UPDATE: S&P Lowers Outlook on Advanced Micro Devices (AMD) to Negative; Ratings Affirmed

Standard & Poor's Ratings Services said today that it revised its rating outlook on Advanced Micro Devices Inc. (NYSE: AMD) to negative from stable. At the same time, we affirmed our 'B-' corporate credit rating on the company.

The outlook revision reflects AMD's recently sharpened revenue declines, the weak industry conditions, the intense competition from Intel Corp. in PC markets, and the challenges the company faces to grow in targeted enterprise, embedded, and semi-custom (EESC) product markets to offset PC business declines.

"In 2015, we expect that the company will generate revenues, earnings, and cash flow significantly below our previous forecasts," said Standard & Poor's credit analyst John Moore. We now expect revenues to decline by about 26% in 2015 versus our prior expectation for a 20% decline. We also expect 2015 adjusted EBITDA margins at about breakeven, down from our previous forecast of about 6%-7%; and negative free cash flow of about $125 million, compared with our previous estimate for weak to modestly negative free cash flow.

We could lower the rating on AMD if its liquidity weakens such that its cash balances declined to less than $500 million or if its business declines persist further, impacting its liquidity position.

We could revise the outlook to stable if AMD is able to stabilize its revenue and earnings declines, and demonstrate improved liquidity preservation.

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