Analysts warn AMD facing cash crunch

BusinessWeek reports financial analysts are pessimistic about AMD's cash levels. The chip designer's cash reserve decline by $279 million in the third quarter to $1.5 billion, and if the trend continues, cash levels may drop to only $600 million by this time next year. AMD CEO Rory Read raised hope last week that new markets may pull AMD out of its mess, but analysts are worried AMD might run out of money before any transformation can happen.

If the trend continues, cash levels may drop to $600 million by this time next year, according to an estimate by Sanford C. Bernstein & Co. That compares with the $1.1 billion in reserves the company said it requires, and a quarterly operating expense target of $450 million. AMD has $2.04 billion of debt.

“I’d never been worried about cash flow; I am now worried,” said Stacy Rasgon, an analyst at Bernstein.

Read said the decline of the PC market -- which provides 85 percent of AMD’s sales -- happened faster than he expected and left him with less time to remake the company. As AMD concentrates on developing products for new markets, Rasgon, Chris Caso at Susquehanna International Group and Craig Berger at FBR Capital Markets are among analysts who say they’re concerned AMD might run out of money before any transformation can happen.