Boards have the final say in who runs a public company. They also control who will sit on their boards, what management makes in compensation, and how complete and accurate the audit statements of their firms are. Boards are also charged with guiding the strategic direction of the companies they serve.

24/7 Wall St. will, from time to time, look at the worst board members. This will be based on their positions on the boards, the returns the companies have given to shareholders over the periods of their tenures, the quality of management over the same period and the quality of governance.

Robert B. Palmer has been a member of the AMD (NYSE: AMD) board since 1999. The chip company’s stock price is down about 50% from the end of that year. Palmer was the chairman and CEO of troubled tech company Digital Equipment from 1995 to 1998.

Palmer was at AMD during the disastrous buyout of graphics chip company ATI in mid-2006. The purchase price was $5.4 billion which severely burdened AMD’s balance sheet. AMD was modestly profitable in 2005. It lost money from 2006 to 2008. Intel’s (NASDAQ: INTC) $1.25 billion in 2009 settlement helped its financial results.

Palmer was also on the board during the disastrous tenure of CEO Hector Ruiz. Ruiz eventually stepped down as CEO in July 2008 after AMD had lost money in seven straight quarters.

AMD’s revenue was off 2% in its most recently reported quarter. The company lost $118 million for the period. AMD’s shares are down 15% over the last year. Palmer made $274,000 as an AMD director in 2009.

Douglas A. McIntyre

There is the possibility that a negative on Intel (NASDAQ: INTC) was caused by AMD.  We just aren’t finding anyone on the research side nor on the technology side that agrees with this.  That is even more true when you consider that the quad-core is more like a tri-core and the clocking speeds are running much slower than both original goals and revised goals.  There are also the issues of delays and damaged relationships as a result of the delays.

The good news is that the graphics side of the business might actually carry the quarter.  That alone won’t make up for the processor shortfalls for an entire year ahead, but at least if your name is Dr. Pangloss you could have at least one bright spot to hang your hat on.   

Yesterday’s surge after a disappointing Intel may have been more short covering than anything else as the latest short interest reading grew to 79,207,000 shares from 75,656,300.  That is more than 14% of the float.  We also believe that many are speculating that today could be Hector Ruiz’s last earnings release as the head of the company.  Ruiz is our own top pick for the next technology CEO to be fired. We are not as convinced as Hector Ruiz is that their current succession plan with Dirk Meyer will fly with Wall Street.  Wall Street might be communicating to Mr. Clegg that entirely new blood with a fresh start is needed.  The good news for Ruiz himself is that a general recession might actually give him the excuse to continue poor performance and take away the timing demands on its new processors.

There is also the shot that ATI’s future status and AMD’s current fab-process may all be up for review, although the company has some hidden benefits in keeping each somewhat as is.  Lastly, we are now a year or so away from the Intel trial and now that 2009 is only a year away this could start to at least get some attention from at least the legal watchers that trade stocks.

Covering the financial metrics on this one is actually fairly easy.  The analysts are negative on it, the chart is ugly.  You just have to wonder if the stock has based out or not, particularly if you consider that the one thing that may save AMD is that AMD has to exit to keep Intel from being an official monopoly.  Options expire tomorrow and because each $1 move represents such a large percentage in stock price the open interest isn’t what we’d normally expect.  So we are not using options as a measurement today.

AMD shares have given back almost half of yesterday’s gains and at $6.37 are actually up nearly 20% from recent lows of $5.31. 

Jon C. Ogg
January 17, 2008

But AMD did the unthinkable a couple years back and that decision is made at the top.  It picked a pricing war with near-monopoly Intel Corp. (NASDAQ: INTC) and as it turns out it really seems that the limitations of Moore’s Law seems to apply to AMD much more than Intel.  This could have had a shot at being a David vs. Goliath, but this David turned out to be really near-sighted and incapable of using a sling.  Now AMD can’t even really just back away from higher-end chips to focus on the lower-end because it gets to fight Intel there too.  Intel seems to have its legal advantages intact too.

