Editor's note: This article has been updated to reflect AMD's stated first-quarter guidance. The previous version cited management's projected 9% first-quarter revenue decline as year-over-year, but the projected decline was actually quarter to quarter.NEW YORK ( TheStreet) -- Since reporting fiscal first-quarter results April 18, shares of beleaguered chip company Advanced Micro Devices (AMD - Get Report) traded as high as $3.99 (on May 9), a gain of 66%. Is it deserved?
This is clearly a company with underlying fundamental issues. Meanwhile, rivals including ARM Holdings (ARMH) are posting record revenue in chip license and royalties that increased 24% and 33% respectively. The beneficiaries of this growth have been Qualcomm, which posted a 24% surge in revenue. Along with Broadcom, Qualcomm continues to dominate smartphones and tablets. What's left for AMD? Games aren't going to cut it. Management believes it will. Regardless, AMD investors are filled with optimism. I appreciate that. However, given the company's lack of competitive leverage, I do wonder if management's aggressive growth strategy, which will likely arrive at the expense of better margins, can work in the long term. It's not as if AMD has been raking in the cash -- it's now posted four consecutive quarters of negative cash flow. It's a "lose if you do and lose if you don't" situation.