What happened to AMD?

Original author: Sean Hollister
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In water, blood and sharks are already cutting circles. AMD has such problems that rumors about the sale seem very plausible, even when it turns out that this is not true. AMD is finding it harder to ship processors to computers that people want to buy. The company is losing money, and some employees are already leaving the ship. Under new leadership, after two waves of contraction, the market price almost reached its minimum, which was noted at the end of 2008 when the company tried to get rid of huge debts amid a global recession.

This has not always been the case.

Seven years ago, AMD processors overtook Intel in its price range. In 2005, AMD was not just a competitor, they surpassed Intel in the development of chips. AMD led consumers to 64-bit computing with the introduction of the Athlon 64, and shortly after that, the company led the transition to dual-core processors. And with the acquisition of ATI for $ 5.4 billion, they got not only a graphics accelerator business and several talented employees, but also a number of markets to boot: smartphone graphics, graphics in game consoles, and the ability to create a new type of hybrid CPU-GPU processor, which AMD called "Fusion APU." AMD supplied chips for the Xbox 360, Nintendo Wii, and more heaps of Dell computers.

It was the heyday of AMD, but not the only glorious period in recent times. At the end of 2009, AMD managed to receive compensation from Intel in the amount of $ 1.25 billion for anti-competitive actions, and launched the GPU, in one fell swoop ahead of rival nVidia. In 2010, Sony began installing AMD chips in the VAIO, and in 2011 Apple chose AMD as the graphics provider for both laptops and desktop systems. After completely ignoring the netbook market for three years, AMD slid a lot, eventually releasing the AMD Fusion APU in a variety of low-cost laptops. In the desktop segment, Core 2 and Core i from Intel managed to maintain the lead in performance, but allowed competition from AMD, which offered more cores for the same money.

However, the days when AMD flew at full speed are a thing of the past. The question remains - why?

The AMD board mainly refers to the macroeconomic situation, which, roughly speaking, means "personal computers are not selling as well as before." Either this is a general recession, or a lack of components due to the floods in Thailand, or people are eager to buy tablets and smartphones - you can rely on many factors - not even mentioning the reduction in spending in anticipation of the launch of Windows 8, because people and companies are in no hurry to buy computers that can become obsolete overnight. AMD executives are very clear on these industry-wide downturns. But that is not all.

The main thing here was the periodic failures of AMD in an attempt to surpass Intel. The company has released a number of extremely unlucky products. While Opteron processors are used in the fastest supercomputer in the world, their Bulldozer architecture was not able to impress customers with either ordinary servers or desktop systems. When nVidia spun hybrid graphics in laptops, AMD was not able to release an opponent on time. Launched Llano chips have not made good sales, partly due to the need for a new chipset for motherboards, which AMD has not managed to ship. As a result, the company has accumulated a large stock of Llano, which they can no longer sell, because its successor, Trinity, has already been launched. However, Trinity also has problems - he did not have time to launch Intel Ivy Bridge,

While AMD was trying to get out, Intel was rolling. The company not only releases new chips according to the famous tick-to-tack strategy (redesign, then reduction), but also adds new technologies every year. By releasing Ivy Bridge, they improved their internal graphics, stepping on the APU field from AMD, Intel maintained a good performance advantage, making Trinity an outsider. If you're interested, Trinity still wins either in terms of graphics performance or energy saving, but not both at once - as they say, this GPU is quite voracious. Intel, in addition, manages to lure manufacturers into its chips, offering millions of dollars to help design and promote its ultrabook standard, which AMD cannot or simply does not want to afford.

Over the past couple of years, AMD has rejected all its brands, completely getting rid of the ATI badge in 2010, and replacing the Athlon, Phenom and Sempron lines with a series of alphanumeric products like C-50, Z-60 and A8-3850. Later, the company tried to introduce brands like “AMD Vision”, launching a series of words, slogans and code names, which turned out to be even more difficult to follow than the above brands. Intel's product naming schemes are also not very user friendly, but they have a certain degree of meaningfulness, while the names promoted by AMD seem rather random.

