Advanced Micro Devices, Inc. (NYSE:AMD) lost nearly 80% of its market value in the past year. The company also ended the year with substantial losses due to the massive structural changes in the market. Advanced Micro Devices has lagged behind its peers in adopting the most recent trends. However, it is good to see that the company is going after the market and taking new measures to cope with competition. In this article, I dig deeper into the company’s recent financials and restructuring efforts to prove my point.
AMD’s financial situation is not pleasing at the moment, as it is facing substantial headwinds. The company’s business environment is changing at an immense pace. For example, the company lost the microchip battle to the industry giant Intel Corporation (NASDAQ:INTC) . Although the company realized necessary changes, the company posted significant losses year after year. Its shareholders were also highly disappointed as the company’s market cap was decimated since the sub-prime crises. Intel showed a relatively poor performance in 2012 due to lack of growth in personal computer units in emerging markets, and it was still better than Advanced Micro Devices. Now that prospects are strong in 2013, it will be harder for AMD to reclaim its position in the industry.
Along with field performance, Intel is also in a much better position than AMD in terms of balance sheet. Intel has a Beta value of 1.02, while AMD is at a concerning rate of 2.25. Intel’s dividends are very stable and robust (dividend yield rate at 4.21%), wheres Advanced Micro offers no dividends at all. Intel’s total assets are increasing for the last five years straight. Advanced Micro Devices, on the other hand, has a very uncomfortable assets line. Intel shows no red flags in its key stats, and pays consistent dividends to double your pleasure.
At the end of 2012, Advanced Micro Devices lost nearly 17% of revenue compared to the previous year. For the full year, the company’s revenue stands at $5.42 billion. The company’s operating loss stands at $1.06 billion, which is an enormous loss in the challenging environments. Moreover, the company’s gross margin contracted by 4% compared to earlier years.
The company lost an enormous amount in operating expenses, burning $2.2 billion in its business operations. However, management is taking initiatives to reduce operating costs. AMD is looking to cut its expenses by $450 million by the end of 2013. I think the cost reduction measures can lead the company back to profitability.
At the end of 2012, the company’s net losses stood at $1.18 billion. Moreover, its cash balances decreased compared to earlier periodsdeclining by $297 million. At the end of last year the tech stock generated cash reserves of $1.1 billion. The company’s cash balance adequately covers its business obligations. Actually, Advanced Micro generated positive cash flows from operations, but free cash flows are negative at $308 million.
At the same time, the company initiated a restructuring program. Obviously there is a risk that cash could be burnt off if the sales keep going down and the company pays substantial restructuring costs. However, in the case of the company, it looks like it needs to change operations to adopt with shifting market conditions. At the end of Q4, the company spent $90 million in restructuring efforts. Let’s dig into the company restructuring efforts to explore future possibilities.
Advanced Micro Devices neglected the speed of change in the computing industry. Nonetheless, the company comprehends the urgency of required restructuring. The company announced a restructuring plan to strengthen the company’s competitiveness, and cut its operating expenses by 25 percent. In an effort to reduce costs, the company plans to cut its current workforce by 15%.