It didn't take long for AMD bulls to remind me about my recent bearishness and what they perceived as an unfair attack on the company. But as shares of AMD spiked up as fast as the eye can blink, just as quickly the shares have fallen -- causing that same eye to swell up.
Should it have been a surprise?
As much as I like a good turnaround story, I've never been able to find any compelling evidence to believe AMD deserves consideration. The company's string of recent performances, which include consecutive quarters of 30%-plus revenue declines, has been average at best. These sorts of details, however, were never enough to keep AMD longs from exaggerating the company's rate of recovery, while insisting that "new money" should hop aboard the AMD bandwagon.On more than one occasion, this level of investor support has worked as new investors have jumped in - pouring their faith into the stock. Investors continue to buy the story that "What was once old can be new again" - helping the stock to double in value over the past eight months from its November 2012 lows of $1.81 to as high as $4.65 in July. But the business fundamentals have never justified the optimism. PC's are dying and "they ain't coming back." It's a new era. we've always known: This is still one of the best short plays on the market. Despite posting 6.7% revenue growth in its recent earnings report, which beat estimates by more than 5%, AMD still has too far to go to catch rivals Qualcomm (QCOM) and Broadcom (BRCM) in mobile devices. What's more, AMD's server business, which once was looked upon to offset the weakness in chips, has begun to fall apart, losing meaningful market share to Intel (INTC). AMD management, which doesn't have a strong history of execution, decided it was best to hinge the company's future on the gaming industry. Essentially, despite the company's lack of leverage in chips, the fact that management wants to "play games" with Microsoft's (MSFT) Xbox and Sony's (SNE) PlayStation, was a mistake.
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