-- U.S. semiconductor supplier Advanced Micro Devices Inc. (AMD) has
released preliminary financial results for the quarter ended September 2012,
which contained weaker results than we had anticipated and underperformance
relative to its primary competitor, Intel.
-- We now expect AMD's leverage to rise above our threshold for the
rating of 3.0x.
-- We are placing AMD's ratings, including its 'BB-' corporate credit
rating, on CreditWatch with negative implications.
On Oct. 12, 2012, Standard & Poor's Rating Services placed its ratings on
Sunnyvale, Calif.-based semiconductor microprocessor supplier Advanced Micro
Devices (AMD) Inc., including its 'BB-' corporate credit rating, on
CreditWatch with negative implications.
The CreditWatch action follows the company's announcement yesterday that it
expects revenue for the September 2012 quarter to decline approximately 10%
sequentially, with weaker demand across all product lines, down from its prior
guidance range of -4% to 2%. The company also expects a 31% gross margin for
the September quarter, including the $100 million write-down of its inventory,
down from prior guidance of about 44%. We expect these results to contribute
to leverage remaining over 3.0x, up from 2.4x as of June 30, 2012, as well as
the potential that liquidity could approach the company's $1.5 billion cash
minimum target level, from about $1.8 billion as of June 30, 2012. In our
view, Intel's sequential revenue decline expectation for the September
quarter, which ranges between - 4.5% and flat sequential performance, implies
market share weakening for AMD during this period.
We plan to meet with management to assess the company's business strategy and
financial profile before resolving the CreditWatch. We had previously
indicated that we could lower the rating if leverage were to stay above 3x or
if liquidity were to fall below $1 billion.
Related Criteria And Research
-- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
-- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
-- Use Of CreditWatch And Outlooks, Sept. 14, 2009
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
Ratings Placed On CreditWatch
Advanced Micro Devices Inc.
Corporate Credit Rating BB-/Watch Neg/-- BB-/Negative
Senior Unsecured BB-/Watch Neg BB-
Recovery Rating 3 3