RPT-S&P cuts AMD rating to 'B' from 'BB-', outlook stable

Tue Jan 8, 2013 12:01pm EST

-- Sunnyvale, Calif.-based Advanced Micro Devices Inc. (AMD)
amended its wafer supply agreement with GLOBALFOUNDRIES in December 2012, which
reduced burdensome prior minimum purchase commitments, though we expect AMD's
negative free cash flow to continue in 2013.  
     -- We are lowering our corporate credit and senior unsecured issue 
ratings on AMD to 'B' from 'BB-', and removing the ratings from CreditWatch 
with Negative implications.
     -- The outlook is stable. Despite our expectation for AMD's leverage to 
climb above 7x over the coming year, we believe the company has the 
opportunity to stabilize its operating performance in 2013 through product 
introductions, potential embedded product design wins, and recently announced 
restructuring initiatives and has sufficient liquidity to bridge this period 
of expected weak earnings.  

NEW YORK (Standard & Poor's) Jan. 8, 2013--Standard & Poor's Rating Services 
said today that it lowered its corporate credit and senior unsecured ratings 
on Advanced Micro Devices Inc. (AMD) to 'B' from 'BB-'.  At the same time, we 
removed the ratings from CreditWatch, where we had placed them with negative 
implications on Oct. 12, 2012. 

"The downgrade reflects our expectation for continued revenue and earnings 
declines resulting in leverage exceeding 7x over the coming year because of 
weak PC industry demand prospects and intense competition from industry peers, 
including Intel," said Standard & Poor's credit analyst John Moore.

The 'B' corporate credit rating reflects AMD's "vulnerable" business risk 
profile, characterized by intense competition from  Intel Corp., as well as 
prospects for tablet computing to continue to subdue PC industry growth and 
AMD's earnings over the coming year, resulting in leverage expected to exceed 
7x and our assessment of AMD's financial risk profile as "highly leveraged." 
The ratings also reflect the company's "adequate" liquidity. Our management 
and governance assessment is "fair."

The outlook is stable. Despite our expectation for AMD's leverage to climb 
above 7x over the coming year, we believe the company has an opportunity to 
stabilize its operating performance in 2013 and has liquidity sufficient to 
bridge this period of weak performance. Improvements should come through 
product introductions, potential embedded product design wins, and recently 
announced restructuring initiatives. A downgrade could result from a number of 
developments, including protracted low demand, further erosion of market 
share, or weaker manufacturing execution in concert with foundry partners. Any 
of these scenarios could weaken the financial profile that supports the 
rating. Specifically, we would consider a lower rating if liquidity were 
likely to fall below $700 million or prospects to reduce leverage below 7x in 
2014 diminish. Considering AMD's competitive challenges, an upgrade is 
unlikely at present. 

RELATED CRITERIA AND RESEARCH
     -- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
     -- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008

Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.
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