Eric Gomberg, an analyst at Thomas Weisel Partners, yesterday trimmed his estimates on Advanced Micro Devices (NYSE:AMD), citing expectations of further price cuts. He also expects the company to raise additional capital in the public market in the next several months. Gomberg asserts that he is “incrementally more negative on shares given pricing, channel and financial challenges.”
Gomberg writes in a research note that he expects a round of price cuts averaging 30%-35% on April 9 on its “problematic inventory.” He notes the cuts will be just 3 weeks after the last round of price cuts, on March 16. “While the price cuts may stimulate some demand, we believe the product mix and stale inventory ultimately remain major headwinds likely to persist through [the second quarter] and possibly later,” he writes.
As for possible financings, Gomberg says he expects a $1 billion convertible deal in the second quarter. “We believe ongoing concerns regarding potential financing is likely to continue to weight on shares, although we believe that management may have other options (including the possibility of lowering its capex requirements,” he writes.
For 2007, Gomberg now looks for a loss of 46 cents a share; he had expected a loss of 28 cents. For 2008, he sees a profit of 22 cents, which is down from 46 cents. His rating on the stock remains Market Weight.
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My colleague Steve Sears, who writes about options for Barron’s and Barrons.com, passes along the word that AMD options are trading higher on rumors that the company could receive a cash infusion from a private equity investor or strategic partner. The theory, apparently, is that the chipmaker could do a deal similar to the $700 million investment Sun Microsystems (NASDAQ:SUNW) received recently from KKR.
In a post earlier today, I noted that Thomas Weisel analyst Eric Gomberg expects the company to raise capital in the next few months; he is anticipating a convertible deal in the neighborhood of $1 billion.
AMD is up 56 cents at $13.97.