Advanced Micro Devices Prices $500M Senior Notes - Analyst Blog

Advanced Micro Devices Inc. ( AMD ) recently announced the pricing of senior unsecured notes aggregating $500 million. These bonds carry a coupon rate of 7.00% and are due to mature in 2024. The offering is expected to close on Jun 16, 2014, subject to customary closing conditions.

Advanced Micro expects to raise $490.0 million from the transaction. The company stated that the transaction proceeds would be used for redeeming its outstanding senior unsecured notes, maturing in 2017. The remaining net proceeds would be used to redeem, repurchase or otherwise retire other outstanding indebtedness.

Moody's Investor Services - the credit rating agency of Moody's Corporation - assigned a "B2" rating to the proposed senior notes. Given the diversification of AMD's business in other growing markets, Moody's is confident of an improvement in its liquidity profile. The B2 rating carries a stable outlook.

Moody's anticipates steady revenue growth from semi-custom chips in the near term driven by design wins and strong demand for Microsoft 's ( MSFT ) Xbox and Sony 's ( SNE ) PS4 gaming consoles. However, the rating also takes into account the ongoing weak demand conditions in the personal computer market due to tablet cannibalization. The ratings also consider increased competition from Intel ( INTC ) and the weak demand in the server market.

However, a more conducive market, increased game console wins, adoption of new products, position in graphics and good execution are expected to pull the company out of the weak PC market.

AMD is the world's second-largest maker of microprocessors. In the last reported quarter, AMD's top line was better than its guidance, supported by healthy demand for Radeon GPUs and semi-custom gaming APUs. Also, the company's bottom line beat the Zacks Consensus Estimate by a couple of cents.

At quarter-end, the company had cash and short-term investments balance of $9.02 billion, up from $1.10 billion in the prior quarter. The company had total debt (short- and long-term) of $2.14 billion on its balance sheet. Additionally, the company paid $200 million cash to GlobalFoundries for the reduction of the "take or pay" wafer obligation commitments for 2012.

We believe that AMD has a strong balance sheet, which will help the company to capitalize on investment opportunities and make strategic acquisitions, further improving its growth prospects. We believe that the senior notes offering will bring down its cost of capital, thus strengthening the company's balance sheet and supporting its future growth.

Currently, AMD has a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

SONY CORP ADR (SNE): Free Stock Analysis Report

INTEL CORP (INTC): Free Stock Analysis Report

MICROSOFT CORP (MSFT): Free Stock Analysis Report

ADV MICRO DEV (AMD): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Markets Videos


    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at

    Learn More