Still Missing a CEO, AMD Is Hammered on a Downgrade
Alex Gauna of JMP Securities cut his rating on AMD to “market underperform,” arguing that its Fusion line of chips isn’t winning sufficient business from PC makers. Having interviewed people at PC retailers and at PC manufacturers, he concludes Fusion is going nowhere. He says he was unable to purchase a Fusion-based PC from Dell via its Web site.
AMD’s Fusion processors aren’t winning many positive reviews, Gauna says, indicating a “lack of market interest.” Sales representatives at various online retailers steered his researchers “away from AMD platforms.”
As you might expect, it doesn’t take much to send AMD shares south these days. Intel is far and away the king of the hill in PC and server microprocessors, and chips from companies like Nvidia and Qualcomm based on the designs of ARM Holdings are coming into notebooks and tablets, minimizing AMD’s chances to win business there. He slashed his target price on AMD to $4.50 a share, which would constitute a drastic drop from the $6.80 at which it opened today, having closed Friday at $6.95. By today’s close of regular trading, investors knocked AMD’s shares down to $6.76, a drop of nearly 3 percent.
The day ended however, with AMD shares being defended by analyst JoAnne Feeney at Longbow Research. Dell is not an early adopter of the AMD technology, she says, but will be offering systems using AMD’s Fusion chips — the codename of the specific AMD product is Llano — soon. I heard the same thing from a source at AMD. On top of that, Toshiba and Lenovo are happy AMD customers. Tiernan Ray at Barron’s has a little more on Feeney’s note.
The downgrade came 10 days before AMD is due to report quarterly earnings and amid growing speculation on the company’s ongoing search to find a new CEO to replace the ousted Dirk Meyer. The search is about to drag into its sixth month, and I’m told it won’t be resolved before earnings are announced.
There were reports last month that several A-list executives, none of whom would have realistically considered the job in the first place — Oracle’s Mark Hurd, Apple’s Tim Cook — had turned down approaches by AMD’s recruiting agency, Heidrick & Struggles. Another who topped AMD’s list early on, Pat Gelsinger, the former Intel CTO who’s now in line to succeed Joe Tucci as the CEO of storage giant EMC, even said he told AMD no not once but twice. A lot of those people, Hurd and Cook especially, are really just names that any recruiter looking to fill a senior position would call in the course of building a list, just to make sure they’ve covered their bases.
The sense of urgency to find a new CEO seems to have dissipated at AMD, though not entirely. With the company running a profit again — its most recent quarter showed a $510 million profit on sales of $1.6 billion — it may be that directors feel they have the luxury of time in finding the right candidate, so they don’t have to rush the process, though obviously they’ll want to get it done soon. Expect the company to face a lot of questions from analysts when it reports earnings on July 21.