Market Reality Check: AMD Is Completely Irrelevant (AMD, INTC, AAPL, NVDA, QCOM, ARMH)

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If you have followed the saga of Advanced Micro Devices Inc. (NYSE: AMD) for very long, you know that it is a rather painful story. After the company announced the departure of Thomas Seifert, its chief financial officer, “to pursue other interests,” investors have to be worrying that they are sticking by a dying horse.

Intel Corp. (NASDAQ: INTC) has managed to outpace AMD to the point that AMD’s relevance is under question. Other than having cheap processors, the fab-lite business model has not yielded what was originally hoped for. It may be cheaper to be fab-lite but it also slows down making adjustments along the way through a product cycle. And perhaps sadly, Intel’s dominance is now starting to be challenged in many select markets.

Seifert was said to be Dirk Meyer’s replacement as interim-CEO, when Meyer was forced out before Rory Read took over as CEO. Devinder Kumar, controller at AMD, will hold the interim CFO position until a replacement is found. If the guy who ran the company for a while cannot take working for AMD any longer, we would wonder just how good of a replacement CFO can be found. It would seem unlikely that many high-caliber technology CFOs out there are just dying to take the helm at a troubled company like AMD.

Apple Inc. (NASDAQ: AAPL) has started making many of its own processors. Whether Intel can keep that effort at a minimum is something we will know only in time. NVIDIA Corp. (NASDAQ: NVDA) competes against AMD’s ATI unit for graphics chips, and now NVIDIA wants a part of the processor market.

In the world of smartphones and tablets, it is Qualcomm Inc. (NASDAQ: QCOM) and ARM Holdings PLC (NASDAQ: ARMH) that are making so much of the leaping ahead in mobile processors. Can you imagine ever wanting to buy a smartphone made with an AMD processor? Really? OK, you can stop laughing now.

There is at least some good news for AMD holders to consider. Historically there has been a belief that Intel Corp. (NASDAQ: INTC) actually has held back on many new processor releases just so that it would not get too far ahead of AMD and take up too much more in market share to the point that antitrust issues would come up again.

With Intel’s latest rounds of profit warnings, it is just hard to get excited about AMD. If Intel cannot get it right, then it is hard to imagine that AMD is getting right.

The last issue is back to this CFO departure. Who it is and what the real reason for leaving was might not even matter. When investors see a CFO departing a company, the first question that arises is around the company’s accounting. The next question that arises is whether a CFO wants to be around when more and more disappointment is coming down the pipe in earnings and sales.

AMD shares closed down more than 9% on Tuesday at $3.62, and its market cap is now only about $2.56 billion. Perhaps the only shock here is that AMD did not close at a 52-week low. The stock went as low as $3.60 in regular trading on Tuesday, and its 52-week range is $3.43 to $8.35.

Analysts do not exactly have a great calling here for AMD either. Even before the CFO left, we saw downgrades this month from Evercore, UBS, Longbow and Citigroup. AMD may still be relevant, but its relevance is getting closer and closer to the relevance of gold to a dead man.

JON C. OGG

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