AMD needs money to make it through the year

[Alpine]

One billion dollars

WALL STREET WATCHERS Merrill Lynch told customers yesterday that AMD needs another $1bn in equity funding to make it through 2007, given its incredibly tight cash situation.

The firm said that many analysts still don't quite understand the massive scale on which AMD is going to lose money in the first half of this year, as it works to sell off its range of 90nm products in a bid to clear the way for 65nm products to launch later on in the year. The losses are likely to amount to a cash burn of around $900m by the middle of the year, said Joe Osha, who covers DAAMIT for Lynch.

Whilst AMD will need to go and raise more money by September, it will be constrained by the fact it already raised $5bn last year to purchase ATI, and it's starting to run out of room to take on even more debt.

The good news for AMD is that Osha thinks that its 65nm Athlon X2s will be the bees knees, and could be just the thing that it needs to kick Intel back into touch in the performance sector. The bad news, product-wise, is that Lynch considers its quad-core server products to be 'beside the point', which can't be good news for the legions of benchmarketers out to prove that 'native' quad-core is the one true way.

The analysts also think that Hector Ruiz is on the right track with his comment that margins on products are likely to stabilise around 50 per cent, and that the company needs to focus on making money at this level, rather than trying to push margins up. It seems both Intel and AMD are going to feel the squeeze. The INQuirer