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Politics : Formerly About Advanced Micro Devices
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To: tommy parks who wrote (31578)4/9/1998 12:56:00 AM
From: Maxwell  Read Replies (1) of 1580569
 
Tommy Parks:

<<What amazes me even more is that when a company says its going to seek a second stock offering people dont understand that AMD is going to be worth even less.>>

You need to take a business course man, especially finance and accounting. Let me give you an introduction. AMD's book value per share is about $17. If AMD goes out and sell 30M shares today and gets $27/share they are actually making a profit of $10/shr. This extra $10/sh * 30M shrs = $300M revenue is RETAINED EARNINGS and added back to AMD assets. As a result the BOOK VALUE/shr INCREASES.

Offering more share through second stock offering is also know as dilution. Dilution can either be good or bad. It is bad if that money raised can't be put to use to make more money. It is good if that money generates more money and especially if the return of equity is higher than normal. AMD is profitable in flash and communication (not sure on Vantis). Computer Product Group (CPG) is losing money because AMD can't produce enough volume K6 to overcome fab fixed costs. To produce more AMD must solve the yield issue and IT IS DONE. To get more wafers AMD must buy more equipment and fabs. To achieve the later without going into debts, second stock offering is the best if the shareholders approve. Thus the last piece of the puzzle is found.

Maxwell
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