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Does AMD/ATI have to sell at a loss?

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October 23, 2009 4:36:19 PM

I was perusing the financials of AMD, NVidia, and Intel and AMD's financials look horrible. They have over $5 billion in debt while NVidia has $25 million and Intel about $2 billion. AMD loses money every quarter. Their 3Q2009 losses were better than past quarters, but they made $66 million by buying back debt at below par. Basically, there were entities that loaned them money and agreed to retire it for less than what was owed because they would rather be paid now than risk not being paid in the future.

It looks like AMD gets about 75% of its revenue from CPU sales and 25% from ATI.

I know they're a good deal at the lower cost spectrum, but it seems they have to sell things at a loss to be competitive. I just can't see how they can survive with their debt load by selling CPUs for $87. They currently have about $2 billion in cash and lose about $1 billion a year, so if things don't improve or they don't find new investors, they'll likely go bankrupt in 2011.

More about : amd ati sell loss

a b U Graphics card
October 23, 2009 4:43:52 PM

Why not rename it 'is amd/ati doomed' so we can really have a go at it?

AMD will not be going bankrupt. If they are selling cpu's for $87 it means they can afford to do that. The biggest issue right now is poor market share on both fronts, but the graphics will certainly be improving at least.

If AMD bring out quad cores for $99 then a lot of would-be intel buyers might think twice. It doesn't matter how little AMD make on these, all that matters is improving market share at intel's cost.
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a b Î Nvidia
October 23, 2009 4:46:40 PM

Budget Tri+Quad-Core CPU's ($100) with Aggressive GPU's (380$ to ATI > $500 to nVid) will take these guys from the grave.
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October 23, 2009 5:29:55 PM

jennyh said:

AMD will not be going bankrupt. If they are selling cpu's for $87 it means they can afford to do that.


Apparently, that's not true. They're losing money hand over fist.
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October 23, 2009 5:38:42 PM

shadow187 said:
Budget Tri+Quad-Core CPU's ($100) with Aggressive GPU's (380$ to ATI > $500 to nVid) will take these guys from the grave.


Their CPUs have always cost less than Intel and have given more bang for the buck. I don't see how this has changed other than the cost of CPUs have dropped across the board for both AMD and Intel. Deflation is a killer when you're buried in debt.

I agree their 5000 series will help, but, it will just be a dent in their losses. They sell about $300 million worth of GPUs every quarter and without the debt buyback, would have lost over $200 million last quarter, so it's hard to imagine how this will put them in the green. Even if they could make these cards for nothing, they would have to increase sales by 2/3rd to break even.

I think I'm actually being generous with their financial problems. In reality, if they don't start turning a profit in the next couple of quarters, they'll likely trigger some debt covenants and be at the mercy of their debt holders. They could have some very onerous terms placed on them.
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October 23, 2009 5:54:01 PM

AMD CPUs most definitely have NOT always cost less than Intel. If anyone remembers when the X2s first came out, they would remember that AMD demanded a price premium for their products. An X2-4800+ for $1000? Yeah, thanks AMD!!! Don't try to make AMD out to be some altruistic company... they're not... they charge what they can and currently they can't charge a lot for their processors because Intel holds all the cards.

That said... my GPU is an ATI 5850 and I'm VERY happy with it and the price ($259) that I paid for it.
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a b U Graphics card
October 23, 2009 6:09:19 PM

AMD survives and will keep on truckin for this reason (there are many more reasons too, but this is the most obvious) US Monopoly laws. AMD goes down in the CPU market, there is no fair competition and thus Intel would be a monopoly.

Even if AMD falls and it's graphics division drops off the face of the earth, Intel and Nvidia remain, (thanks to Intel's shitty integrated graphics bundled in with some of their crap) but there is no other competition for CPU's. it simply cannot and will not be done until at least another CPU company emerges with at least 10% of the market share.

AMD is safe for now...

