Is AMD (advanced micro devices) a Buy?

[Free To Canoe]

Might be a good trade.

AMD has a new president. She said that they will not live in Intel's shadow. I guess they will look for little fish to push around. Looks cheap right now. Any thoughts from the retired chip makers or others?

Maybe a good one for my stock club.

AMD Appoints Dr. Lisa Su as President and Chief Executive Officer

 

[clifp]

My first job out of school was at AMD, so I have a bit of soft spot for the company. I know a fair number of people who've worked at both places, but nobody that's been at AMD for the last 5 year, so I am afraid I have no particular insight.

It isn't an enviable position to compete with a well run company with vastly greater resources. Essentially AMD has always had to sell slightly inferior chips, for considerable less money, and their lack of scale and inferior process technology meant their cost were way higher (often 2-3x as much). So the company hasn't been consistently profitable since I left in the left in the early 1980s. The lack of profits meant lack of capital for R&D and manufacturing capacity. It is somewhat telling that AMD revenues have been flat since the great recession (5 years) while Intel's have increased 50%.

Traditionally AMD has been more cost effective at developing products, and avoided the tens of billions of dollars of expense that Intel has spent of the decade in enhancing the PC platform.

All that said at $2.50 the company absolutely has the potential to make a $1/share with hit a graphics chip, or perhaps they can find some other niche. A $1 share earnings would translate into only $10 stock price, because the business is very cyclical and AMD is well AMD.

I have yet to meet a stupid MIT grad, so Dr. Siu getting her degrees from the place bodes well.

 

[Free To Canoe]

I have worked in the chip industry and watched the cycle over the decades where AMDs fortunes rise, only to be smashed down by the 500 lb Intel gorilla. Yet they always seem to survive.

Is AMD the only "other" player for high end microprocessors?

 

[Running_Man]

AMD is at 2.50 for a reason, they are making no money, for the past 2 years in order to preserve cash they have slashed Capital expenditures to about 5% of Capital expenditures in 2006/2007 before the 2008 implosion. They still are making no money despite depreciation expense plummeting as a result of no capital employed.

At some point old equipment means you can't get into new markets. I don't know enough about this company to offer a good opinion on anything other than what the balance sheet looks like and what it looks like is a high debt low investing company dependent on a aging PC industry.


This is needless to say an extremely speculative stock. Intel has been reporting good PC sales, this would be a total bet on the CEO and or/ if there was some technology they are developing without much capital that could have a big return, but chip makers are usually pretty capital intensive so the lack of capital spending is a giant red flag

 

[NW-Bound]

... I have yet to meet a stupid MIT grad...

I beg to differ!

Maybe I met only the bottom of the heap, but still...

 

[clifp]

I have worked in the chip industry and watched the cycle over the decades where AMDs fortunes rise, only to be smashed down by the 500 lb Intel gorilla. Yet they always seem to survive.

Is AMD the only "other" player for high end microprocessors?

Pretty much, it's possible somebody will try and scale up ARM to be a server high end desktop chip, but I somewhat doubt it. Intel is generally a whole generation ahead in process tech which makes it tough to put out a faster processor, even with architectural superiority.

IBM just gave away their chip division, Motorola is dead, Japan Inc. gave up the race in mid 90s. All the RISC guys are out of business.

Intel acted like a Navy SEAL team reacting to somebody threatening their family to new microprocessors. (Processor were literally referred to as "the family jewels"). Although by the end of my time, we generally had to ask the lawyers permission before pulling the trigger . Not many people are excited about entering the market. ARM slipped under the radar, because it wasn't backed by a big company in the beginning.

My bet is that company or technology that knocks the gorilla of the top of mountain, is something total disruptive and exists only in somebodies imagination right now.

 

[clifp]

I beg to differ!

Maybe I met only the bottom of the heap, but still...

Yes, I have meet dumb (not exactly the right word but not smart) grads, from pretty much all the top schools, Harvard, Yale, Stanford, Cal, Princeton, Wharton, but the MIT grads I've meet have been between smart and brilliant.
Although their emotional IQ wasn't always at the top

 

[nuke_diver]

An MIT grad doesn't necessarily make one a stellar and game changing CEO...it might make you a good engineer

AMD looks to be in real trouble with both CPU and GPU, the ATI purchase doesn't look that good these days. They are doing semi-custom SoCs (System on Chip) that is doing ok but I'm not convinced that there is a big enough market for them in that. They are reducing the workforce by another 7% by Q4. At some point in time you are going to reach critical mass and not have the people to do what you want to do. They might survive as a much smaller company and after a time the stock could double...but I'm not convinced and would look at other options personally.

