(The following statement was released by the rating agency)
-- U.S. semiconductor supplier Advanced Micro Devices Inc. (AMD) has released preliminary financial results for the quarter ended September 2012, which contained weaker results than we had anticipated and underperformance relative to its primary competitor, Intel.
-- We now expect AMD's leverage to rise above our threshold for the rating of 3.0x.
-- We are placing AMD's ratings, including its 'BB-' corporate credit rating, on CreditWatch with negative implications.
Rating Action On Oct. 12, 2012, Standard & Poor's Rating Services placed its ratings on Sunnyvale, Calif.-based semiconductor microprocessor supplier Advanced Micro Devices (AMD) Inc., including its 'BB-' corporate credit rating, on CreditWatch with negative implications.
The CreditWatch action follows the company's announcement yesterday that it expects revenue for the September 2012 quarter to decline approximately 10% sequentially, with weaker demand across all product lines, down from its prior guidance range of -4% to 2%. The company also expects a 31% gross margin for the September quarter, including the $100 million write-down of its inventory, down from prior guidance of about 44%. We expect these results to contribute to leverage remaining over 3.0x, up from 2.4x as of June 30, 2012, as well as the potential that liquidity could approach the company's $1.5 billion cash minimum target level, from about $1.8 billion as of June 30, 2012. In our view, Intel's sequential revenue decline expectation for the September quarter, which ranges between - 4.5% and flat sequential performance, implies market share weakening for AMD during this period.
We plan to meet with management to assess the company's business strategy and financial profile before resolving the CreditWatch. We had previously indicated that we could lower the rating if leverage were to stay above 3x or if liquidity were to fall below $1 billion.
Related Criteria And Research
-- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
-- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
-- Use Of CreditWatch And Outlooks, Sept. 14, 2009
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
Ratings List Ratings Placed On CreditWatch To From Advanced Micro Devices Inc. Corporate Credit Rating BB-/Watch Neg/-- BB-/Negative Senior Unsecured BB-/Watch Neg BB- Recovery Rating 3 3
(Caryn Trokie, New York Ratings Unit)