Is It Panic Time for Advanced Micro Devices?

Source: Thinkstock

Source: Thinkstock

Advanced Micro Devices Corporation (NYSE: AMD) has been a great stock for trading but a lousy investment on the last five years. The company has come back from the brink of death, but is being absolutely decimated on the back of disappointing earnings.

The company operates as a semiconductor company worldwide. It operates in two segments, Computing Solutions and Graphics and Visual Solutions. The company designs, develops, and sells microprocessors, such as central processing unit (CPU) and accelerated processing unit (APU) for desktop PCs, notebooks, tablets, hybrids, servers, and embedded products. It also offers embedded processor products for vendors in industrial control and automation, digital signage, point of sale/self-service kiosks, medical imaging, set-top box, and casino gaming machines, as well as enterprise class telecommunications, networking, security, storage systems and thin-clients, or computers that serve as an access device on a network. In addition, the company provides chipset products with and without integrated graphics processors for its desktop PCs and servers, APUs, notebooks, and embedded products. Further, it develops graphics and visual solutions products for use in desktop PCs, notebooks, tablets, professional workstations, servers, and gaming consoles. This type of business always has ups and downs, but Advanced Micro Devices has had more than its fair share. After its most recent report, the stock is heading much lower. In fact, it seems like its panic time for shareholders.

So how bad was it? Well we have certainly seen worse from this company. Revenue for the second quarter was $1.44 billion, operating income was $63 million and the net loss was $36 million, or $0.05 per share. These numbers all whiffed on estimates. Non-GAAP operating income was $67 million and non-GAAP net income, which primarily excludes $49 million of loss from debt redemption in the quarter, was $17 million, or $0.02 per share. Gross margin was 35 percent and was flat sequentially. Cash is not in horrible shape. Cash, cash equivalents and marketable securities were $948 million at the end of the quarter, significantly higher than the target minimum of $600 million and close to its optimal zone of $1 billion.

However, the company has a lot of debt. In fact total debt at the end of the quarter was $2.21 billion, an increase from $2.14 billion at the end of the first quarter.