AmTech Reiterates Buy and $10 PT on AMD (AMD)
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American Technology Research reiterates its Buy rating and $10 price target on Advanced Micro Devices (NYSE: AMD).
The firm believes that "The cash infusion, debt off-load, reduction in R&D expenses, operating cash flow and long term capital commitment must lay to rest all investor concern regarding access and control of future process technology." After more than a year of investor concerns, AmTech feels that AMD's Chairman, Hector Ruiz, has found a way for the company to "stay in the CPU race": fab lite.
As a result of AMD's recent deal with investors from Abu Dhabi, AmTech believes that the company will cut its capital expense and R&D costs significantly moving forward. The firm is estimating that AMD will spend $150-$200 million per year on process technology R&D.
AmTech is estimating that AMD will retain about 44.1% of the fab lite holding company, with its foreign investors taking about 55.9%. As AMD will no longer be the majority holder of this company, $1.2 billion in debt will be removed from AMD's balance sheet, although it will continue to be responsible for a portion of this. Moreover, AmTech points out that while there will be 10-11% dilution for AMD shareholders as a consequence of the Abu Dhabi investment, the chip-maker will be receiving a "much needed cash infusion of $700 million and $314 million..." AmTech believes that the majority of this cash will go toward reducing AMD's debt.
With shares of AMD trading 18% higher to $5.02 today, AmTech's maintained price target represents a potential gain of about 100% from current levels.
Advanced Micro Devices, Inc., a semiconductor company, provides processing solutions for the computing, graphics, and consumer electronics markets in the United States, Canada, Europe, and Asia.
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AMD Had Too Much Capacity
Gumby on Oct 7, 2008 04:12 PMI rather see AMD be bought out whole, but I guess it is okay to sell off excess capacity and recover the money while still having access to the Fabs to a lowered share of capacity. It probably wont matter as they are now going to build a third fab in NY. AMD will have enough fab to play around with. Now AMD can focus more on design and shrinking dies to keep up and catch up with Intel. Also, AMD is integrating graphic circuitries into CPUs away from graphic chips and cards on motherboards and PCX slots. Most of us dont need $500 graphics cards to play violent games. We are more interested in creating and editing videos and pictures that requires capable graphics in CPUs. AMD will still sell graphics cards to gamers, but the bread and butter will be in CPU with graphics that Intel is already following AMD as usual...