Not to mention intel's antics they used to OEM's that basically crippled AMD's sales. Anyone can agree that Intel acted dirty there... and what happens? they get fined a fraction of what they probably gained...
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October 23, 2009 6:19:17 PM

rodney_ws said:
AMD CPUs most definitely have NOT always cost less than Intel. If anyone remembers when the X2s first came out, they would remember that AMD demanded a price premium for their products. An X2-4800+ for $1000? Yeah, thanks AMD!!! Don't try to make AMD out to be some altruistic company... they're not... they charge what they can and currently they can't charge a lot for their processors because Intel holds all the cards.

That said... my GPU is an ATI 5850 and I'm VERY happy with it and the price ($259) that I paid for it.


amd not an altruistic company? What company is? A companies first loyalty is always to the shareholders and their first priority is to maximize profits, not give super deals to consumers.
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October 23, 2009 6:52:35 PM

jonpaul37 said:
AMD survives and will keep on truckin for this reason (there are many more reasons too, but this is the most obvious) US Monopoly laws. AMD goes down in the CPU market, there is no fair competition and thus Intel would be a monopoly.

Even if AMD falls and it's graphics division drops off the face of the earth, Intel and Nvidia remain, (thanks to Intel's shitty integrated graphics bundled in with some of their crap) but there is no other competition for CPU's. it simply cannot and will not be done until at least another CPU company emerges with at least 10% of the market share.

AMD is safe for now...

Not to mention intel's antics they used to OEM's that basically crippled AMD's sales. Anyone can agree that Intel acted dirty there... and what happens? they get fined a fraction of what they probably gained...


What are you saying? If AMD files for bankruptcy protection, they'll be turned down on the grounds it will give Intel a monopoly. Can you site an example of where this has happened?

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a c 271 U Graphics card
a c 171 Î Nvidia
a b À AMD
October 23, 2009 7:02:56 PM

KidHorn said:
What are you saying? If AMD files for bankruptcy protection, they'll be turned down on the grounds it will give Intel a monopoly. Can you site an example of where this has happened?

It's in Intels best interest to not let it go that far, which may be why they have let AMD take the bottom end of the market by not releasing any low end CPU's recently or slashing any prices.
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October 23, 2009 7:16:09 PM

Yes, the X2-4800+ initially sold for ~$1000. I paid $600 for my X2-4400+ and felt like that was a steal! Fast forward a few years and I get a vastly superior quad core (i5-750) and a killer GPU (ATI 5850) for less than the price of that one stinking chip!

Here's an article that references the release prices of the X2s...

http://www.xbitlabs.com/articles/cpu/display/athlon64-x...

It was just the first I stumbled across, but there are many more out there I'm sure. The X2-4800 came out before the FX-60 if I recall correctly.
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a b U Graphics card
October 23, 2009 7:29:45 PM

You're missing the point here KidHorn...

Bottom line is that unless there is another contender in the CPU market, AMD will be there.

I don't have a crystal ball that'll show me what happens if AMD files chapter, but there is no way that it'll happen, otherwise, Intel would have the only Chips on the market and prices would sky-rocket.

Government involvement would ensue in the event that AMD had no choice but file. Period!
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a b U Graphics card
October 23, 2009 8:45:02 PM

KidHorn said:
Apparently, that's not true. They're losing money hand over fist.


Except they aren't. If you'd looked more closely you'd have seen that the product company made a profit of $55m. The $128m loss was the result of ~$200m spent on global foundries R&D.
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a b U Graphics card
October 25, 2009 3:02:14 AM

jonpaul37 said:
AMD survives and will keep on truckin for this reason (there are many more reasons too, but this is the most obvious) US Monopoly laws. AMD goes down in the CPU market, there is no fair competition and thus Intel would be a monopoly.

Even if AMD falls and it's graphics division drops off the face of the earth, Intel and Nvidia remain, (thanks to Intel's shitty integrated graphics bundled in with some of their crap) but there is no other competition for CPU's. it simply cannot and will not be done until at least another CPU company emerges with at least 10% of the market share.

AMD is safe for now...

Not to mention intel's antics they used to OEM's that basically crippled AMD's sales. Anyone can agree that Intel acted dirty there... and what happens? they get fined a fraction of what they probably gained...

