Analysis: AMD XLNX

Shares of Advanced Micro Devices (AMD) popped Wednesday afternoon after the company announced its Board of Directors approved a new share repurchase program worth up to $4 billion. AMD CEO Dr. Lisa Su spoke to the announcement at the company's annual shareholder meeting today:

"Given our strong product portfolio and growing customer adoption, we are very confident in our long-term revenue and profit growth and strong cash generation potential. While we've always said that our #1 priority for capital allocation is investing in the business, and that's investing in R&D and sales and marketing and scaling the overall size of the business, our Board feels strongly that this is the right time to start to return capital to our shareholders as our cash balances grow," Su said.

The news took the market by surprise because AMD does not have a history of returning cash to shareholders. But this is a different AMD under Su's leadership. Since becoming CEO in 2014, Su has developed superior products, gained market share, and cleaned up its balance sheet so that management can play offense.

And how is AMD playing offense? We have two recent examples. The first was when AMD announced plans to acquire Xilinx (XLNX) for $35 billion, and the second was this new $4 billion repurchase program, which will allow management to take advantage of their beaten-down stock price. These moves would not be possible if the company was not performing at such a high level, and it is an incredible sign of confidence for their future.

And to touch on the Xilinx deal, because its pending status is one reason why the stock has been pressured year to date, Su provided an update at the shareholder meeting. She indicated that progress has been made with regulators and several important milestones have been achieved to date. Although Su's guidance of the deal closing by the end of 2021 was unchanged, we remain optimistic that it will be approved earlier than expected.