Ask Matt: Can AMD survive?

Q: Can AMD survive?

A: The reasons for Advanced Micro Devices (AMD) to exist continue to dwindle - along with its financial resources. The stock might look cheap - but that's for a good reason.

Shares of computer chipmaker AMD have been decimated. Following another disappointing quarterly loss reported on Oct. 15, the stock dropped Friday and is now down 25% over the past 12 months. AMD shares now trade for about $2 apiece and the company is clinging to a market value of less than $2 billion. The company is getting clobbered by Intel for chips for desktop systems and by a variety of players in mobile.

The fundamentals are ugly. The company has posted adjusted losses in each of the past three quarters and its expected to lose money for at least the next five quarters, says S&P Capital IQ. This is eating away at the company's financial firepower. The company gets low scores for its ability to service debt as well as on cash flow, says S&P Capital IQ. S&P's Ratings Services rates AMD's debt with a B- with a negative outlook, putting it just clearly in the speculative area even among junk bonds. AMD does have $755 million in cash and cash equivalents. But that would only last less than three years based on the company's free cash flow. Investors can do better.

Paste BN markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com or on Twitter @mattkrantz.