AMD's management team has been constantly changing lately. CEO Hector Ruiz, left the company in July 2008, in the middle of a wave of cuts, and later became embroiled in an insider scandal that caused him to be fired from Globalfoundries daughter in late 2009. In January 2010, the board of directors ousted CEO Dirk Mayer, because that he did not show an aggressive vision regarding tablets and mobile devices. CFO Tamas Siefert served as CEO for 7 months until a replacement was found. In September, Siefert again went down to the CFO position, lowering the company's rating. Former Lenovo president and COO, Rory Reid became CEO last August, but a quick reversal didn’t really raise confidence in the company.

We heard rumors from AMD employees that the collapse was like a domino track, right after Dirk Mayer left, because it was with him that the company was returned to profitability a few years before. The company found itself in a multi-billion dollar debt after the acquisition of ATI, and later admitted that it overpaid for the graphics card manufacturer. Under Mayer, the company allocated Globalfoundries and sold part of its units, including the sale of Broadcom digital TV, and mobile graphics, Qualcomm.
Be that as it may, a source inside AMD says that despite the company's great benefit, Mayer was too self-sufficient. In 2008, he said that AMD “ignores the netbook platform,” as a result the company lost an entire segment. After purchasing a computer graphics unit for almost nothing, Qualcomm creates Adreno, the graphic part of its successful Snapdragon platform (and recently lured Eric Demers from AMD to manage it).

However, the same insider at AMD says that AMD’s confusion was not due to a lack of a leader, but to a lack of leadership. Despite characterizing Rory Reid as a fanatic in the crusade - dismissing old AMD cadres and replacing them with fellow believers blindly striding for innovations like modular chips - he does not blame Reed for the problems AMD faced. On the contrary, there was a “gap in leadership” due to the seven-month gap between Mayer's resignation and Reed's arrival. Our source says about this gap: “a lot of people just hung out in the unknown,” he believes that AMD’s current strategy of focusing on the server, embedded and gaming markets is actually not a bad idea, and supports the development of modular chips, but notes that AMD may simply not hold out long enough to achieve these goals,

Analysts feared the same last month. They cited comparing the company's declining finances and its costs, coupled with a $ 2 billion debt, but the company itself and other analysts insist that there are still ways out. Despite the loss of control over Globalfoundries, they still have connections through chip manufacturing contracts, and AMD may have enough influence to revise these contracts - AMD's problems will affect Globalfoundries as well. Vijay Rakesh, an analyst at Sterne Agee, released a report that suggested (among other things) that AMD could sell or sell back its campus to lease funds, as well as sell or license some of its patents valued at 2.2 billion dollars.

So, we are back to where we started: AMD is likely to make difficult decisions, including the sale of important assets - intellectual property - which in their opinion will be critical for future strategies. AMD wants to lead the microserver market using the new 64-bit ARM cores, and offers to choose the chips they like for embedded applications. But what will AMD do in anticipation of the take-off of these markets?

Nathan Brookwood, an analyst at Insight64, a consulting company, said it might take some time to simply run a traditional business. “Management failures have very serious consequences. What AMD really needs is to work out the next few quarters without a miss, then if they succeed, it will be possible to regain some of its influence. ”
“When AMD was desperate the last time,” recalls Brookwood, “the acquisition of [ATI] was the cause of the company's problems. In 1995, when Pentium fell short of expectations, AMD bought Nexgen to acquire talented engineers to develop its future processors. If AMD plans to develop the direction of ARM, it can help them again: in August, AMD bought back Jim Keller, who led the development of Apple A4 and A5 systems-on-a-chip. In addition, despite the fact that many people left, it does not seem that the company ran out of employees. AMD still has around 10,000 employees. This is a big company. ”

Despite trusting the company’s management to say that they are not looking for a buyer, according to Brookwood, AMD has a certain value for the right company. They say that it will be very difficult for an AMD buyer to carry out their plans, because of Intel lawyers who will perceive the sale as an opportunity to terminate a special x86 architecture license that allows AMD to develop chips. Brookwood also points out that Intel also depends on a license for AMD's 64-bit extensions. Such relationships are mutually beneficial and mutually destructive at the same time, and, according to Brookwood, theoretically this can serve as protection for any company buyer.

So, we will soon see whether AMD will be able to present interesting products quickly enough to get out of this hole ... or there will be a patron who wants to compete with Intel and nVidia, paying a lot for such a privilege.

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