A Tipsy Tech Titan

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Marilyn Cohen Image Marilyn Cohen President & CEO, Envision Capital Management, Inc.

In the tech world one day you are the windshield and the next day you're the bug and this chip company is a prime example of that observes Marilyn Cohen of Bond Smart Investor.

We recommended Advanced Micro Devices (AMD) in January 2011. We see this position as a problem for two reasons:

  • There is overall weakness in the PC industry-cyclical as well as secular. The PC industry is AMD's principal market.
  • Within this declining market, AMD's share continues to fall

So we're faced with two unfortunate circumstances that combine to create problems for AMD. However, management is not just sitting on their collective thumbs, waiting for the other shoe to drop. They're doing are a number of things to counter these negative market influences.

First is where AMD chooses to compete. Their goal is to derive a larger portion of their revenue from non-PC markets going forward. They are specifically targeting the smartphone and tablet markets. Management's target is to get 20% of total revenue from these markets.

Management's next strategy should endear them to any bondholder. They intend to conserve as much cash as possible. AMD is well on its way to accomplishing this goal by working with its principal chip manufacturer, Global Foundries.

The purchase agreement, delivery, and payment schedules have been greatly modified to AMD's benefit.

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