Late in the week, Intel (INTC) was accused by the EU of anti-competitive practices aimed at keeping AMD (AMD) sales as low as possible in the region. The complaint detailed Intel’s practices. It will probably be a real challenge to defend and could be spread out over a year or more.
That would seem to be good news for AMD, which has its own complaints on a similar matter pending in the US. But on Friday AMD’s shares dropped almost 6% to $13.85, not far from their 52-week low.
Forbes seems to think that the fact that an AMD director sold shares may have hurt confidence in the company. But, the answer may be much more basic than that.
In markets that are moving down, companies with poor prospects tend to fall more quickly. There was not much in AMD’s last earnings report to draw Wall St. to the stock. The S&P was down about 5% last week and AMD was down 11%. Intel is down less than the S&P.
AMD’s gross margins are still awful. At 33% they are down from 57% in the second quarter of 2006. All AMD would say about its future prospects was: "In the seasonally up third quarter, AMD expects revenue to increase in line with seasonality." Cold comfort for shareholder.
There is really no evidence that Intel will not keep pricing pressure on AMD which would almost certainly keep the company’s gross margins low.
AMD is trading down because it is not a very good business.
Douglas A. McIntyre
Take This Retirement Quiz To Get Matched With An Advisor Now (Sponsored)
Are you ready for retirement? Planning for retirement can be overwhelming, that’s why it could be a good idea to speak to a fiduciary financial advisor about your goals today.
Start by taking this retirement quiz right here from SmartAsset that will match you with up to 3 financial advisors that serve your area and beyond in 5 minutes. Smart Asset is now matching over 50,000 people a month.
Click here now to get started.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Editors' Picks
