Zarathustra[H]
Extremely [H]
- Joined
- Oct 29, 2000
- Messages
- 38,864
I am particularly interested in how Jim Keller was received as an engineer mercenary for hire with regards to Zen, given that after engineering was essentially complete he left AMD to go elsewhere. And given that, how AMD expect to compete once the Zen line is obsolete down the road.
I can't remember the details from when that story broke, but I always kind of assumed that that was the plan all along from AMD's perspective.
The Jim Keller's of the world don't come cheap. When you are operating with an ever dwindling cash reserve that needs to last until you launch your hail mary pass product that you hope will save the company (Zen) you can't keep that burn rate going once the work is done. I doubt very much Jim Keller had a standard employment agreement with AMD. I think AMD hired him intentionally under a contract which ended when his work was done, probably with various incentives built in for completing early/on time and penalties for being late.
AMD is currently operating like a very large startup. They have a burn rate to balance against their existing cash, and they need to launch a viable profit generating product before that cash reserve runs out.
From AMD's Q1 2016 Financial statement:
Cash and cash equivalents were $716 million at the end of the quarter, down $69 million from the end of the prior quarter, due to lower sales and higher debt interest payments, partially offset by $52 million of cash received related to our newly announced IP licensing agreement.
So, they have $716M in the bank, and their cash on hand is dwindling by about $121M per quarter (but shows up as $69M due to a $52M IP licensing deal).
At this rate - not accounting for their bonds about to mature or any sales of new product, they run out of money in a year and a half.
Now add to this that they have about $1.1B in bonds maturing in December 2017, another ~$600M in bonds maturing in March 2019, a further $1.95B of bonds maturing in August 2020, and a whole bunch more in 2024.
Their credit rating was recently downgraded to CCC, as well, meanign it will be more difficult for them to issue new bonds to replace the existing ones, and when they do, it will cost them more, increasing their debt (coupon) payments and making them even less profitable.
Make no mistake. EVERYTHING now hinges on Zen. If Zen is not immediately successful and profitable out of the gate, by the time those bonds come due, there will no longer be an AMD in its current form.
This is a sobering read when it comes to AMD. They are very much in final hail mary pass territory now.
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