Tuesday, April 08, 2008

AMD Plays To The Traders

AMD issued a press release after market close on Monday headlined as a Q1 update. Executive summary: The results will stink badly in Q1 and Q2 will also have an ugly but still to be determined restructuring charge in Q2. End of message.

The regulatory and corporate governance driven press release with Reg FD quality details such as financial statements and management comments surely followed by a conference call allowing analysts to ask probing questions will come in ten days. But right now AMD wants the market to know that it all stinks and they are surprised by the downturn.

By the way 10% of the work force will be decimated by the end of Q3. So employee morale and engagement must be at an all time high.

The quandary is this. The accountants are beavering away crunching numbers. Their faces turn grey as they realize the numbers are bad. The way the press release reads it’s a surprise. But as AMD was operating, were there no systems that would tell them they were about to hit a financial brick wall at high speeds?

The last sentence of the first paragraph indicates management was asleep at the switch. And I Quote “AMD had previously anticipated first quarter revenue to decline in line with seasonality.”

OK we all know AMD has a high beta. Somewhere around 2.78. But with high beta stocks we need to ensure the bridge is staffed with alert executives. We all know this is a tough business. Is this management team up for the next storm?