Advanced Micro Devices, Inc. (AMD): What Happened?

As for Intel Corporation (NASDAQ:INTC), a recent report by Bank of America indicates that Intel will have strong momentum in the second half 2013, taking away market share from Advanced Micro Devices, Inc. (NYSE:AMD). The company plans to achieve this through its Haswell chips, which will bring about a substantial increase in efficiency and blur the lines between mobile and desktop processors. Although the company reported a 3% decline in its first quarter revenues due to market softness, it has a robust pipeline of upcoming platforms that will help it have a better second half of 2013. The company is increasingly focusing on developing convertibles and detachable ultra-book designs. In the next couple of months, it plans to introduce more than 140 core-based ultra-books, out of which around 40 will be touch-based.

Another front on which Advanced Micro Devices, Inc. (NYSE:AMD) falls back is R&D and its cash flows.

Intel Corporation (NASDAQ:INTC) is known to have the best in class R&D capabilities. In 2012, it purchased $11 billion in capital assets and spent $10 billion in R&D. Furthermore, in July 2012 it invested $4.1 billion in ASML Holdings to jointly develop the next-generation of chip-making technology. In contrast, Advanced Micro Devices, Inc. (NYSE:AMD) invested only $1.3 billion in R&D in 2012, down 6% versus 2011. In addition, Advanced Micro Devices is bleeding cash and has posted an operating cash outflow of $338 million in 2012. The company was able to maintain its cash balance within its target mainly due to the leaseback transaction for its Austin campus through which it generated $164 million in cash. On the other hand, Intel Corporation (NASDAQ:INTC) and NVIDIA Corporation (NASDAQ:NVDA) both have deep pockets, which help it fund each company’s research. Advanced Micro Devices’ declining cash flows is the one area which has many investors worried, with some even thinking that the company is no longer a concern.

Conclusion

From the above, it is easy to derive that Advanced Micro Devices, Inc. (NYSE:AMD) is going through a tough phase. The company’s survival is now solely dependent on the success of its upcoming products. But I still wouldn’t recommend selling the stock just yet. To support my viewpoint, most research analysts also maintain a buy rating and not a sell on the stock (source: Yahoo! Finance). So, if you have the patience, hold the stock and keep a close watch on its product acceptance.

The article What Went Wrong With Advanced Micro Devices? originally appeared on Fool.com and is written by Shas Dey.

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