AMD's miserable week
Posted
Apr 08 2008, 04:36 PM
by
Kim Peterson
AMD investors are banging their heads against the wall again today after the chipmaker said first-quarter sales will disappoint Wall Street. Shares fell 5% today to $6.03. A year ago AMD traded in the $13 range; two years ago the stock was at $34.
AMD also said it will cut about 1,700 jobs, or 10% of its work force. It estimated first-quarter revenue to be $1.5 billion, not the $1.62 billion analysts were looking for.
The economy is certainly to blame, but could Dell be a culprit as well? Citigroup analyst Glen Yeung said in a note that Dell is reducing its exposure to AMD, which is contributing to AMD's current woes. Yeung said he didn't know if Dell had completely bailed from the AMD camp, however.
More troubling for AMD is that it continues to be creamed by Intel. AMD is months behind its rival on the rollout of certain products, and it's having a tough time catching up. Its snazzy new Barcelona chip was supposed to be a lifesaver, but AMD hasn't been able to deliver it in volume until recently.
Analysts are pretty down on the company. James Covello at Goldman Sachs said AMD's business model "remains structurally broken." John Lau at Jefferies & Co. said he's cautious because of AMD's delays, its competition and its weak cash position. And Cody Acree at Stifel Nicolaus said AMD's products are "sub-par."
AMD reports its Q1 earnings on April 17. It's sad to see a company in such a bleak spiral. And the worst may still be ahead; some analysts think shares could drop even lower.
It's admirable that AMD has stuck with chief executive Hector Ruiz through these tough times. I hate to jump on the reactionary bandwagon, but I wonder how bad things will have to get before AMD's board starts to have doubts about the company's executive leadership.