Uncertainty reigns at AMD amid CFO resignation, PC sales worries

Uncertainty reigns at AMD amid CFO resignation, PC sales worries

Summary: The departure of AMD's CFO is just one more issue for analysts to worry about. By itself, Thomas Seifert's resignation is manageable, but analysts see another profit warning ahead amid bloated inventory levels and weak PC sales.

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AMD has a bevy of worries---weak PC demand, graphics chip pressure, Intel's ability to boost performance regularly---and now CFO Thomas Seifert's resignation is another headwind.

Where does the No. 2 PC chip maker behind Intel go next?

Analysts have been asking those questions about AMD regularly and Tuesday's trading broad another round of squeamish analysts. AMD emphasized that Seifert departure "is not based on any disagreement over the company's accounting principles or practices, or financial statement disclosures."

Related: AMD's Thomas Seifert resigns; new CFO search begins | AMD gets into datacentre hardware with SeaMicro update | AMD previews processors for tablets and PCs at Hot Chips | AMD's Q2 weak, sees Q3 sluggish too

Nevertheless, analysts were worried about AMD. Wedbush analyst Betsy Van Hees said in a research note:

 

We think Mr. Seifert’s departure couldn’t be coming at a more inopportune time for the beleaguered company given the challenging environment that the overall PC industry is facing.

The rationale for analysts is clear: Intel's revenue warning for the third quarter means more bad news for AMD, which is much weaker. Meanwhile, it's unclear how AMD's acquisition of SeaMicro will work out---especially since the unit is building systems on Intel's chips. And then there are looming issues with manufacturing partner GlobalFoundries, which just partnered with ARM. Simply put, AMD may ultimately be on the hook for more wafers than it can sell, said analysts. If that's the case, bloated inventories will be the norm.

Here's a look at AMD's share performance year to date. 

amd091812a

Van Hees continued:

AMD guided Q3 revenue to decrease -1% Q/Q, +/- 3%, at the midpoint implying a revenue range of $1,355MM to $1,440MM. AMD’s below-seasonal Q3 guidance was on the heels of a disappointing Q2 in which revenue declined 11% Q/Q largely due to weak channel demand for Llano desktop APUs, weak consumer market impacting notebook APUs, and slower-than-expected uptake of Bulldozer processors in the mainstream IT market. We believe following our industry checks that the same issues that hindered AMD in Q2 coupled with market share losses in both CPUs and GPU are likely pressuring AMD’s Q3 revenue to the lower end of its Q3 guidance range.

Evercore analyst Patrick Wang gave AMD a $3 stock price target. Wang said Intel is being aggressive and AMD's Kaveri processor---the follow-up to Trinity---is likely to be delayed. Wang said that AMD may issue another profit warning since it is under fire from Intel as well as ARM competitors.

The upshot is that Seifert's departure isn't that worrisome by itself---Devinder Kumar, who is corporate controller will be interim CFO---but combined with other issues presents more uncertainty.

Deutsche Bank analyst Ross Seymore noted:

 

We do not see any financial implications from this resignation and do not believe it was related to the ongoing restructuring at the company. However, we expect the news to add uncertainty at a time when questions on near-term macro conditions, PC demand, and AMD’s strategic direction already weigh on inventors’ minds.

Topics: Processors, Data Centers, Hardware, Servers, PCs

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5 comments
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  • I liked and in the past

    They used to make good processors up to the Athlon XP series..
    But once they went with the AMD Athlon (745 socket and above) they just couldn't keep performance great.

    Even a fresh install on XP at the time there was slight lag on start up and application loading where intel was flawless.

    The last straw in the bucket was when i tried to play a blueray on a Phenom X2 that studdered where a single core celeron played no problem..

    I still hope they don't go under... I kind of like intel chip prices cheaper than what they used to be.
    Anthony E
    • AMD is clearly in the doldrums, and it's kind of sad

      Their troubles began in earnest when Intel was facing an unexpected meltdown with their Netburst line and then, as if by magic, pulled a most fortuitous rabbit from their legacy (mobile + PIII) hat and christened it Core Duo. A veritable Phoenix arose from the burning ashes.

      AMD has not been able catch their breath since, and it's kind of sad.
      klumper
    • There is no way

      a Phenom X2 stuttered playing a Bluray. The issue was not the CPU I assure you.

      BTW... the Athlon XP series were great compared with the abysmal Pentium4's, but I think the Athlon64 was probably better and gave Intel a good run for their money right up to the point that Intel released Core2. Core2 was the turning point and AMD seems to have found it hard to keep up with Intel since then on both cpu tech and fabrication tech. It's not entirely fair since Intel gets away with atrocious GPU designs while AMD is criticised on both fronts.
      12312332123
    • Who said Intel prices would skyrocket as a result?

      Never mind ARM also being a competitor, more people moving from AMD or others to Intel would mean more revenue for Intel... would Intel really get greedy and squeeze even more out of us turnips?
      HypnoToad72
  • Ever since Core2Duo, Intel has mopped the floor with AMD

    But with our new normal economy, sales might be down because fewer people have jobs, any new jobs don't pay nearly as well, and other things a lot of people aren't fathoming. "Supply-side economics" does demand the demand-side grow their money off of trees, while demanding free bailouts when they start to stutter because they used price wars to kill the competition while whittling down wages...
    HypnoToad72