Should I Sell AMD Now?

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My modest holdings of Advanced Micro Devices (NYSE: AMD  ) leave me feeling conflicted on a day like this.

The silver lining
On the one hand, it's great to see the constant underdog in the processor wars doing well. Shares jumped more than 19% Friday thanks to a confidence-boosting second-quarter report. The headline figure was a $0.09 non-GAAP profit per share on sales of $1.6 billion, just about in line with analyst estimates.

As if to shoot down critics of its all-in-one processor strategy, interim CEO Thomas Seifert noted that the new Fusion line of chips "is an unqualified hit and is one of our fastest-growing processors in our history."

The first Fusion-based server chips will hit the market in the current quarter, and we'll see whether this architecture can hold a candle to the Sandy Bridge high-end chips from Intel (Nasdaq: INTC  ) . AMD saw its server share plummet last summer, so there’s headroom for gains.

And in the graphics segment, AMD's products are holding their own against the upgraded video functions of Intel's platforms as well as the best NVIDIA (Nasdaq: NVDA  ) can offer. As a badge of honor, AMD graphics will power the next-generation Wii U console from Nintendo (OTC BB: NTDOY.PK), and rumor has it that both Microsoft (Nasdaq: MSFT  ) and Sony (NYSE: SNE  ) will follow suit with their refreshed consoles -- giving AMD a clean sweep of the console market.

So what's wrong, then?
All of this is great news for AMD investors like me. But this jump merely restored AMD shares to May prices, as a rough June took its toll on the stock. And most of all, AMD has been running under temporary leadership for six months now, and we still don't know who'll take the CEO seat.

The company reassured us all that the CEO search is still going strong: "The board is pleased with the quality of the candidates interviewed and is confident in its robust and active process. They continue making progress to ensure a person is selected with the right vision, experience and track record to lead AMD into the future and to create increased shareholder value."

That's fine -- I agree that quality beats speedy delivery -- but I find it somewhat telling and chilling that these words weren't delivered by AMD Chairman Bruce Claflin or any other board member. Instead, the news came from general counsel Harry Wolin, who also answered follow-up questions on that topic. Having lawyers speaking where you'd expect managers or directors to take the floor kind of creeps me out, with all due respect to Wolin.

I'm worried that the current duct-tape-and-spitballs, MacGyver-style management team will hand over a difficult mess to that final top talent and might be putting more spin on the situation than necessary.

Speed may not be of the essence, but it matters.

What now?
I'm inclined to take advantage of this resurgent stock next week and cash out of my AMD position very close to my buy-in price. I have my eye on a few alternatives that I think would serve me better than AMD from this point, including suddenly cheap mobile-audio purveyor Cirrus Logic (Nasdaq: CRUS  ) . And I have exposure to the mainstream chip industry already by way of my written puts on archrival Intel.

Add AMD to your Foolish watchlist, and then drop down to the comments box. Whether you want to commend me for making a tough decision or talk me out of selling AMD, I'm happy to hear what you think -- and so are all the other AMD investors, critics, and watchers out there.

Fool contributor Anders Bylund owns shares of Advanced Micro Devices and has written puts on Intel, but he holds no other position in any company mentioned. The Motley Fool owns shares of Microsoft, Intel, and Cirrus Logic and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Nintendo, Microsoft, Intel, and NVIDIA and creating a diagonal call position in Intel and writing puts in NVIDIA. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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, follow him on Twitter or Google+, or peruse our Foolish disclosure policy.

Read/Post Comments (9) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 23, 2011, at 2:18 PM, TEBuddy wrote:

    I also bought in a little below the current level a few months ago, but I have faith that it will be above $10 within a year. So I will hold on for what I think to be at least 50% gains, potentially more. Brazos tablet performance with Win7 could be a key tell. As in, if the MSI and Acer machines work well then when AMD releases lower power draw versions in less than a year they will be in high demand. Tablets are also not the only market for these low power embedded APU designs. Higher margin server sales are expected.

  • Report this Comment On July 23, 2011, at 4:41 PM, rav55 wrote:

    Come on Bylund whats with the hyperbole?

    Please tell us just what is "current duct-tape-and-spitballs, MacGyver-style management"?

    And "Telling and chilling","creeps you out", come on now are you trying out for a job writing for one of Rupert Murdoch's red top rags?

    "Duct-tape and spitballs" isn't even original. That phrase has been used too many times in the last few years so could you at least be original?

    And it's not "MacGiver-style" that's clumsy; what you meant to say was MacGiveresque. Besides what's wrong with MacGiver? He ALWAYS won!

    Mr. Seifert is doing a great job.

    Sell out? Hmmm. Friday the shorts were squeezed. Why? Two words: Market Share.

