AMD Investors Get Sucker Punched

There's something fishy going on at Advanced Micro Devices (NYSE: AMD  ) .

Dirk Meyer, who chaperoned the company out of the dark ages and nursed it back to health, is no longer CEO. CFO Tom Seifert is the interim CEO, with no interest in a permanent title change. Nobody saw this change coming, and AMD is trying to assure us that everything is all right because its fourth-quarter sales were stronger than expected.

Nothing to see here, folks -- move along!

I'm not reassured at all, and I'm not alone. The stock fell hard on the news.

Meyer was a fine leader and a proven winner with an appropriately technical background, and he will be hard to replace. There's no separation agreement and no long goodbye, just a quick exit. AMD is not keeping Meyer around, or perhaps it's his choice not to stick around. That's a hot issue among AMD analysts today, because it makes no sense to boot out a proven CEO without a replacement plan. On the other hand, why would Meyer choose to leave the company he helped construct in a manner that might permanently damage his creation?

Intel (Nasdaq: INTC  ) and NVIDIA (Nasdaq: NVDA  ) now have an unexpected window of opportunity to outwit a rudderless AMD. At the turn of the year, I thought AMD looked poised to capitalize on the many victories Meyer rowed home, including the Fusion launch, the successful separation of design church and manufacturing state, and the legal settlements from Intel that swiftly rebuilt a war-torn balance sheet. Now, less than two weeks later, I'm not so sure.

AMD reports earnings in another two weeks, and the company had better have a sensational CEO with a solid execution plan by then. Otherwise, the conference call will be a verbal bloodbath, and the stock will suffer again. Yesterday, I would have told you to buy on nearly any dip, but the stock is now cheap because it deserves to be.

The board and Meyer himself have a lot of questions to answer before any of them can be trusted again. I haven't seen an exit this ugly since Hewlett-Packard unceremoniously dispatched Mark Hurd last summer.

Will AMD find a suitable successor to Meyer, or did the company just miss out on a golden age? Add AMD to your watchlist, then discuss in the comments below.

Fool contributor Anders Bylund owns shares of AMD but holds no other position in any of the companies discussed here. Intel is a Motley Fool Inside Value choice. NVIDIA is a Motley Fool Stock Advisor selection. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended buying calls on Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


Read/Post Comments (9) | Recommend This Article (7)

Comments from our Foolish Readers

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  • Report this Comment On January 11, 2011, at 3:50 PM, midnightmoney wrote:

    It seems if the ceo had done his job a decent system would be in place to take the company forward, at least until someone else can be found. Can a company produce the kinds of products amd does without someone else having more than a clue about what's going on? I'd be willing to bet the place aint too short on brain power. If it's really all down to the dude at the top I wouldn't want to invest in the company. But tell us, if they don't find someone fast, will you be parting with the shares you picked up recently? Just curious. Love your articles and authoritative voice, by the way.

  • Report this Comment On January 11, 2011, at 4:09 PM, eyerish62 wrote:

    Why can't the company be valued by its potential? They pre-announced better than expected earnings at same time as CEO resigned but the stock has got pummeled....doesn't make sense. How has this impacted those earnings? I agree company direction is now in question but the fundamentals are the same as yesterday when this stock was upgraded and applauded for their upcoming chips. Strange....hopefully rationalization comes back soon.

  • Report this Comment On January 11, 2011, at 4:35 PM, TEBuddy wrote:

    Strong and devoted leadership is key to future growth. I cannot tell if this is a strong devoted board ousting someone that doesnt carry the same ambition and ethic, or a back stabbing move by some grudge holding haters.

    Now, I will say that Hector Ruiz was the actual mastermind of everything that happened good under Dirk Meyer, but Ruiz was also the lame leader that allowed failure and schedule slips that made AMD less relevant, and overpayed for ATI.

    So bring back Ruiz from Global Foundries! He can step right in and he is at least dedicated. If Bulldozer release soon is not spectacular AMD will be dismissed again, but I have high expectations that the Bulldozer release will restore AMD's performance in the desktop arena that has been absent, and crush Intel in server efficiency.

    People are lining up to put the Fusion in their netbooks and tablets because it is a great design that took AMD too long. Great engineering with slow execution is starting to be corrected at AMD. AMD has new life with Global Foundries as an industry partner.

  • Report this Comment On January 11, 2011, at 5:09 PM, asH95 wrote:

    In the kingdome of blind men the one ey'd is king.

    [1640 G. Herbert Outlandish Proverbs no. 469]

    If things were as bad as knee-jerk perception, I would have thought Apple to have made its decision months ago on Mac book CPU's, APU's, GPU's.

    In the kingdome of blind the one ey'd man is king.

    [1640 G. Herbert Outlandish Proverbs no. 469]

    As for Dirk Meyer, I refer to these 3 articles and ask; what did Acer (Microsoft) see that Meyer didnt? And why wasnt it working at CES? Dammit!

    http://news.cnet.com/8301-13924_3-20019680-64.html

    http://www.gottabemobile.com/2010/11/23/acer-announces-amd-p...

    http://www.electronista.com/articles/10/12/29/brazos.platfor...

    asH

    Buy, Buy, Buy

  • Report this Comment On January 11, 2011, at 10:49 PM, mclinb3001 wrote:

    Already dumped my shares. Didnt want to, but had to. Also, Motley, please get on these spammers or I will cancel. this is nonsense.

  • Report this Comment On January 12, 2011, at 1:04 AM, TheBlindCat wrote:

    It's a tough balancing act, vision and execution.

    By all accounts Meyers execution was above reproach. If I had to guess I'd have to say it was a "vision thing", or lack thereof in respect to a mobile strategy.

    http://news.cnet.com/8301-13924_3-20028096-64.html?tag=mncol...

  • Report this Comment On January 12, 2011, at 8:22 PM, mountain8 wrote:

    My guess is they must have known the damage this move would make on the company, the stock, their business as a whole, If that's true, they must have expected a more damaging outlook if they kept him.

    If not, we shareholders should fire the whole board.

    Anybody know the insider ownership?

  • Report this Comment On January 13, 2011, at 3:03 AM, TheBlindCat wrote:

    Looks like a consensus on the lack of a mobile strategy.

    "AMD Pushed Out CEO for Lack of Focus on Mobile"

    http://www.fool.com/investing/fiercemarkets/2011/01/12/amd-p...

  • Report this Comment On January 14, 2011, at 1:08 PM, TomRockStarr wrote:

    I bought the day before.

    Everyone was talking this up.

    Unbelievable.

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