Ever since Advanced Micro Devices, Inc. (NYSE: AMD) forced out former CEO Dirk Meyer in January it has been hunting fruitlessly for a new leader. Several candidates are reported to have rejected an approach to take over the reins from acting CEO Thomas Seifert, AMD’s CFO. With the company seemingly recovering from some past woes, will a new CEO continue to lead AMD out of its past doldrums or will it mark the end of this recent surge?
Shares of AMD are soaring today, up more than 17% at mid-day, following the company’s second quarter earnings report. AMD reported EPS of $0.08 on revenue of $1.57 billion, which met EPS estimates and barely missed estimates on revenue. That’s a big turnaround from the same period last year, when AMD posted an EPS loss of -$0.06/share. AMD’s forecast that revenue would grow 10% in the third quarter is likely to be the main driver behind the share price rise.
There are a few ways to look at AMD’s CEO search. First, anyone hired now that several others have rejected AMD’s overtures is sure to be seen as someone other than the company’s first choice. In other words, AMD settled for someone they really didn’t want. The board member leading the search has said that the company is looking for the right person and not working on a timetable. That’s pretty weak tea as a counter argument.
Second, the situation that lead to Meyer’s removal hasn’t really changed. Meyer was slow to discern the industry’s move to small, low-power processors for the fast-growing smartphone market. A new CEO practically needs to have a plan from the moment he or she takes the job in order for the company to have a chance of catching up. That’s a pretty daunting challenge and anyone who wants a long career as AMD’s CEO is likely to be wary about accepting the challenge.
Third, Seifert has removed himself from consideration for the permanent CEO post. A reasonable question is why he would do that. Does he know something the rest of us don’t?
These sorts of concerns are likely to taint the appointment of any new CEO and, at the same time, weigh on the company’s share price. The stock has lost nearly a third of its value since Meyer’s departure although its gained about half of that back just today.
If Seifert changes his mind and if the board anoints him, he will be viewed as the best the company could do. And he’s not a technologist, so there will be questions about how he will lead AMD into the new promised land of smartphones. If someone else gets the nod, all three of these concerns come into play.
As strange as it may seem, AMD may be better off with an interim CEO than a permanent one, at least as far as shareholders are concerned.
Paul Ausick
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