PC decline a headache for Intel rival

Advanced Micro Devices, the long-struggling competitor of giant rival Intel, is facing yet another crisis amid a shifting technology landscape and declining demand for personal computers.

CEO Rory Read is firing workers to pare expenses as the chipmaker’s sales slide. Still, he can’t cut costs fast enough to head off his next looming challenge: Shrinking cash reserves.

Cash declined to $1.5bn (€1.15bn) in the third quarter, shedding $279m from the previous period.

If the trend continues, cash levels may drop to $600m by this time next year, according to Sanford C Bernstein & Co.

That compares with the $1.1bn in reserves the company said it requires, and a quarterly operating expense target of $450m. AMD has $2.04bn of debt.

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

Mr Read said the decline of the PC market — which provides 85% 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, Ms 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.

Ms Rasgon said a lack of compelling new products from AMD could leave the California-based company with as little as $300m by the end of next year.

Amid a squeeze by the weak economy and changing consumer tastes, the global PC market will contract by 1.2% to 348.7m units this year, according to IHS iSuppli — the first annual decline since 2001.