"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.
From : http://seekingalpha.com/
