Chip maker Advanced Micro Devices, Inc. (NYSE: AMD) may be planning another round of price cuts and may be looking to tap financial markets to offset its negative cash flow, according to one research analyst.
Research analyst Eric Gomberg of Thomas Weisel Partners lowered his 2007 revenue estimate for the company to $6.52 billion from $6.81 billion and widened his loss forecast to 46 cents a share from 28 cents on Wednesday.
We believe ongoing concerns regarding potential financing is likely to continue to weigh on shares, although we believe that management may have other options, including the possibility of lowering their capital expenditure requirements, Gomberg told clients this morning in a note.
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The analyst believes a round of price cuts of 30-35 percent will occur on April 9, just 3 weeks after its previous round of cuts.
While the price cuts may stimulate some demand, we believe the product mix and stale inventory ultimately remain major headwinds likely to persist through [the second quarter] and possibly later, he said.
The Santa Clara, Calif.-based semiconductor firm may seek an outside capital infusion from an outside partner or private equity firm. Gromberg is anticipating a convertible deal worth around $1 billion.
Shares of AMD rose in mid-day trading, up 3.4 percent, or 45 cents to $13.86 on the New York Stock Exchange.