*cough* VIA *cough*

lol i'm just kidding on that by the way. I too think that AMD won't go down all the way. They might fade away at the worst case but even that i highly doubt. Someone will want in on their marketshare and it could be sold before they go down.
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October 25, 2009 3:09:48 AM

Imagine Intel being the only company selling cpu's. They could sell their basic cpu for $500..and people will buy it if its their only option. You want AMD to survive. Without AMD, Intel and Nvidia could make up their own prices without fear of competition, and vise-versa btw..
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a b U Graphics card
October 25, 2009 3:27:40 AM

jonpaul37 said:
I don't have a crystal ball that'll show me what happens if AMD files chapter, but there is no way that it'll happen, otherwise, Intel would have the only Chips on the market and prices would sky-rocket.

People always preach that doom and gloom pricing model, but it won't happen. Intel would be slugged with fines for monopolistic behaviour. That plus the fact that nobody will pay those kinds of prices and will simply stick with current hardware. Can you imagine how happy Dell will be when their customers don't want to pay $1600 for a baseline PC?

Would prices rise? Most likely. Would they "sky-rocket"? I doubt it.
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a b U Graphics card
October 25, 2009 4:49:23 AM

Who here doesnt think Intel would heristate to raise prices for AMDs viability sake?
Intels sales wouldnt hardly change, and whatever it did change, the higher profit per sale would offset it.
Intel needs AMD around, and ATI is just now starting to kick in its share, as, when they first merged, the 2900 came along, and we all know how that fared, not only in perf, but profit as well.
AMD is also releasing product now, and tho its not as compelling as Intels, its closer than theyve been, and theirs new releases coming along all the time.
Theyve done a much better job lately, and hopefully well enough for them to survive well enough to keep functioning fully
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October 25, 2009 7:55:52 AM

for me the lower price wins and frankly intel and nvidia just doesnt cut it :D 
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October 25, 2009 8:40:54 AM

AMD dont sell cpu and gpu at the loss, and Intel NEED competition to float around so they dont pressure too hard, while Nvidia cant even pressure on prices due to more expensive products, therefore AMD has pretty good margins (30-40%?). If you take away payments for ATI and R&D Globalfoundries, AMD is already in profit. Add rich investors, very successful 5000 series without competition, and you can see AMD is on the right track.
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October 25, 2009 9:52:02 AM

This could explain why ATI are being so aggressive with their marketing and demoting of the competition....If their finances are already in trouble and the possibility Nvidia are gonna be releasing a stronger GPU card and their CPU business isnt exactly goin well....
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a b U Graphics card
October 25, 2009 3:38:41 PM

I wouldn't say they're being more aggressive than necisary but yeah i think they're taking advantage of being the only DX11 card maker and turning out a profit while they can. Not saying anything about nvidia's cards cuz *cough* fanboyism *cough* we dont know anything about their performance yet, do we smoggy? I didn't know you were an nvidia insider and you already have performance figures? Oh wait, sorry, i guess you dont.
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October 25, 2009 3:45:36 PM

I suggest you watch that new Battlestar Galactica movie titled, "The Plan"

ATi has a plan, we just don't know it.
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a b U Graphics card
October 25, 2009 4:10:23 PM

ATI's plan is finished. It was to price Nvidia out of the market and guess what?
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a c 271 U Graphics card
a c 171 Î Nvidia
a b À AMD
October 25, 2009 4:12:55 PM

jennyh said:
ATI's plan is finished. It was to price Nvidia out of the market and guess what?

It hasn't worked as Nvidia are still there. :lol: 
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October 25, 2009 4:22:21 PM

I'd be really interested to skip ahead 10 years and see what the market is like then, or even 5 years. If ATi become the new Nvidia, will another rival company assert itself to keep up competition with ATi? What would drive the development market? Perhaps an 'end-all' graphics card will be produced that is so powerful that it cannot be upgraded, or makes upgrades irrelevant. The Genesis Card!

