The vast majority of stock is traded without tracking the companies. Ever
heard about algorithmic trading? Then vast majority of human traders base
their opinions on varius indicators not connected directly with company
product. And the reason is simple -- they do not understand what's the product.
You are simply amazing.
Peter Lynch, the founder and long-time manager of the Fidelity
Magellan Fund and widely regarded as one of the most successful
institutional investors of all time, famously taught: "Buy what you
know."
It's true that program trading can produce fast "technical" moves in a
stock; that is to say, moves unrelated to fundamentals. Program
trading can't explain AMD's 2007 performance, and the most recent
stock price slide isn't just a coincidence with the Barcelona fiasco.
Under other circumstances, Barcelona might be a minor fumble, just as
some fumbles in football are of little consequence. When the clock is
running out and you are driving for a touchdown you need and you
fumble the ball, that's like what just happened with Barcelona.
AMD has introduced a product that I really like, something that I've
been wanting a major chipmaker to make for a long time: a GPGPU stream
processor with double precision floating point. It will turn vector
computers into commodities. Unfortunately, it will never be more than
a footnote on AMD's balance sheet. How do I conclude that? The Wall
Street Journal didn't even mention the product introduction.
Then such great manager who does not see the difference between a can od
soft drink and a computer drives the company to the edge of bancrupcy.
CEO's are a different matter, entirely. More and more, CEO's are
given incentives to drive stock price. That often leads to short term
thinking and decisions that are bad for shareholders. The day you see
me quoting a CEO on a company's prospects is the day you will be
justified in speaking to me the way you have.
Even noticed that those most succesfull technical companies are lead to
their biggest success by people who know the technical stuff. Just notice
Intel or Microsoft. Then compare Intel & AMD -- both started as Fairchild
offsprings, Intel was lead by guys who were semiconductor specialist (behind
being good managers) and AMD was run by Jerry Sanders, who was just
management specialist. Compare the performance of the both.
You've just lost the AMD supporters. Jerry Sanders placed a hugely
risky bet on Opteron, and he won. He was a true visionary, a cowboy
almost, in his willingness to take on Intel. I wouldn't have taken
the Opteron bet for any reason, but, then, I'm not Jerry Sanders. I'm
only a techie.
One can look at Intel and see just the opposite. Intel became
obsessed with its stock price and seemed to forget that physics do
matter, even though the company was famously founded and run by
scientists. It mismanaged Itanium horribly, and got away with it only
because it is so wealthy. Stockholders have not been well served by
Intel management, at least not until Core 2.
And great technical companies have trouble if there are taken over by those
management majors you're praising. See Apple, DEC and even Intel at it's
time of little trouble.
Management is a discipline for a reason, and I don't identify classic
management types with the troubles of any of the companies you name.
For a classic management failure, look to Home Depot, where a General
Electric (known for producing sought-after management talent) alumnus
stumbled badly. It happens.
You really don't understand what a problem this is. Buyers don't want
to see problems on the balance sheets of vendors. AMD worked long and
hard to get rid of its reputation as a fly-by-night company always
teetering on the edge of collapse, and, almost overnight, it's got
that reputation back.
AMD is now just two pony ride. No one can turn it around without throwing
out much of the company.
That's what turnaround and buyout specialists are about. Without
looking, I think that AMD's current market cap is less than what they
paid for ATI. IBM doesn't want AMD out of the x86 business, but IBM
has to do things at arm's length, because IBM wants to be able to do
business with Intel (which also wants to do business with IBM). There
are people who are pretty good at these things who wouldn't know a
pole from a zero.
This last thing is just a little addition. AMD was worst performer of the
league the entire year. The stock was below 8 before the news wrt that bug
struck anyway. So they "worked" on their current evaluation whole year.
Barcelona was supposed to pull them out of that hole. And, guess
what? Markets tend to find these things out before they make the
news.
Robert.
