Shareholders of Advanced Micro Devices
Despite this, AMD has rallied off its recent lows on speculation that Oracle
Oracle buying AMD might sound like a fairytale ending for AMD shareholders, but luckily this glass slipper doesn't fit. There are two reasons Oracle should avoid AMD -- and so should you.
First off, AMD simply doesn't have the pricing power to compete with the likes of Intel
AMD, on the other hand, lacks a strong balance sheet, carrying $2.4 billion in long-term debt to only $1.9 billion in cash, and their lowered guidance stemmed largely from a cloudy near-term outlook in notebook and PC sales.
It's the margins, stupid
Second, AMD lacks genuine growth in its gross margins. According to their most recent annual report, it took a gain related to an inventory writedown in 2008 for them to show a sequential gross margin increase. Notwithstanding this writedown, AMD gross margins fell from the prior year. It's not difficult to see now why AMD has lost money 10 of the past 12 quarters. If they don't do a better job of controlling expenses and inventory, they'll likely continue to lose money with regularity.
Some investors see value in AMD. If you ask me, all I see is a money pit.
What's your take on AMD? Let's hear about it in the comments section.
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Fool contributor Sean Williams does not own shares in any companies mentioned in this article. You can follow him on CAPS under the screen name UltraLong. Apple is a Motley Fool Stock Advisor recommendation. Intel is a Motley Fool Inside Value pick. The Fool owns shares of Apple, Intel, and Oracle. Motley Fool Options has recommended subscribers buy Intel calls. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.