Ah well, the world could end in 2012 anyway.
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October 25, 2009 4:24:17 PM

uncfan_2563 said:
I wouldn't say they're being more aggressive than necisary but yeah i think they're taking advantage of being the only DX11 card maker and turning out a profit while they can. Not saying anything about nvidia's cards cuz *cough* fanboyism *cough* we dont know anything about their performance yet, do we smoggy? I didn't know you were an nvidia insider and you already have performance figures? Oh wait, sorry, i guess you dont.



**** me im sick of this, does everyone jus jump to conclusions on this forum!?

RE-READ THE POST....

See the words 'possibility' ??????
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a b U Graphics card
October 25, 2009 4:51:28 PM

smoggy12345 said:
**** me im sick of this, does everyone jus jump to conclusions on this forum!?

RE-READ THE POST....

See the words 'possibility' ??????

that doesn't change anything tho. You have to still know something about a product to know if it does have a possibility. w/e, if theres anything that annoys me is getting into these flame wars. I'll give you the benefit of the doubt smoggy.

in any case, it's the same with CPUs. Intel's name sells and so does NVIDIA's. ATI has to get their name out to the public before everyone, not just enthusiasts and gamers, knows who they are and picks them out as a good brand.
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a b U Graphics card
October 25, 2009 6:55:43 PM

Saying a 100$ card is better than a brand new released card costing 3+ times as much is aggressive.Or overly so.
I dont think ATI is being overly aggressive, just extremely confident, as they know nVidia cant do anything currently, and their future looks to be very limited as well, trying to use 1 piece of HW to do 2 things, each of which requires its own silicon real estate
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a b U Graphics card
October 25, 2009 8:04:53 PM

JAYDEEJOHN said:
Saying a 100$ card is better than a brand new released card costing 3+ times as much is aggressive.Or overly so.
I dont think ATI is being overly aggressive, just extremely confident, as they know nVidia cant do anything currently, and their future looks to be very limited as well, trying to use 1 piece of HW to do 2 things, each of which requires its own silicon real estate

and considering nvidia's chips are also already bigger than ati's, thats going to make them bigger
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a b U Graphics card
October 25, 2009 11:25:18 PM

AMD are just taking advantage of a market position they haven't been in for a long time.
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a b U Graphics card
October 25, 2009 11:48:17 PM

I don't believe some people in this thread know how financials work. There's a difference between being in debt and going bankrupt. Also, whatever "financials" you're looking into (I'm going to assume via stocks or some type of "worth" to fit your statement) you clearly have no grasp on the concept. There's a lot more to debt than you're plainly looking at. All three of companies you mentioned are in debt (And Intel for $2 billion), do you really think it matters? No one seems to be worrying about paying off debt these days anyways, just look at the government. Regardless, I wouldn't be suprised if AMD wasn't on their way to some healthy books by 2011; not to say they'll be out of debt. Second of all, why the heck are we posting this here? Total flamebait.
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a b U Graphics card
October 26, 2009 12:19:54 AM

Companies go into debt all the time, as is most often the case, the companies monies are worth more than than what can be borrowed.
The company needs/uses thier profits for R&D/peoduction etc, with a profit ranging in whatever their margins are, say, 20%.
Borrowing money for some things often only costs 4-5%, and that can still be turned into a 15% profit to the company, even with debt paid.
Simple, if one thinks about it
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October 26, 2009 1:49:23 AM

thank you Jaydeejohn for starting this thread :p 
it ended up pretty amusing
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October 26, 2009 12:41:19 PM

brockh said:
I don't believe some people in this thread know how financials work. There's a difference between being in debt and going bankrupt. Also, whatever "financials" you're looking into (I'm going to assume via stocks or some type of "worth" to fit your statement) you clearly have no grasp on the concept. There's a lot more to debt than you're plainly looking at. All three of companies you mentioned are in debt (And Intel for $2 billion), do you really think it matters? No one seems to be worrying about paying off debt these days anyways, just look at the government. Regardless, I wouldn't be suprised if AMD wasn't on their way to some healthy books by 2011; not to say they'll be out of debt. Second of all, why the heck are we posting this here? Total flamebait.


Can you explain to me how financials work? I would love to know how.

I thought in every case, when a company files for bankruptcy protection, they were asking the court to protect them from suits files by their debtors.

