AMD is on the lookout for a new CEO as it aims to deliver more growth, but the company is likely to suffer initially due to uncertainty about its strategy.
On Monday, Dirk Meyer stepped down as CEO of AMD. The board wanted to have "significant growth, establish market leadership and generate superior financial returns."
Barclays Capital analyst Tim Luke said in a research note:
We believe Mr. Meyer’s departure may have resulted from the strategic difference with the new Board regarding the pace with which AMD has approached its opportunities relating to possibly the company’s strategy in areas such as ARM licenses, tablets and cloud computing.
Indeed, AMD doesn't seem well positioned for the mobile era.
Meyer was at the helm as AMD separated its manufacturing operations, weathered a downturn and mended fences after the Hector Ruiz era. AMD remains a distant No. 2, but just two years ago the chipmaker looked like it was toast. AMD is off life support, but it's unclear that a new face can change the company's standing. AMD doesn't have the financial heft to compete with Intel so it either needs to change the game or play ball with embedded systems or mobile.
Internally, the resignation of Meyer led to the following comments on Glassdoor. Meyer had a 63 percent approval rating among AMD employees. Here are a few comments from AMD employees:
The upshot: Meyer navigated the company through a rough time and was seen as a solid leader. However, he wasn't a revolutionary that was going to make bold bets.
But before any of that happens AMD is likely to take some hits. Will enterprise customers be hot for AMD server chips when the company could conceivably focus on embedded systems and downplay its core business? What is AMD's strategy? Are the Fusion products really the future? Is AMD even in the right businesses? What about mobile? Can AMD really compete with the likes of Qualcomm and Nvidia?
Simply put, AMD's new leader has a bevy of challenges. Analysts expect AMD's prospects to get worse before improvement. Wells Fargo analyst David Wong said:
AMD lost several percentage points of market share in servers in the June 2010 quarter and a little more share in the September 2010 quarter, even after the launch of Magny-Cours in March 2010. According to Mercury Research, AMD’s unit market share is now down to below 7%. We think that there is risk to AMD that market share losses might continue through 2011.
We think there is some amount of risk that the schedule for AMD's next generation Llano or Bulldozer families might slip from the current expectation that both will become available at some point in the middle of 2011. In mid 2010 AMD announced its first delay in its 32nm technology schedule, due to “slower-than-anticipated progress up the 32nm yield curve.” Both the Llano and the Bulldozer families require successful implementation of multiple new technology features, the complexity of which could, we think, result in further delays.
Meyer's departure seemed sudden. Whenever a CEO unexpectedly splits there will be more questions than answers. Ultimately, if customers play wait and see with AMD, the company is going to get knocked around a bit. Meyer fixed up the house of AMD, but it's still a fixer upper.