Advanced Micro Devices Reshuffle: Not Just 'Rearranging The Deck Chairs'
Advanced Micro Devices (NYSE: AMD) latest bid to overcome the faltering market for personal computer doesn't alter its difficulties, but is “more than re-arranging the deck chairs," an analyst said.
“They're making the right choices, but re-organizing the business doesn't fundamentally change the challenges they face,” Argus analyst Jim Kelleher said in a research note concerning the world's second-largest chip-maker after Intel.
Kelleher maintained a Hold rating on the stock.
The company has been under siege lately as an important market niche, the mid-level consumer personal computer, is being quickly eroded by rapid growth in the popularity of tablets.
Advanced Micro Devices unveiled its latest corporate shakeup last Thursday, consolidating the company into two units: Corporate and Graphics and an Enterprise unit.
It also named 44-year-old Lisa Su chief operating officer, a move some see as “grooming” her for an eventual role as chief executive. Kelleher said the elevation of Su may free-up chief executive Rory Reed, in place since 2011, for more “strategic transformations,” perhaps including niche acquisitions or other structural shifts.
To counter the decline in PCs, the company has sought to diversify into gaming consoles, embedded chips and dense servers which contain a high number of central processing units.
The move constitutes the latest risk to Advanced Micro Devices, as it bets heavily on non-traditional markets, Kelleher said.
“But the bigger risk would have been to cling to the PC market,” he added.
The company has seen a recent sales spurt in chips for gaming consoles because of new products from Sony and Microsoft, but it's probably not enough. On a long-term structural level, the gaming segment faces declining sales because customers remain content with far cheaper “apps” for their phones, Kelleher said.
As for the reorganization, “if nothing else it should be more efficient in attaining back-office synergies,” Kelleher said.
Advanced Micro Devices traded recently at $4.43, up 3.39 percent.
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