I agree that being in debt doesn't automatically mean you're in trouble, but in this case it appears AMD is in trouble. I really don't see any conceivable way out for them. Why else would their debtors be willing to collect less than par on their debts? If you want to see what kind of shape a company is truly in, look at their bonds. People who loan money tend to look very closely at the financials of who their lending to.

AMD can't win a war of attrition with Intel or NVidia. They have to pay $600 million dollars a year in interest while the others don't. All NVidia or Intel have to do is lower their prices and it's lights out for AMD. They can survive much longer.

The thing that no one on this thread seems to be able to grasp is going bankrupt does not mean they stop producing product. They would likely wipe out existing equity holders and bond holders would probably end up owning the company after emerging from bankruptcy. Plus, whoever funded debtor in possession financing would likely get a decent chunk of the new company. The bottom line is AMD would emerge a new company without a lot of debt and would be much better positioned to compete. Filing for bankruptcy would probably be the best thing for them in the long run.
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October 26, 2009 12:47:46 PM

I wonder if Nvidia would ever consider buying out ATi outright. I think if you merged the brains of both companies, you'd end up with some tight products.
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a b U Graphics card
October 26, 2009 12:59:09 PM

In such a closed market, theres much more leniancy, due to the overall size/importance, and the few players involved.
Its not as if AMD isnt paying their bills, they are, and they are coming closer to breaking even.
That said, it doesnt mean theyre out of the woods or going under.
What we have to watch for is in a couple years when certain debts have to be paid off, and whether they get further help down the road.
Its been going better for them, and BullDozer needs to come thru for them, as well as their gpgpu capability.
Their partners may help spring them, if they keep pace, and BD is a good product.
The fact that nVidia is coming in late with their own product, and its geared for gpgpu usage and DT gfx, will help margins, as I dont see G300 as being a cheap alternative, and some performance will suffer per cost because of this.
That too will help down the road, as 1 of the major competitors of AMD struggles to find its own future, ATI is free to run in the DT gfx market.
This in itself shows that ATI is doing consumers a good thing by keeping their cards lower priced, tho again, like Ive said before, those prices may not come down quickly like weve seen in the past
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October 26, 2009 1:11:05 PM

purplefire said:
I wonder if Nvidia would ever consider buying out ATi outright. I think if you merged the brains of both companies, you'd end up with some tight products.

AMD considered merging with Nvidia instead of buying ATI, but JHH ego got in the way. AMD shares droped but still Nvidia couldnt buy AMD now even if they wanted to. Plus merging ATI with nvidia would be pretty bad for us, monopoly means higher prices and slower progress.
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a b U Graphics card
October 26, 2009 1:14:02 PM

Quote:
This in itself shows that ATI is doing consumers a good thing by keeping their cards lower priced, tho again, like Ive said before, those prices may not come down quickly like weve seen in the past


Even if the prices don't come down for awhile the cards still offer good price/performance ratio. Seeing the prices of the 5850/5870 cards makes me think ATI is making good profit out of each unit sold.

Some guesstimates (be gentle :D ) :

- initial price of 4870 - 300$
- current price of 4870 (10$ profit?) - 150$ ==> 140$ production cost

- 5870 (cheaper manufacturing process)~2x4870 - 100$ (guess) ==> 180$ production cost.
- initial price of 5870 ~ 380 ==> 200$ profit/unit sold.

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a b U Graphics card
October 26, 2009 1:54:23 PM

I cant remember, someone had guesstimated the total costs, but what those costs relay to with their parthers (Sapphire,XFX etc) and shipping etc, plus retails markup, who knows?
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October 26, 2009 3:31:41 PM

purplefire said:
I wonder if Nvidia would ever consider buying out ATi outright. I think if you merged the brains of both companies, you'd end up with some tight products.


This would help AMD. At least in the short run. They need cash and this would be a way to raise it.

I doubt the merger would be approved. It would give NVidia too much market share. Even if it were approved, it would likely take years and cost a lot of money.

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October 27, 2009 9:42:59 AM

KidHorn said:
Apparently, that's not true. They're losing money hand over fist.


I totally agree with you.
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