Rumors that AMD may be acquired by Qualcomm have lifted AMD's stock for a few days, but the company's shares have tumbled and there appears a persistent pessimistic sentiment about the firm's future.
AMD stock was trading in the neighborhood of $4.10 on Thursday, which is down from $8.25 in March of this year. The market cap of AMD has settled below $3 billion, the lowest since August 2009. The stock traded as high as $46 during the height of the dotcom boom and $40 in 2006, when the company was challenging Intel's processor dominance with its Opteron and Athlon X2 CPUs.
While AMD was able to recover in 2002 and 2009, there are signs that AMD may be stuck in the $4 segment for awhile. According to investment research firm Schaeffer's, almost 15 percent of current AMD stock investments are betting on a declining stock value over time. The firm noted that current trading indicate a bearish sentiment "for the long haul" and recent aggressive investments bet that the stock will drop even below $3 with a profitability target for short interest investments of $2.84 by January 2013.
So far, this is just speculation. However, there is no denying that AMD's board and investor base will grow increasingly nervous if the stock continues to slide. On the day CEO Rory Read was hired, AMD's stock stood at $6.49, and at $8.83 when his predecessor Dirk Meyer was let go. AMD's stock has always been rocked by sharp ups and downs and Meyer had to deal with prices as low as $1.82 in November 2008, but Read's hiring appeared to be focused exactly at avoiding those sharp declines.
The recent downward trend began in April 2010 and AMD's new executive management needs an effective plan to inject more confidence in the company again. Otherwise, the recently launched transition toward a much more consumer-oriented company could come to a sudden stop and AMD may turn into a bargain acquisition target for increasingly powerful ARM SoC designers.