AMD continues to withhold details on asset-lite plans

CEO Hector Ruiz reassures stockholders that AMD is on a "path to continuing profitability" after a "difficult" 2007 that produced admittedly disappointing financial results on the company's Barcelona delays.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 5/9/2008

Advanced Micro Devices Inc continued to withhold details on its “asset-smart” strategy at its 2008 annual meeting of stockholders Thursday.

The chipmaker, which has been encouraged by financial analysts to sell its fabs as it moves toward profitability,  reassured its stockholders this week that it is on a “path to continuing profitability” after a “difficult” 2007 that produced admittedly disappointing financial results on the company’s Barcelona delays.

“Our management team with the support of the board of directors has taken dramatic measures to transform the business,” AMD CEO Hector Ruiz (pictured) said during the meeting. 

“Many changes have occurred already and there are more to come. You can expect to see new blood, increased focus, experienced leadership, and stronger execution,” he said, calling 2008 a “year of opportunity.”

Indeed, AMD has taken major steps in recent weeks to turn itself around. The company announced plans to cut 10% of its workforce by the end of Q3 and said it would exit any non-core businesses to better focus on its strengths and reach profitability. Rumors also surfaced this week that AMD would, in fact, announce plans to sell its fabs. Such rumors drove AMD’s stock up to a Tuesday high of $7.39. However, Ruiz and company did not choose to confirm such plans at Thursday’s meeting.

“We are progressing forward with an asset-lite strategy, one in which we will deploy our manufacturing assets to most cost effectively stay at the leading edge and deliver customer value. Our plans and progress are ongoing and I hope to communicate details of this undertaking in the near future,” Ruiz said.

AMD’s continued silence on its asset-lite strategy has not sat well with Wall Street. Without further manufacturing-related details, the stock slid from its Thursday, pre-meeting high of $7.12 to $6.94 at 12:49pm eastern today.

“While Mr. Ruiz did promise that changes were in process to make he company ‘consistently’ profitable by the second half of 2008, while also stating that the company will look to exit business segments that are operationally challenged, shifting the company's focus to doing ‘fewer things better,’ which we view constructively, we believe details on the completion of AMD's ‘asset smart’ program remain an overhang on the shares,” Tim Luke, a semiconductor analyst with Lehman Brothers said in a research note late Thursday.

On that, Lehman continues to favor Intel Corp on its “solid product cycle outlook.”

“With regard to MPU leader Intel, we highlight that our checks with Asian motherboard makers and ODMs continue to suggest solid trends, and we continue to favor the company's strong product positioning/manufacturing technology lead,” Luke said.

Intel’s stock was trading at $23.40 as of 12:49pm eastern today.