Loading...
Symbols:
Authors:

Struggling AMD Is Still Searching for Inspiration

by: Tech Confidential July 20, 2008 | about stocks: AMD / INTC    
Tech Confidential

Tech Confidential

About this author:
Become a Contributor Submit an Article
  • Font Size:
  • Print

"Uninspiring" is never a word a company wants associated with its performance or its executive changes--or anything, for that matter. But it's an apt description, used in a report Friday by Merrill Lynch & Co. analyst Srini Pajjuri to describe microprocessor maker Advanced Micro Devices Inc.'s (AMD) second-quarter financial results and the appointment of a new CEO.

The struggling chipmaker said late Thursday that it will replace CEO Hector Ruiz  with president and chief operating officer Dirk Meyer. Ruiz, who will remain executive chairman, has led AMD since 2002, when he took the reins from flamboyant founder Jerry Sanders. Under Ruiz's leadership, the company did have a few big wins against its arch-enemy, Intel Corp. (INTC). Its Opteron chips, for example, helped it gain a strong foothold in enterprise computing.

But it's been a tough run for AMD over the past couple years. Product stumbles and the 2006 acquisition of graphics processor maker ATI Technologies Inc. have helped drive the company's stock price to new lows. AMD paid $5.4 billion to purchase of ATI; analysts considered that price much too high, and that belief has been borne out by several goodwill writedowns, the latest of which was announced last week and brought the total charges against the deal to $2.56 billion.

As an article in the Wall Street Journal points out, AMD's market cap is far below what it paid for ATI a couple years ago. The company yesterday posted second-quarter revenue of $1.35 billion, a 10% decline from the previous quarter. This missed Merrill Lynch's forecast, and AMD also announced third quarter guidance below Merrill's expectations, Pajjuri wrote.

As for bringing in a new CEO, this seemed like a perfect opportunity to shake AMD up, kind of like Hewlett-Packard Co. (HPQ) wisely bringing in new blood by tapping Mark Hurd as its new chief. 

But for incoming AMD CEO Meyer, a 12-year veteran of the chipmaker, the general thought is that the company is in for more of the same.

"While the CEO change could bring in a new perspective, we do not expect any drastic changes in the near term," Pajjuri wrote.

Wall Street seemed to agree Friday morning. Shares of AMD plunged 12%, to $4.66. Uninspiring, indeed.

Related Articles

This article has 9 comments:

  •  
    Jul 20 10:42 AM
    Looks like its going to be a penny stock soon unless someone steps in and buys them. Intel cannot do that due to anti-trust issues and that leaves no one else apart from the PC makers if they want to integrate backwards. Say a Dell or HP, though that might be disastrous for them.
    $1 in 6 months.
    Reply
  •  
    Jul 20 11:12 AM
    Actually, I don't think anyone would buy them. The buyer would not be allowed to make X86 parts because the license somehow only applies to AMD in it's current form. At least that is what I have read/heard from several sources over the years.

    I think their only chance is to sell the ATI assets and use the money to try to re-emerge as a focussed tier 2 supplier of X86 processors and stop trying to attack Intel head on in all markets
    Reply
  •  
    Jul 20 11:37 AM
    AMD a penny stock?? you guys are crazy. AMD will hit back to the 30's and 40's within 3 Qs... watch and see.
    I hate people and the enws who talk badly about a company, simply because they own their competitors.... what a joke...
    Reply
  •  
    Jul 20 12:47 PM
    IF AMD combines the ati video processor in as a layer on the on a multicore chip one will get massive throughput on the cpu. I wouldn't count AMD out yet it's probably a buy at this point. People will only wait so long before having to upgrade their machines and if R&D comes out with the previous idea they will be the cpu to buy.
    Reply
  •  
    Jul 20 12:54 PM
    IntelKiller is right - A Magic Bolt Of Lightning will strike AMD infusing it with new billions of Dollars, New Fully Equipped State-Of-The-Art 45 nM fabs along with several new x86 architecture CPU designs that will magically be defect free and 100% functional on first silicon. Not to mention that they will be half the power and twice the speed of their Intel counterparts.

    This same bolt of lighning wil also strike AMD's customers and ex-customers, erasing from their memories the TLB Barcelona disaster as well as the piss poor perfromance of AMD's devices and finances over the past two years.

    These customers will welcome back AMD and risk their own corporate futures by buying these new AMD devices that have magically appeared from the electric heavens.

    LSD must still be a favourite drug of choice for some of the remaining Marxists.
    Reply
  •  
    Jul 20 01:08 PM
    You bunch of dumb azz moder fuggers. AMD will be back, stronger than ever, and soon. Getting 1 share of both the "second best" cpu maker AND a good graphics company in one FOR UNDER $5??!? BUY NOW and sell to make yourself rich like me. Don't say I didn't warn you!!!
    Reply
  •  
    Jul 20 02:59 PM
    As a committed use AMD products since 1998 I believe strongly in the company.
    I also believe that when (or if) the latest products from AMD find their way into retail channels they will completely outclass Intel. So Intel will only have one solution left - as they've shown themselves capable of in the past - prevent market access to these new products.
    Reply
  •  
    Jul 20 03:31 PM
    For those actually trying to do work on AMD. ATI is a pretty interesting and valuable asset. However the AMD CPU business needs help. The cost of being the game is higher than ever and AMD may not be able to scale up; we'll see.

    Don't forget to look at the whole capital structure. Debt plays a major role, as do assets.

    Technologically there is still lots of opportunity but AMD as an independent company may not be able to take advantage of it. With NVDA also in the dumps it makes the M&A outcome even less visible.

    It's an interesting situation but INTC right now has all the momentum and resources in X86, they definitely "get" the high end graphics market even if NVDA and ATi/AMD are the leaders. There could be a positive wild card for AMD in the anti-trust work going against INTC. It could prod a buyer from Europe to buy AMD on the cheap.

    Investing in AMD requires a pretty complete research effort. If I were making a bet I'd say they get acquired by a European technology company but given the debt structure knowing the equity value stub isn't simple.
    Reply
  •  
    Jul 25 08:41 AM
    hm... LSD... wow. have you ever seen Pirates of Silicon Valley? remaining marxists?!?! here's a lesson from the Communist Manifesto ~ the income tax is one of the planks of a communist society. Gee, you live as a quasi-marxist and weren't even aware of it!

    well, as far as AMD goes, it could become a penny stock. not sure about $1, damn, but $3...quite possible...ironic that the "teraflop barrier broken" headline came just before a near 50% drop in share price...And what of the barrier being broken...? not a word since the initial announcement...wtf? Very little looks bullish right now, and I believe AMD simply fell with the market. Companies perceived as crappy are dumped first in bearish times. AMD needs to start over, meaning no new announcements until the product is 100% OK and ready to ship the next week, stop fighting Intel and just make a better product, and bring in some fresh blood to management. And selling ATI may not be a bad idea as someone mentioned.

    Acquisition does seem possible, big up Tuttle.

    What was with the rally a couple months back?
    Reply
More Comments on AMD ยป
More by Tech Confidential
Investment Resources
Money Managment
Research
Seeking Alpha provides these ads as a service to its leading contributors
Articles on related themes
Semiconductor Majors
Communications Chips
Optics Chips
Semi Design & Fabless