Advanced Micro Devices Inc. has approached at least four candidates to succeed ousted Chief Executive Officer Dirk Meyer and been rebuffed, slowing the chipmaker’s effort at a turnaround.
Apple Inc. Chief Operating Officer Tim Cook, Oracle Corp. Co-President Mark Hurd, EMC Corp. Chief Operating Officer Pat Gelsinger and Carlyle Group Managing Director Greg Summe spurned approaches by Sunnyvale, California-based AMD, according to people familiar with the search, who asked not to be named because the talks are private.
AMD’s next CEO will need to push the company into new markets for tablet computers and mobile phones -- a task that eluded Meyer, prompting his ouster in January. The company also has struggled to gain ground on Intel Corp. in the $36 billion personal-computer processor industry. AMD, founded a year after Intel, has spent 42 years in the shadow of its larger rival.
“With the state of the economy in that industry, it can be relatively hard to get people,” said Daniel Grassi, an Atlanta-based managing director at executive-search firm Boyden.
Bruce Claflin, AMD’s chairman, has been leading the search for Meyer’s replacement. Claflin was a manager at International Business Machines Corp.’s personal-computer division, which was sold in 2005 to Lenovo Group Ltd. He was also CEO of 3Com Corp. from 2001 to 2006. Hewlett-Packard bought 3Com in 2010 for about $2.7 billion.
Chief Financial Officer Thomas Seifert, who is serving as interim CEO, said at a conference on May 17 that the board has made “good progress” in its quest for a new leader. Seifert has said he doesn’t want the job permanently. The Chicago-based recruitment firm Heidrick & Struggles is helping with the search.
With no new strategy, AMD shares have declined 8.3 percent this year. They fell 17 cents, or 2.2 percent, to $7.50 at 4 p.m. in New York Stock Exchange composite trading, compared with a 2 percent slide in the Philadelphia Semiconductor Index today.
Founded in 1969, AMD has less than 20 percent of the semiconductor market. In recent years, it also has missed out on the shift to smartphones and other devices.
“The search is obviously a priority and the board is moving the process forward to ensure that we select a person with the right vision, experience and track record to lead AMD into the future and to create increased shareholder value over time,” said Drew Prairie, a spokesman for AMD.
‘I Said No’
EMC’s Gelsinger said last week that he turned down AMD’s overtures.
“I said no, and I said no again,” he said in an interview. Gelsinger, a former Intel executive, said he’d rather be considered for the job of CEO at his own company. EMC CEO Joe Tucci this month reiterated plans to step down after next year.
When asked about Hurd, Deborah Hellinger, a spokeswoman for Redwood City, California-based Oracle, declined to comment. Christopher Ullman, a spokesman for Washington-based Carlyle, declined to comment about Summe.
While a leadership vacuum can make a company vulnerable to a takeover, there aren’t any likely acquirers for AMD, said Cody Acree, an analyst at Williams Financial Group in Dallas.
“You have to have a buyer,” he said. “I don’t see anybody of size that would want to compete with Intel.”
Private-equity firms capable of buying a company with AMD’s $5.3 billion market value may shy away from chipmakers after the ill-fated takeover of Freescale Semiconductor, he said. Freescale’s private-equity owners, which included Blackstone Group LP, TPG Capital and Carlyle, paid $17.6 billion for Freescale, which is now valued at less than $4 billion.
Recruiters would typically plan on taking about six months to fill a CEO position of this nature, said Louis Gerhardy, a former consultant at Heidrick & Struggles and ex-Morgan Stanley analyst.
Candidates will want to know whether there is consensus on the board as to the company’s direction, and how much leeway the new CEO will have in setting a strategy, said Gerhardy, who’s now an independent investor.
“Faster is better, but quality is critical and in this case the search is not just about finding a proven CEO who fits into the culture, but much more importantly, a transformative leader,” he said. “The selection will have a profound impact on shareholder value at AMD.”
The board wants Meyer’s replacement to find a way for AMD to compete in tablets and mobile phones. That may prove just as challenging as taking on Intel, said Sean Conner, an analyst at Nuveen Investments Inc. in Minneapolis. AMD would again find itself up against well funded competitors, including Qualcomm Inc. and Texas Instruments Inc.
“If you’re just going to move into tablets and handsets, you’re competing against guys who’ve been in this a long time,” Conner said.
Under Meyer and his predecessor, Hector Ruiz, AMD suffered product delays that cost it orders in the lucrative market for chips used in server machines. AMD’s share of that industry peaked at 26 percent in 2006, according to Cave Creek, Arizona-based Mercury Research. At the end of the first quarter, that number had fallen to 6.8 percent.
The company has delivered profit in only four of the past 10 years. Its stock decline this year has underperformed the 3.2 percent slide in the Philadelphia Semiconductor Index and Intel’s 1.9 percent gain.
Investors may lose patience with AMD if the search languishes, said Hans Mosesmann, a St. Petersburg, Florida-based analyst for Raymond James & Associates.
“If by the end of the summer they haven’t done something, then they’ve got a problem,” Mosesmann said. “I would suspect they are looking for a visionary type guy. Drafting behind Intel doesn’t work.”