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Tech Check
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It was only January when Banc of America issued a blistering advisory to clients that despite a 62 percent pummeling in 2007, AMD [AMD
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] was still not a good deal; that difficult times still lay ahead.
And here we are today, digesting yet another revenue and earnings warning from a company quickly shaping up as an also-ran in tech. The red ink will be so bad that it's forcing AMD to slash 10 percent of its workforce, 1,600 jobs, trying to shave $250 million in annual operating expenses. And yet, the stock still falls. I'm talking to a number of analysts who tell me these shares will hit $5 before they hit $7, and that's a jagged little pill to swallow for investors who bought in at $40 less than two years ago.
For AMD, nothing new here; product delays, missed market opportunities, difficulty digesting the $6 billion ATI Technologies acquisition, worries about customers fleeing, an inability to compete with Intel either in the marketplace or in the courts. AMD has long made the case, for the past 30 years or so, that Intel [INTC
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] competes unfairly and that's the reason why AMD is only able to scrounge Intel scraps. And while there may be a little fire under all that smoke, Intel had nothing to do with the product-delay 8-ball that killed AMD last year.
I'm also hearing from a number of sources that Dell [DELL
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], a customer so celebrated when AMD was finally able to wrestle it away from an exclusive deal with Intel, may be pulling away from the arrangement. Not all at once, and not immediately, but something that a few people are telling me is evolving now.
Citigroup wrote about the issues with Dell this morning, saying: "Our analysis suggests that a source of AMD's shortfall is Dell's decision to reduce their AMD exposure. Consistent with speculation throughout the quarter, AMD's shortcomings in two flagship products (Barcelona and Phenom) was the likely sore spot for Dell. While we cannot confirm that Dell will desist in using AMD altogether, we expect the overhang of share loss at Dell (and risk to estimates it creates) will hamper AMD share appreciation."
Ouch.
I'm not sure what this all means for CEO Hector Ruiz. The last time he and I sat down together, he told me he enjoyed the full support of the board. And he was quite dismissive in any suggestion to the contrary.
But Ruiz doesn't own the board the way his predecessor, Jerry Sanders, used to. Jerry was an interesting fellow, a true Silicon Valley pioneer. I'm not sure Ruiz carries the same weight. And you gotta wonder with the meltdown this company has suffered during Ruiz's tenure, how long he can remain in the C-suite.
Questions? Comments?
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