AMD (AMD): A Sucker Born Every Minute

By Douglas A. McIntyre Published Jan 18, 6:31AM EST

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In any market, fools probably outnumber smart investor by a wide margin. Shareholders in dead pool tech firms like Sun (JAVA) and AMD (AMD) are not at the "high intelligence" end of the spectrum.

AMD yesterday announced that its revenue was flat in the last quarter compared to the same period last year. The company took a $1.6 billion write-off for its wrong-headed purchase of graphics chip company ATI. After that was taken into account, the company still lost money.

AMD would like investors to believe that, if PC sales and server purchases pick up, it can do fine. Its gross margins did improve from 36% last year to 44%, but that is still far shy of Intel’s (INTC) 58% in the most recently reported quarter.

AMD has one disadvantage compared to a company like Sun. It has over $5 billion in debt and almost $100 million in debt service each quarter.

There are some companies in the tech sector backwater that are not likely to come back. They face larger competitors with better R&D, bigger budgets, larger sales forces, and humongous market shares. AMD has a 20% piece of its market. Sun has less and fights IBM (IBM), HP (HPQ), and a host of other companies marketing servers to enterprises.

The two companies share one other thing in common. Both stocks have been pounded relentlessly. AMD has managed to trade down from over $40 less than two years ago to just over $6. Sun’s shares are down over 10% in the last two years while HP is up about 40%.

AMD is not likely to go out of business. Intel needs a small competitor to keep from being a monopoly. But, being in business and being successful are not the same thing.

Douglas A. McIntyre

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.