Fitch downgrades AMD ratings on revenue concerns

Fitch lowers Advanced Micro Devices ratings on concerns about continued weak revenue

Associated Press

CHICAGO (AP) -- Fitch Ratings on Wednesday lowered its ratings on Advanced Micro Devices Inc., citing concerns about the impact of the chip maker's weak revenue.

AMD is the world's second-largest maker of microprocessors, behind Intel Corp. Both companies are struggling with a shift in consumer demand away from personal computers, which use their chips, toward smartphones and tablets. The company has cut jobs and sold assets to free up cash for new projects.

The Sunnyvale, Calif., company reported last week that it lost $473 million in its fourth quarter on declining revenue but still beat market expectations. It said its first-quarter revenue may fall short of market expectations.

Fitch lowered its long-term issuer default rating for AMD by two notches to "CCC" from "B." Both ratings are below investment grade, or "junk."

The rating agency's action affects approximately $2.1 billion of total debt.

Fitch said the company's negative free cash flow in 2013 could drive it below the company's minimum operating level. The agency said that the market must embrace the company's new products, which largely focus on non-PC markets, in order for it to recover.

The rating agency said it expects revenue to decline in the mid- to high-teens for 2013, driven by weak consumer spending, robust tablet sales and excess inventory. Revenue growth could turn positive in the back half of 2013, assuming strong sales of AMD's new products. This will drive its profitability lower in 2013, despite restructuring efforts, Fitch said.

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