"AMD represents my worst investment," declared Fred."Mine too," shot back Sanders
April 29, 1999 21:15
AMD CEO faces pressure to salvage stock or leave
By Eric Auchard
NEW YORK, April 29 (Reuters) - Advanced Micro Devices Inc. , perennial No.
2 finisher to computer chip giant Intel Corp. , took steps to assuage angry
shareholders at its annual meeting Thursday but resisted calls to fire its CEO.
Officials of the Sunnyvale, Calif.-company faced withering criticism for a
three-year slump in AMD's stock price, frequent financial disappointments,
lack of board diversity and refusal of AMD founder Jerry Sanders to step aside
as chief executive.
In his remarks to shareholders, Sanders said he hoped in the next decade to
give investors "more thrills, less spills" than in his first 30 years of running
AMD.
Sanders acknowledged AMD's "performance leaves much to be desired,"
including a manufacturing shortfall that crippled earnings in the first-quarter, but
blamed AMD's main failings on Intel's monopoly power over its main computer
chip markets.
The outspoken Silicon Valley executive, was at turns defensive and combative
about his company's track record.
"AMD represents my worst investment," declared Fred Strauss, a private
investor from New York, during the meeting. "Mine too," shot back Sanders.
"I've invested my life in it," the chief executive said, a reference to Sanders 30
years running AMD -- which he and seven others formed in 1969 after leaving
Silicon Valley pioneer Fairchild Semiconductor.
"Listening to you... makes me think I want to go buy Intel shares," Strauss
said after Sander's speech to shareholders.
Afterward, the stockholder said he owned 30,000 AMD shares purchased at
over $30 during the past five years, or nearly twice the $16.50 closing price of
AMD stock Thursday. The stock has had its ups and downs in that interval,
with a high point of $48.50 in the spring of 1997.
Sanders said he was seeking profitable growth for AMD and to nearly double
its microprocessor market share to 30 percent over time, up from 16 percent in
the fourth quarter in the U.S. consumer market and 8 percent in fourth-quarter
1997.
"We are going to manage through this unpredictability," Sanders said of the
brutally competitive semiconductor industry. "We will return to profitability
sooner than you imagine," he told the meeting, but declined to set a timetable.
He harnessed his hopes on the company's upcoming K7 microprocessor, due
out in June, which he boasted would prove more powerful feature-for-feature
than available Intel chips.
AMD is betting the K7 will allow the company to compete effectively in the
business computer market instead of principally the low-end of the consumer
PC market, where it has made limited strides in the past year versus Intel.
The K7 chips are designed for high-performance desktop PCs, workstations
and low-end server computers used to manage networks of office computers,
he said.
First versions of this next-generation microprocessor will run at speeds of 500,
550 and 600 megahertz, or millions of processing cycles -- competitive with
expected Intel speeds.
Thursday witnessed several measures by the company to mollify angry
investors, many of whom openly have openly demanded the removal of
Sanders, the semiconductor industry's original mass marketer of computer
chips.
One Wall Street analyst spoke for many critics in pinpointing AMD's failed
decisions on AMD's "crony board" of directors -- a reference to the close ties
among insiders and non-management board members with overlapping
directorships.
Activist shareholders, including public pension funds like the California Public
Employees Retirement Fund, have campaigned for changes in corporate
governance at AMD.
Nonetheless, shareholders at the meeting representing 79 percent of
outstanding shares reelected the company's board with 97 percent of votes
cast, including the addition of an outside board member -- due in part to
investor pressure. In a first step toward diversifying the company's board of
directors, Robert Palmer, the former head of Digital Equipment Corp., became
the sole new director on the nine-member board.
Palmer, who headed Digital through the 1990s until selling the computer maker
to Compaq Computer Corp. last year, offers insight into AMD's battle with Intel
from Digital's bid to develop its own Alpha processor to compete with Intel.
"My presence on the board indicates my confidence in AMD," Palmer said
when asked by an audience member to state his view of AMD's own chances
to succeed against Intel.
Later Thursday, the board was set to confirm Executive Vice President and
Chief Operating Officer Atiq Raza as AMD president and COO -- perhaps
putting him in line to succeed Sanders when the CEO's contract ends in 2001,
a spokesman said.
During the meeting, Sanders asked shareholders for time.
"You should reserve judgment for at least another year," he said. "I believe if
we can't do it, it can't be done," Sanders said of AMD's quixotic bid to create
an alternative to Intel's dominance of microprocessors -- the chips which form
the guts of personal computers.
After the meeting, Stanley Zinder, a New York investor holding 200 AMD
shares he bought three years ago at $39, said he was willing to give Sanders
and the AMD board another chance. "I'll give him his year," he said.
But other investors vented rage at Sanders' rich employment contract, which
awarded him 2.1 million AMD stock options in 1998, and triggers multimillion
dollar bonuses to Sanders in the event of attempts to force him from office
before 2001.
"He gets his money" seethed John Rainwater, who said he was an owner of
1,000 AMD shares purchased three years ago. |
