"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 (NASDAQ: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. (NASDAQ: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.
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.