    For AMD to win big all it needs is a few percentage points of market share, the wisdom is they are gaining share in the notebook and laptop arena. Desktop APU's haven't been released yet and enthusiast Zambezi is coming at the end of the summer. And we are moving into the Christmas buying season.

    I'm not selling because I'd rather wait until AFTER a new CEO is announced. Because another squeeze will run for the day and that would be a good time to sell only to buy on the dip and be ready for the October quarterly report which will see another short squeeze.

    Why have a lawyer discuss the CEO search? Lawyers are trained to reveal very little while saying a lot, that's why so many of them go into politics. AMD's board has if anything clearly shown a lack of restraint and okay lets get it right out there; they are stupid. Who fires a CEO in the middle of a new product launch anyway and without someone waiting in the wings. As for being able to hire another CEO, who wants to work for a board that acts impulsively.

    So obviously AMD Chairman Bruce Claflin or any other board member couldn't be trusted to again be indiscrete.

    The shareholders should kick Bruce Clafin outta there.

  • Report this Comment On July 23, 2011, at 4:44 PM, rav55 wrote:

    Hey Bylund, you and JMP's Alex Guano wouldn't be drinkin buds now would you?

  • Report this Comment On July 23, 2011, at 10:41 PM, mtechac wrote:

    Last time AMD released good innovated technology, their stock was in the $40.00..

    AMD Fusion technology is a lot more innovative and significant than their first innovations.

    Intel does not have GPU technology, crossfire,technology, DirectX11, etc.., without NVIDIA and AMD, GPU technology nobody will use Intel CPU's because all the graphics and windows operations will really suck..

    AMD has CPU and GPU technology, and much more coming in the next months.

    NVIDIA has GPU technology and it has ARM CPU technology. Though, ARM implementations are 2 to 5 years before they are released and adopted.

    Intel is too late for catching up to the APU level technology and it has proven, with Larrabee failure, that they don't know how to implement high performance GPU's and even more important, crossfire/SLI type technology..

    Intel has good chip building technology, though they advertize while they don't have it yet, and all other foundires TSMC, Global, etc. will sooner or later have the same technology that Intel will have.

    So AMD is one of the best APU (CPU's are obsoleted now), investments that most likely take AMD to the $40.00+ stock value, in the not too distant future..

    Enjoy your AMD profits.. And expect Intel to pay 100's of millions in misleading advertisings and bad analysts to continue to mislead naive inverstors while they get the whole pie to themselves..

    Intel is going down in the next couple of years.. AMD, ARM, NVIDIA, Apple, etc.. All of them are now capable companies that have tehcnologies that now out-competes Intel mediocre technology. Fast CPU's are dinosaurs.. CPU + GPU native implementations is the right way to go.. AMD has the right technology and now has released it succesfully, and the sky is the limit in performance, since they are able to perform scalar and vector processing all in the APU and with using main memory.

  • Report this Comment On July 24, 2011, at 6:53 AM, PenguChuck wrote:

    Not going to sell AMD till after I see how well they do after game consoles sales.

    A note though, I wouldn't rule out INTC quite yet. I've heard word that Intel is bringing back its larrabee project, which they cancelled in '09. Regardless though, in terms of power Intel processors are the way to go. Industry, gamers, system builders/overclockers almost exclusively buy Intel CPUs, I realize they are mostly a niche market, but anyone of them pay big bucks for high-end machines.

  • Report this Comment On July 24, 2011, at 10:18 AM, rav55 wrote:

    Actuall Intel killed Larrabee in May 2010.

    And it's deader than dinosaur poo. But it's also a headscratcher. Why can't Intel build a decent graphics GPU? Maybe they step on nVidia and AMD patents?

    But you are right about the game console market. XBOX, Nintendo and Wii is a huge win. Thats 50 million units anyway. But the talk now is even more powerful APU's rather than IBM's cell processor. It seems that game concoles want to be more than game consoles. Hmmm, isn't that a PC?

    What is important here is that AMD is EXECUTING! They are firing on all 8 cylinders.

  • Report this Comment On July 24, 2011, at 7:13 PM, austec wrote:



    IF that has happened, or if all of the manufacturers now dare to defy Intel's threats and bribes, then we shall see a truly different AMD in a year or two.

  • Report this Comment On July 25, 2011, at 12:54 AM, TEBuddy wrote:

    If excitement dwindles and the price dips near $7 I will just buy more! AMD llano destroys Intel Sandybridge in overall performance, price, and battery life in notebooks. What more could you ask for? Bulldozer architecture will trickle down next year and integer performance will catch up to Intel CPUs, where AMD has lagged, but my AMD systems always have done just fine without that crown.

  • Report this Comment On July 25, 2011, at 9:56 AM, PenguChuck wrote:

    2010 it is, I should have touched up on my facts before posting from memory. :[

    Still though, Intel's Knights Corner is said to use some of the aspects from Larrabee. It'll be interesting to see how well it goes.

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