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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: K. M. Strickler who wrote (31831)	4/13/1998 7:15:00 PM
From: Maverick	Respond to of 1572214

NEW YORK, April 9 - Standard & Poor's today lowered its bank loan, senior secured debt, and corporate credit ratings on Advanced Micro Devices Inc. (AMD) to single-B' from double-B'-minus. Standard & Poor's also lowered its ratings on the company's $1 billion universal shelf registration to preliminary single-B'/triple-C'-plus from double-B'-minus/single-B'. These ratings are removed from CreditWatch, where they were placed March 5, 1998. The outlook is negative. Ratings reflect the company's continuing shortfalls in executing its business plan in a very competitive market, resulting in ongoing losses and substantially negative free cash flows. Sunnyvale, Calif.-based AMD manufactures Windows-compatible personal computer microprocessors and other semiconductors. The company's current Pentium-equivalent K6 processor chip was late to market while manufacturing problems -- reportedly solved in March 1998 -- impacted production levels. AMD has recently achieved a good market share in the thinly profitable low-priced PC market segment. However, Intel's first entry-level product is expected to be available momentarily, likely to exacerbate already aggressive price declines. Furthermore, AMD could be challenged to again upgrade its processes to profitably manufacture the successor K7 next year, while its long-term prospects remain overshadowed by Intel's rapidly proliferating product line, aggressive pricing policies, and substantially greater balance sheet strength, in addition to Intel's R&D, marketing, and manufacturing prowess. AMD's revenues have fluctuated around $2.2 billion for the last four years while operating margins have shrunk to 14% from 35% over the period. This drop was due to delayed product introductions, high R&D expenses, and chronic inability to provide sufficient volumes of its processor chips on a timely basis, particularly the more profitable higher speed versions. The company also faces competitive pressures in its other product lines. Thus, continued net losses remain likely over the intermediate term. Capital expenditures have been high, averaging 28% of sales, resulting in negative free cash flows totaling $700 million over the last four years. Expenditures will continue to be substantial at about $900 million this year, for ongoing improvements in the domestic plants and for the construction of an additional microprocessor factory, heavily subsidized by the German government.

To: K. M. Strickler who wrote (31831)	4/13/1998 7:16:00 PM
From: Maverick	Read Replies (2) \| Respond to of 1572214

Cash, $307 million at March 31, 1998, is expected to decline further over the intermediate period, offset by an expected sale of securities this quarter. OUTLOOK: NEGATIVE Over the near term, AMD faces heightened competitive pressures and the challenges of ramping production of its current product line to restore profitability. Longer term, the company must develop and implement its manufacturing processes more expeditiously than it has demonstrated to date, while introducing new generations of processor chips in a rapidly evolving, unforgiving environment, Standard & Poor's said.