Advanced Micro Devices, Inc.(NYSE:AMD), which is struggling with slowing sales of personal computers and laptop, staged a sudden rally to rise to its highest level in six weeks on buying prompted by hopes that the company could avert a cash shortfall.
On Monday, the stock advanced 7.3 percent to $2.36 at the close in New York, the highest since Oct. 18. Shares of the chip maker have lost 56 percent this year. On Tuesday, the stock fell 4.24% to $2.26.
The hopes arose from Mubadala Development Co raising its stake in AMD to about 19 percent including warrants while it also took an extra board seat last month.
Analysts said that that it was quite likely that the investment arm of the government of Abu Dhabi would bail out the company if cash reserves dipped too low.
Part of the rally has also been due to short-covering by investors, who have short sold expecting the stock to fall further.
n October, AMD gave a forecast for fourth-quarter sales that fell short of analysts’ estimates and said it will cut 15 percent of its staff, citing weak demand across all product lines in a challenging economic environment.
The company has already seen its revenues decline for three quarters consecutively and this will be the fourth quarter of decline according to its own estimates.
If the sales keep declining then he company is in danger of seeing a severe cash crunch.
Last week the company had said that it was in talks to sell its campus in Texas to raise cash.