Financial Analysts Criticize Step Down of AMD's Chief Executive

Analysts Consider Dirk Meyer's Resignation a Bad Sign

by Anton Shilov
01/11/2011 | 07:21 PM

Even though officially AMD considers resignation of Dirk Meyer, the former chief executive officer, as a way to improve the value of the company, financial analysts that cover AMD see the departure of the CEO as a bad sign for the company. Some market observers even consider the exit of the CEO a new drama for the company.


"Consensus is clearly negative on AMD’s ability to execute, but our work (and Mr. Meyer’s resignation) suggests these concerns might even be worse than many fear. With the 32nm ramp at GlobalFoundries delayed, and the ability to value-price Fusion products in some doubt, we see no reason to move off our negative bias," Daniel Berenbaum, an analyst with Auriga investment firm, wrote in a note to clients, reports Barron's web-site.

Back in November, 2010, high-ranking executives of Advanced Micro Devices said that the problems with 32nm with silicon on insulator process technology were behind the company. In addition, AMD itself said the day of Mr. Meyer's resignation that its products were on track to be released in previously discussed timeframes. In case it is correct, AMD may release first Bulldozer chips for desktops in May as well as server-grade server microprocessor on Bulldozer micro-architecture and second-generation Fusion accelerated processing units (APUs) for mainstream and performance notebooks in summer.

Even after a number of turnaround decisions made by Dirk Meyer, AMD still continues to lose server market share to Intel, struggles on the market of notebooks and lacks clear roadmap for tablet-class devices. In general, this may be considered as a lack of consistent strategic plans.

"As AMD moves forward without a leader or clear strategic vision, shares will likely move lower until some clarity is achieved. All things being equal we could become constructive on AMD shares near $6," analyst Craig Berger with FBR Capital wrote to his clients.

An analyst, who has been praising Nvidia Corp. for the past ten or more years even when there was no reasons for that, even said that with the recent market developments Intel no longer competes with AMD, who has a portfolio of microprocessors, but against Nvidia, who will have a portfolio of APUs at some point in the future.

"AMD is in strategic limbo. [...] [I am] rather puzzled by the recent enthusiasm for AMD shares given the delays in the Llano processor, the superior performance of Sandy Bridge from Intel vs. AMD’s current mainstream CPU portfolio, the near absence of a cohesive mobile strategy, Microsoft’s move to include ARM cores to run Windows, and the upcoming GPU share shift to Nvidia in notebooks. [...] The strategic battle for the microprocessor world has shifted from Intel vs. AMD to Intel vs. Nvidia," said Hans Mosesmann, an analyst with Raymond James.

There are more balanced opinions, though. For example, Patrick Wang from Wedbush Securities called the departure of the CEO a shocking surprise, actually increased his stock price target to $8 since AMD has positive near-term trends. Such trends naturally include unique APUs (Ontario, Zacate) for netbooks, world-class graphics processors, recent design wins with large PC makers, incoming products that look promising and so on.

“While this announcement is likely an overhang until a new CEO is announced, we would be buying the stock on weakness," believes Romit Shah from Nomura Securities.