Advanced Micro Devices (AMD) said Monday its chief executive Dirk Meyer has resigned with immediate effect and appointed senior vice president and chief financial officer Thomas Seifert as interim CEO.
Seifert will maintain his current responsibilities as CFO and has asked not to be considered for the permanent CEO position. Meanwhile, a search Committee led by Bruce Claflin, Chairman of AMD's Board, will look for a new CEO.
In a regulatory filing, AMD said Meyer's resignation will constitute a termination of employment without cause, making him eligible for severance payments.
Analysts expressed surprise over the resignation of Meyer, just after two years of assuming office.
Though the exact reason for the departure not been revealed, analysts say the continuous market share loss of AMD to Intel in server systems, delay in Fusion chips and lack of tablet chips could be the basis of the resignation.
While no explanation has been offered, we note the lack of a tablet chip offering, server share loss to Intel, and continued delays in Fusion products. It is possible the board's position is that AMD is behind in mobile computing (ARM chips) and has poorly executed in server and Fusion, FBR Capital Markets analyst Craig Berger said in a note to clients.
If so, we think the board wants to have its cake and eat it, too, as it expects AMD to generate growing and material cash flow while also investing meaningfully in necessary R&D efforts, said Berger, who has a market perform rating and $10 price target on AMD stock.
Meyer, who took over the CEO role in 2008 from Hector Ruiz, has been credited with stabilizing AMD during a difficult time, spinning off of its manufacturing operations to Globalfoundries, the delivery of Fusion chips and a settlement with Intel that garnered $1.4 billion payment to AMD.
However, the Board believes we have the opportunity to create increased shareholder value over time. This will require the company to have significant growth, establish market leadership and generate superior financial returns. We believe a change in leadership at this time will accelerate the company's ability to accomplish these objectives, Chairman Clafflin said in a statement.
Meanwhile, Seifert joined AMD in 2009, and has more than 20 years of general management, global operations and financial management expertise. Immediately prior to joining AMD, Seifert served as COO and CFO of Qimonda AG, where he led the formation and subsequent IPO of the company.
Consensus is clearly negative on AMD's ability to execute, but our work (and Mr. Meyer's resignation) suggests these concerns might even be worse than many fear. With the 32nm ramp at GlobalFoundries delayed, and the ability to value-price Fusion products in some doubt, we see no reason to move off our negative bias, analyst Daniel Berenbaum of Auriga USA wrote in a note to clients.
Berenbaum, who has a sell rating on AMD stock, said he would not be surprised to hear some of our competitors attempt to revive the oft-circulated speculation that AMD will be an acquisition target, either for Oracle (ORCL) or others.
But he doesn't think it would happen.
Simply put, we do not see AMD as a natural fit for a larger entity with the balance sheet to get a deal done, Berenbaum said.
For the fourth quarter, AMD expects to report revenue of about $1.65 billion and a gross margin of about 45 percent. In October, it had forecast revenue would be flat from the third quarter's $1.62 billion.
Wall Street expects revenue of $1.62 billion, according to analysts polled by Thomson Reuters.
Shares of AMD likely to move lower until some clarity over leadership is achieved.
AMD shares fell 4.5 percent to $8.78 in the extended trading on Monday. However, since Meyer took over reigns, shares have gained over 50 percent.