AMD Back To Its Old Tricks
Friday, September 30th, 2011
Written by Roopak Chakravarty
TopEquityNews.com
Back in the late 90’s and early 2000’s, I used to be a fan of Advanced Micro Devices (AMD) and their ability to produce technology that was competitive to, and at times, better than its much bigger rival Intel (INTC). The problem for the stock was that it always seemed to shoot itself in the foot with poor management decisions and bad execution. It seems AMD is back to its old tricks.
I bought a lot of shares back in 2003 because I thought its Opteron chip would crush Intel, and by all accounts it should have based on reports from those in the know in the technology industry. The stock did rally, but then came crashing down as losses and poor execution from management held them back.
Ineptitude
The company said that it would fall short of its third quarter sales and profit forecasts because there were manufacturing problems at a plant in Germany. Basically the company couldn’t make enough chips, so this was totally self-inflicted. It’s not that things are that negative in the chip industry. In fact, this is a group that has been performing pretty well, so the demand is there.
I remember back when I followed the stock closely that investors didn’t have much faith in the management, which was why the stock traded at such a discount to its big brother Intel. After many management changes, the same mistakes are plaguing the company today. It must be torture being a long-term shareholder of this company.
This is a great example of why you must inspect the management teams of companies before you buy the stock. Sometimes it is difficult to quantify this, but AMD provides a real-world laboratory in this experiment. The sad thing is they always have good technology to compete with Intel, but it takes more than that to beat such a formidable competitor.
