Would Dell want to buy AMD?

Troubled chipmaker a tempting target, except for the troubled part

Whatever thrill the market got out of the rumor that Advanced Micro Devices (NYSE: AMD) may be up for sale, with Dell as a potential buyer, lasted but a day. Shares of AMD fell 3 cents, or 0.4 percent, to 8.60 on Tuesday after climbing more than 4 percent in Monday's session as the Dell-AMD rumor piqued investors' interest.

(Also see: See, this is why you need a CEO succession plan)

Of course, companies in AMD's position are rumor magnets. The semiconductor manufacturer is a rudderless ship these days. In January, CEO Dirk Meyer resigned under pressure (see link above) for the company's loss of server market share and dearth of mobile computing products. Last week two other high-ranking AMD executives, including chief operating officer Robert Rivet, resigned. And the acting CEO -- chief financial officer Thomas Seifert -- doesn't want the top job.

As an analyst told Bloomberg, "There is no management team there."

Which probably makes it hard to attract a buyer. Presumably acquiring companies prefer the businesses they buy to have management teams in place, at least initially. At the very least, an inherited management team provides stability and continuity, giving the acquirer time to get a sense of the business before chopping heads making strategic plans.

On the other hand, if AMD isn't for sale (or can't find a buyer at the right price), it's got a big problem on its hands -- no management during a time when the company needs a turnaround strategy. Consider that:

* Revenue is flat. Q4's $1.65 billion in sales was the same as last year's fourth-quarter total, and only 2 percent above Q3.

* AMD "expects first quarter of 2011 revenue to be flat to slightly down sequentially."

* The company has posted a net loss in five of the past seven quarters.

* AMD is second in the market to Intel for computer chips, but it's a distant second. Intel's quarterly revenue exceeds $10 billion, at least seven times AMD's quarterly sales.

Dell (NASDAQ: DELL), with a market capitalization of $27 billion, could easily absorb AMD, which currently is worth $5.9 billion. In announcing Dell's fourth quarter results on Tuesday, CEO Michael Dell said the company would "remain focused on developing and acquiring new technologies and capabilities." Maybe that means AMD is an option.

What's not an option for AMD's board to let the current situation continue. In the tech business, to drift is to die.

Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.

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