Advanced Micro Devices Inc.’s (AMD) head of its graphics chip unit, Raja Koduri, is leaving, throwing into question the future growth prospects for a unit that has just been taking off for the semiconductor company.
In a memo to his staff, which was obtained by U.K. technology news website Hexus, Koduri said he was resigning to spend more time with his family. Koduri is the company’s chief architect and is in charge of its Radeon Technologies Group, the division responsible for graphics processors. He had been on a 40-day sabbatical with plans to return in December.
AMD shares were down 3.4 percent to $11.65 in trading today at 10:14 a.m. in New York. The stock has lost more than 18 percent since the company reported third-quarter results on Oct. 24.
“Forty is a significant number in history. It is a number representing transition, testing, and change. I have just spent forty days away from the office going through such a transition. It was an important time with my family, and it also offered me a rare space for reflection,” the executive wrote in the memo. “During this time I have come to the extremely difficult conclusion that it is time for me to leave RTG and AMD.” (See also: AMD Could Rise 10% Despite Results, Trades Indicate.)
While the executive said he is leaving the unit in a position of strength, “marching firmly in the right direction,” his departure will likely lead to questions about the graphics unit in general and what it will look like without Koduri. After all the executive, who took charge of the Radeon Technologies unit when it was created two years ago, was credited with giving AMD focus and determination that enabled it to catch up to rival NVIDIA Corp. (NVDA), which has long dominated the market for graphics processing units (GPUs). It doesn’t help that the GPU unit is extremely important to its growth push as it tries to ride the wave of demand brought by cryptocurrency mining and from high-end gamers. AMD told Marketwatch that despite the departure of Koduri, the company is standing by its roadmap for graphics production and that it is “excited” about Navi, its next-generation GPU architecture., AMD Chief Executive Lisa Su has been leading the graphics chip unit since Koduri left on his sabbatical and will continue to do so until a replacement is found, noted Marketwatch.
The departure of Koduri may not sit well with investors who in recent days have been turning negative on AMD and its stock thanks to lackluster fourth-quarter guidance. For its third quarter, the Sunnyvale, Calif., semiconductor company reported better-than-expected adjusted earnings that came in at $0.10, higher than the $0.08 analysts were looking for. Its forecast for the fourth quarter, including less-than-expected sales growth and lower than modeled gross margins, pressured the stock. The company expects fourth-quarter revenue to be $1.34 billion on the low end, representing a sequential decline of 15%.
Following on the heels of the results, Morgan Stanley cut its price target on the stock to $8 from $11, questioning AMD’s ability to grow. The firm is forecasting videogame console revenue to dip 5.5% next year and cryptocurrency mining chip sales to fall 50%. Those two make up 36% and 9% respectively of total sales at the chipmaker, noted the analyst. As for gaming graphic card sales, Morgan Stanley analyst Joseph Moore said it should be flat with this year. “To be clear, we admire what the company has accomplished on a fraction of its competitors’ budgets in both microprocessors and graphics—our cautious view is based entirely on the current stock price, and the limited potential for upside in 2018 and beyond,” wrote Moore.