NVIDIA (NASDAQ: NVDA) also seems to have an upper hand over AMD’s ATI unit, although we know if ATI loyalists that would argue this and each generation of new graphic chips from one to another seems to leapfrog the competing graphic chip.  As far as the computing power that we use ourselves in computing and gaming it is more of a six-five pick-em.  But AMD has been criticized over and over for its ATI acquisition.

We criticized its first financing round as being voodoo financing, although the second round didn’t seem as bad.  We have not heard of any Hail Mary passes that are expected during an upcoming analyst meeting, although we can’t hang our hats on that with any certainty.

We also have pointed out how we found some notes from this Monday that are turning out to be reality about serious problems with the new Barcelona chips and its chips were falling far short of the GHz goals originally set out and short of you know who’s processors.  We also would take the "show-me attitude" in believing that just because AMD indicates that a quarter delay is really just a one quarter delay.  It is quite possible that analysts will have to trim down estimates yet again.  As it stands now AMD is not expected to be profitable this year nor in 2008 and investors have seemed to shift to preferring to buy quality rather than hope.

Ruiz also has an image issue that can’t really be repaired overnight.  Some analysts have noted how he has been very difficult to pin down historically.  One analyst has said directly that it seems a little different than before because he cannot ignore a 75% stock drop as an anomaly and he is almost forced to deal a bit more openly.  But having many of your underlings having very little respect for you and having an almost open lack of respect shown when he’s not around can’t be good.  All those employee stock options aren’t really worth any money when your stock hits 52-week lows every single day.

Our contacts tell us of in-fighting between design groups and that many managers don’t exactly think all that fondly of Mr. Ruiz.  We will be the first to admit that this is the same as the legal term hearsay and that if it was a trial it would not be admissible.  But we’ve seen that most of he hearsay from some of our sources on this topic is usually true on the bad things behind the scenes and turns out to be gossip or rumor when it is positive.

This last financing investment announced out of the Middle East did actually create a rift from some shareholders who have been holding AMD stock.  The last reported $622 million investment from a unit of Mubadala Development Co. in Abu Dhabi represents roughly an 8.1% stake and some institutions have considered it an insult since they didn’t get to participate.

But there is actually at least some good news for shareholders:

• AMD doesn’t need cash now;
• AMD may have a large grant coming down the pipe and it may be able to monetize some of its existing fabs;
• Analysts are already mostly negative, so downgrades may just be "estimate cuts.’
• The ATI unit could be converted to cash and the company could clean its books entirely, although it is a written down asset;
• AMD has an implied permanent safety net  in that it is deemed to be a "must survive company" because it keeps Intel (NASDAQ: INTC) from being a total outright monopoly;
• The worst of the stock drop is likely behind it if you believe they have a perpetual place; It is quite possible that an IBM (NYSE: IBM), Taiwan Semi (NYSE: TSM) or another giant tech company could come in and partner with AMD.  We cannot neglect that possibility, although they may want to install their own leader to save it.
• An activist investor like Carl Icahn could always decide that enough is enough and want to stir up the pot, although we think he’d rather focus on profitable companies that can be made more profitable.

Lastly we want to caution one key issue:

• There are very few readily available names that could step into this role and immediately make a difference.  With no heir apparent Ruiz might be able to shun any serious efforts against him for quite a long time.  In light of reports that Dell isn’t focusing on AMD chips to the point that had been hoped, you can probably forget about a Kevin Rollins being asked to step in.  When we have discussed an heir apparent or even a candidate with others there has yet to be a single solid candidate that everyone likes or would say is the perfect replacement.  picking one senior manager may result in others defecting.  Once again, just because things don’t go well under a leader doesn’t mean he or she can be readily axed without a long hard fight.

At roughly $9.00, shares are only 2% or 3% above 52-week lows.  The 52-week high is $23.00, but the two-year high is above $40.00.

GUIDELINES FOR OUR CEO SELECTION

AMD probably won’t appear in our special situation newsletter but may appear in our "10 Stocks Under $10" newsletter.

Jon C. Ogg
December 6, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.