Advanced Micro Devices - Moderated (AMD) Message Board

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Technology Stocks : Advanced Micro Devices - Moderated (AMD)

AMD 210.24

-1.9%

10:48 AM EST

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To: Petz who wrote (34825)	4/4/2001 4:14:34 PM
From: survivin	Read Replies (2) of 275872

re: then sue them for not taking it Hi John, As someone mentioned here earlier, AMD has no choice but to resell any contract allotment refused by alcatel as an inherent duty to mitigate damages, which is implied in all contracts. If the contract price is $20 and amd is able to sell for $10 the only breach damages are $10 -- no more. If AMD refuses to mitigate, alcatel will be released from all liability. However, they only need to make a good faith effort. There is also a concept where any sales which could have been made from AMD's inventory roll rather than alcatel's scheduled allotment does not invoke a mitigation duty. Correct me if I'm wrong, but when AMD was signing a flurry of supply contracts they required a substantial cash downpayment from their customers. This was mentioned during a conference call and evidenced by the rapid rise in AMD's cash position -- out of line with their quarterly earnings. This may be important as it would suggest AMD is holding alcatel's deposit, willing and able to apply it to cover any shortfall resulting from alcatel's breach. This would include of course both below contract resales and those which remain unsold and stockpiled. I'm wondering if this is why AMD has stated no effect on quarterly earnings from the breach. AMD's management were very shrewd to insist upon these hefty deposits especially when they were foregoing current earnings spikes to ensure a steady income stream in the future. As for those who find their suing of a customer odd and dangerous, think of the implications of allowing non performance to continue. First, failure to insist upon performance may be deemed a waiver destroying their ability to enforce future commitments. Second, other contract customers would line up like cattle seeking to modify or even break their contractual duties. Basically a lose/lose situation for AMD. They would have given up huge revenues during the boom and now receive at or below cost prices due to the oversupply pouring out of their factories. Shutdowns, furloughs and layoffs would be likely and we would probably see a share price in the low $10s or worse. That is why these contracts must be enforced. Good job AMD.

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