannot assure you that we will be able to refinance our debt, sell assets or equity or borrow more funds on terms acceptable to us, if at all." –From Advanced Micro Devices (AMD) 10-K. 

Investors often don’t pay any attention to the "risks" section of 10-Ks, which may be smart. Who wants to know all of the bad things that could happen to a company? They are even less useful when it is apparent that most of them have a 1% chance, or less, of ever occurring.

AMD currently has $3.6 billion in debt. That would not be so bad, but its business appears to be falling apart as its continues its price war with Intel (INTC). AMD has indicated that it won’t make its first quarter numbers, and a number of observers on Wall St. and in the press believe the company will have to raise money quickly. The instrument could be be an offering of convertible preferred shares.

AMD can probably get a private equity firm to put up the capital. Current shareholders might take a hit. The company’s stock is now below $12, against a 52-week high of $35.75. AMD currently trades at less than 1.3x sales. Intel trades at over 3.1x.

And, maybe the risk factor about refinancing debt or borrowing money should not even be in the 10-K. It just scares people.

Douglas A. McIntyre