October 12, 2012 / 7:45 PM / 5 years ago

TEXT-S&P may cut Advanced Micro Devices 'BB-' rating

     -- 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.

Rating Action
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 List

Ratings Placed On CreditWatch
                             To                   From
Advanced Micro Devices Inc.
 Corporate Credit Rating     BB-/Watch Neg/--     BB-/Negative
 Senior Unsecured            BB-/Watch Neg        BB-
   Recovery Rating           3                    3
0 : 0
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