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To: Mike Wong who wrote (50713)	3/17/1998 6:39:00 PM
From: Paul Engel	Read Replies (2) \| Respond to of 186894

Mike - Re: " On the other hand, AMD, and Cyrix, with their already thin margins, will have no room to go lower. Their only option is fold their hand, or sell. That's just simple economics. " Is this what you are referring to? Paul {====================} file:///C\|/Data/Mar98/AMD_DCR_Credit_Rating_Watch.htm Tuesday March 17, 4:08 pm Eastern Time Company Press Release SOURCE: Duff & Phelps Credit Rating Co. DCR Places AMD on Rating Watch--Down CHICAGO, March 17 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has placed the senior debt of Advanced Micro Devices, Inc., (AMD) on Rating Watch -- Down in response to forward-looking statements published in the company's 1997 10K. DCR rates AMD's senior secured notes 'BBB-' (Triple-B- Minus) and senior unsecured debt 'BB' (Double-B). In its 10K, AMD said it ''expects revenues in the first quarter of 1998 to decline significantly, and the net loss to increase significantly as compared to the fourth quarter of 1997.'' In the fourth quarter, AMD reported a loss of $12 million on revenues of $613 million. For the year as a whole, AMD reported a loss of $21 million on revenues of $2.4 billion. Further, the company said it ''plans to continue to make significant capital investments, at a rate higher than in previous years.'' In 1997 capital spending was $685 million, in 1996 $485 million and in 1995 $625 million. The company's credit agreement was amended in February essentially to provide slack for the expected early-1998 shortfall. The 10K further said that ''the company will be required to raise funds through external financing in the second quarter of 1998 in order to meet certain of these amended covenants.'' The company filed a $1 billion universal shelf registration on March 3, 1998. DCR expects that such events would have a negative effect on AMD's credit quality. Whereas competitor Intel has also signaled a weak first quarter of 1998, the causes appear to be different. Intel cites weak demand. Conversely, demand for AMD's K6 microprocessor has benefited from the market's interest in ''sub-$1,000 PCs.'' AMD says it can ship all the microprocessors it can make; it just cannot make enough. It continues to be plagued by manufacturing yield problems. Furthermore, AMD is undertaking a difficult conversion from .35 micron process technology to .25 micron in order to improve the speed, power consumption and cost of K6. Such a conversion could disturb production even without AMD's lingering yield problems. The increase in planned capital spending is largely for the .25 micron conversion and for continuing the development of the new wafer fabrication facility in Dresden, Germany. Dresden is intended to provide additional manufacturing capacity for subsequent AMD microprocessors and to support a higher level of participation in the microprocessor market. The progress in AMD's manufacturing yields and .25 micron process conversion as they affect cash flow and borrowing requirements will be the major factor in any subsequent DCR rating action. Other factors will be competitive pricing in the microprocessor market and the continued favorable acceptance of AMD's product line. SOURCE: Duff & Phelps Credit Rating Co. More Quotes and News: Advanced Micro Devices Inc (NYSE:AMD - news) Duff and Phelps Credit Rating Co (NYSE:DCR - news) Related News Categories: computers, semiconductors