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Optimism in AMD? It's Overdone

It's worth noting here that management has now outlined steps to turn cash-flow positive by the second half of the year. But given AMD's persistent declining revenue and margins, it may require more cost-cutting measures on top of the recent workforce reduction, to increase profitability.

I just don't believe much of this will matter. That sounds overly pessimistic, but AMD doesn't exactly have a strong history of execution. What's more, the fact that management still plans to focus on portions of the business that still have a dependency on PCs is a mistake.

How can investors trust management will in the future? Essentially, the odds are still stacked against AMD. Not only is the company battling a dying PC-business, but AMD is also fighting against itself by wanting to be right. PCs are not coming back. Why invest in it?

I don't see a compelling reason to buy the stock at these levels. What's more, since Nov. 16, when AMD reached a low of $1.81 a share, the stock is now up more than 120%. Again, while there are signs of improvement, these shares might have already reached their expected highs for the year.

If management can execute and return the company to profitability, then the stock may have legs. But at this point I think the safer play here is to take your profits and wait and see what the next quarter brings.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Richard Saintvilus is a private investor with an information technology and engineering background and the founder and producer of the investor Web site Saint's Sense. He has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
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