 

[Totoro]

I'm with clifp on this one.

AMD is strategically at a disadvantage and actually a different animal than Intel, and has lost 6 billion dollars over the last 10 years. It also has negative cash flow quite consistently and has virtually no equity (tangible book value) to speak of, nor cash reserves.

Basically, look at Intel and compare those two. Which company would you rather own for the long term?

That said, there does exist a price for any company (sometimes a negative price - like Enron at a certain point ) at which it is good value in the short term. Also, just for sake of keeping a competitor alive from a purchasers perspective, AMD (or another player) will probably survive.

Valuation wise, AMD is now valued at 2B and near a 10 year low point, but I think for good reasons. However, if they can squeek back to 5% net income on a structural basis they should be worth somewhere between 3B and 5B. So it's not impossible.

I'd pass on this one, but of course good things can happen at AMD. The odds are just better elsewhere I think.

 

[Free To Canoe]

Maybe this is a good one for the stock club.
Our Motto: buy high, sell low

 

[steelyman]

AMD is my second-worst stock pick ever. I bought it when they were flying high, then Intel released their Core processor.

I am still having a hard time unloading my last lot.

 

[RioIndy]

I follow this industry pretty closely simply out of interest in the CPU and GPU technology. The company held an advantage over Intel and were at their all-time peak around 2004, until Intel through $$$$$ at the problem and the 800lbs gorilla re-emerged as the dominant force.

Much of that change came from illegal practices on Intel's part by paying off suppliers. AMD went on to win those legal battles and Intel was forced to pay $1 billion to AMD, but it was many years after the fact and the damage was done and Intel in the meantime enjoyed several times more profit than the amount they were fined.

Me and many others anticipated a "The Return of The Jedi" resurgence of the company, when their rumored new products called Barcelona in 2006 and Bulldozer in 2011 were to be released. After much, MUCH hype and anticipation, both products failed to impress and the company only continued to sink lower and lower.

Their GPU devision goes through much shorter up-down cycles with respect to their competition (Nvidia). Which Nvidia currently has the best product for another expected 3-6 months.

The only new things I am hearing about on the CPU front are their K12 and Zen products which are set to release sometime in the next 2 years. No idea yet on how good those will be.

 

[Free To Canoe]

The insiders are still selling.

Maybe this guy can help.

Advanced Micro Devices Recruits Dell Veteran Forrest Norrod - WSJ - WSJ

Oct. 27, 2014 8:29 p.m. ET <!--[if ! lte IE 8]-->
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Advanced Micro Devices Inc. has recruited a well-known veteran of Dell Inc. to lead one of the chip maker’s two main business groups.
Forrest Norrod, 49 years old, was most recently vice president in charge of Dell’s server systems business. Prior to that role, he led an organization that developed custom-tailored servers for companies in the hyperscale market, AMD said. Hyperscale refers to Web services like Google Inc. and Facebook Inc. that serve a profusion of Web pages and consequently buy large numbers of computer servers.
At AMD, Mr. Norrod will take the role of senior vice president and general manager of the business group in charge of enterprise, embedded and semicustom chips. Besides chips for servers, the unit designs chips to order for applications such as the latest Sony Corp. and Microsoft Corp. videogame systems.
Mr. Norrod will report to Lisa Su, who recently succeeded Rory Read as AMD’s chief executive. She said in prepared remarks that Mr. Norrod had the unique skills “to lead AMD into an expanded set of markets where our differentiated technology assets provide a competitive advantage.”
AMD, which competes with Intel Corp. for sales of chips using a popular design called x86, once accounted for about a third of server chips using that technology. But its share recently dwindled to less 3%, according to the firm Mercury Research.
Dell veteran Ashley Gorakhpurwalla will assume Mr. Norrod’s former responsibilities, said Dell spokesperson Jim Hahn in an email. Mr. Norrod’s last day at the company was Oct. 1, the spokesperson added.
“Forrest Norrod recently notified Dell of his desire to take some time off and then pursue other opportunities,” Mr. Hahn said. “We thank him for his contributions and wish him well in future endeavors.”
Write to Don Clark at don.clark@wsj.com