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Technology Stocks : Investing in Exponential Growth
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From: Paul H. Christiansen7/31/2016 9:26:07 AM
   of 1084
 
Why is AMD Stock Jumping?


One of my favorite pastimes is listening to the quarterly investor calls of the leading semiconductor companies. I can then match up the talking points with the calls I do with Wall Street, the conferences I attend, and the other data points I have collected while working inside the fabless semiconductor ecosystem for more than 30 years. Rarely do all the points match up but sometimes they are so off it makes for an interesting conversation.

As usual the prepared statements were a bit obscure and convoluted so it was very hard to draw any specific conclusions but there are several points worthy of discussion:

First and foremost, it is getting harder to differentiate the reasoning behind GAAP and non-GAAP results. For example, AMD sold a majority interest (85%) in their assembly and test operations to another firm to raise cash. As a result they recorded a significant profit on this sale ($127M after provisions for taxes).

This (one-time) profit was included in GAAP results. The CEO proudly said, "We achieved profitability this quarter, for the first time since 2014." Yet, without this one-time operations spin-out, the net operating results were a significant loss.

It is also interesting to note that there are not many key AMD assets left for sale or spin-out. It was reported that the iconic Sunnyvale campus is for sale so AMD can move to a smaller facility. Unfortunately, AMD does not actually own the property so it cannot be used to bolster future GAAP.

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