Advanced Micro Devices Inc. (AMD) (NYSE: AMD) stunned shareholders and customers Monday, Jan. 10, with the news president and CEO Dirk Meyer had resigned with immediate effect. (See: AMD CEO Resigns.)
The company said CFO Thomas Seifert had been named to act as CEO in an interim capacity while it engages in what will likely be an interesting and exhaustive search for a substantive head at the microprocessor and graphics semiconductor vendor.
Seifert who has been with AMD for less than two years "has asked not to be considered for the permanent CEO position," the company said in a statement.
This development does not sound like an amicable parting of ways, although AMD was trying to put its best spin on it. The company thanked the departed CEO for his services, and board chairman Bruce Claflin said Meyer "successfully stabilized AMD while simultaneously concluding strategic initiatives including the launch of GlobalFoundries Inc. , the successful settlement of our litigation with Intel and delivering Fusion APUs to the market."
Companies typically do not dump a successful CEO just before announcing quarterly results, so something must have happened recently that resulted in Meyer being pushed out. The statement from AMD hints at why it forced Meyer out. The board of directors, it seems, does not believe Meyer is the right person to lead AMD as it struggles against Intel Corp. (Nasdaq: INTC), the No. 1 microprocessor vendor. Claflin explained it this way:
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.
Experts in management changes will agree this is only half the story. AMD's board of directors must have had a clash over strategy with Meyer -- this is pure speculation on my part, but I believe the evidence points in this direction. AMD said its fourth-quarter sales were approximately $1.65 billion, up 2 percent sequentially but flat from the year-ago quarter.
By comparison, 2010 fourth-quarter sales at rival Intel are forecast to increase 8 percent to $11.4 billion from $10.6 billion in the comparable 2009 quarter. AMD under Meyer was not, as they say in the industry, firing on all cylinders.
The disagreement must have been serious enough for AMD's board to decide it must immediately let Meyer go. It is also possible that Meyer could have forced the board to take a decision about his tenure at the company. If this had not been a serious disagreement, the company and Meyer would have waited and conducted a more orderly transition to a new CEO.
Investors don't like such rude shocks and in after-hours trading drove down AMD's stock price more than 4 percent to $8.79. The shares had risen slightly during regular trading hours.
I'll be following up later with more analysis of the unfolding events at AMD.