Uncertainty reigns at AMD amid CFO resignation, PC sales worries

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.
Written by Larry Dignan, Contributor

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. 


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.

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