Though some may not know it, Advanced Micro Devices hasn't exactly been reassuring those agencies tasked with keeping track of financial matters. The latest move on Fitch's part shows this.
In its own words, Fitch Ratings is a global agency that provides “value beyond the rating through objective and balanced credit opinions, research and data.”
In other words, the agency keeps an eye on the cash flow of corporations and their debt status.
Advanced Micro Devices used to have a debt rating of B, but now it has dropped to a CCC-, which is just one step above the so-called “junk status.”
In layman terms, that means Fitch is worried that AMD might not be able to keep generating cash flow.
2013 is going to have a negative free cash flow (FCF), something that may just be the final factor in driving cash below AMD's target level, bringing it to the minimum operating level.
The Sunnyvale, California-based CPU, GPU and APU maker will need to score big in all business outlets in order to preserve money, especially as its “transformation” hasn't been complete yet.
The need gets even greater when considering the weight that Fitch's opinions have on the global stock market.
With the newest downgrading of the debt rating, investors may be scared off by the possibility of a company failure.
It sounds far-fetched that a long-time player on the processor market would actually collapse, especially when there are large legal bodied and organizations that will do all they can to prevent such an outcome (if only to prevent Intel from gaining a monopoly).
In the past, AMD's executives said they had options to remain liquid, but never explained what those were.
Now that the corporation is planning to sell and lease back its own headquarters, it might be that those options have thinned or aren't viable anymore. For the cash talk, go here.