The question of what's next for AMD
took an interesting twist this morning as the company's stock rose ~ five percent on the rumor that Dell
might be interested in acquiring the CPU designer. To say 2011 has been a tumultuous year for AMD thus far would be an understatement; the company has launched
major new products, fired
its CEO, turned in
a solid Q4 2010, and dismissed
two additional board members all in the last six weeks.
The rumors of a potential buyout aren't just leaking in anonymously. This latest is courtesy of Barrons and Bloomberg with the latter noting that, according to Patrick Wang with Wedbush Securities, "there's no management team there [at AMD]." According to Wedbush, while there's 'chatter' regarding a potential AMD takeover, it's a far-fetched possibility.
AMD has been the topic of more proposed mergers and buyouts than we can remember, but there are specific reasons why the company might currently be attractive to a would-be purchaser. Before the GloFo spinoff, anyone interested in buying AMD would have been required to purchase multiple foundries in which they had neither interest nor practical use. AMD's debt situation is improved from where it was a few years ago, and the recent performance of new Ontario and Zacate processors proves that Sunnyvale has a response to Intel in the netbook / notebook market.
There's also the unknown status of AMD's x86 license. Originally, the terms of that license were quite strict and drastically limited Sunnyvale's ability to hire other foundries to produce processors. Back then, it was legally impossible for AMD to transfer the x86 license, even if it sold itself entirely to another company. That may have changed when the two manufacturers' finalized their anti-trust settlement from back in 2009.
In short, AMD's position is now different enough from what it was that a buyout option is more plausible. Even if the Dell rumor comes to nothing, however, Wang's statement that AMD has no current management team is an ominous one. It suggests that AMD prices may have risen not because Dell is seen as a good fit, but because Dell would provide a sense of direction and focus that Wall Street feels is currently lacking.
Firing Meyer, Seyer, and Rivet definitely sent the message that AMD's BoD didn't like their plans for the future. Unfortunately, no one has stepped in, even in an unofficial capacity, to articulate any sort of consensus on what the company should be doing. CEO's don't operate in a vacuum; corporate executives aren't mindless drones who slavishly follow the dictates of a single person. AMD has already taken the unusual step of sacking every corporate executive hired before 2006; a move that's unlikely to make the CEO's attempts to build a new corporate structure any easier.
Analyst's comments on the current situation generally imply that AMD isn't sharing the details of its CEO search or the reasons for various dismissals at the high end of the financial analysis market any more than in the shallows. If Wall Street doesn't see more evidence of a distinct corporate strategy in the near future AMD's stock could be headed for trouble.