S&P downgrades AMD due to weak demand

AP News
Posted: Jan 08, 2013 12:59 PM

SUNNYVALE, Calif. (AP) — Standard & Poor's lowered its ratings on Advanced Micro Devices Tuesday, saying that it expects the chip maker's revenue and earnings to decline further.

Chip makers like AMD have struggled as people shift to tablets and smart phones, rather than personal computers. That has hurt sales at AMD, which had dominated for years in the PC market.

S&P put the company for watch for downgrade in October. It said Tuesday that the weak demand for personal computers will likely weigh on AMD and its competitors this year, intensifying competition. It did note that an amended wafer supply agreement in December reduced some burdensome prior minimum purchase commitments, but it still expects AMD's negative free cash flow to continue in 2013.

In turn, it lowered its corporate credit and senior unsecured ratings two notches in junk status to "B'' from "BB-". The outlook is stable.

Standard & Poor's Rating Services believes the company will have an opportunity to stabilize its operating performance through product introductions and restructuring. It also said the company has sufficient liquidity to bridge this period of what are expected to be weak earnings.

Shares rose 2 cents to $2.69 by midday. Its share price appears to be stabilizing or potentially recovering after a roughly 70 percent plunge from the spring of 2012 to the end of the year.