New AMD chief knows the chips are down
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| Incoming AMD CEO Dirk Meyer is known as a top-notch chip designer. Image: AMD |
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| AMD stock is hitting lows it hasn't seen in more than a decade. |
Hector Ruiz is out as CEO of Advanced Micro Devices (AMD), Dirk Meyer is in. It's not a shock; not only has the company openly groomed Meyer for the top spot, but the chipmaker is bleeding cash and its stock is circling the drain. In situations like this, Wall Street protocol calls for the CEO to fall on his sword.
The latest disappointment came in Thursday's earnings announcement. AMD lost $1.19 billion in the second quarter on $1.35 billion in revenue, missing Wall Street targets.
With Meyer in charge and Ruiz fading into a role as executive chairman, the company is getting a different sort of leader. Known to be a hands-on engineer, Meyer took prominent roles in the design of two now-legendary chips: DEC's Alpha, known as a processor-design masterpiece in the 1990s; and the Opteron, which helped AMD snatch market share from Intel (INTC) five years ago.
Apparently, Meyer intends to stay close to the chip design process as CEO. After a management shakeup announced in May, the buck now stops with Meyer himself when it comes to the crafting and development of processors, with the new central engineering organization and computing solutions group reporting directly to him.
"Having worked with Dirk for a number of years, one of the benefits I clearly see is his expertise in the design engineering function – it's a great asset to have him closer to that area," AMD computing platform chief Randy Allen told me last month.
AMD's chip development clearly needed the guidance. Because of mistakes in the testing process, AMD blew deadlines last year for a server chip code-named Barcelona, injuring its reputation and chances at profitability all at once. "We just grew to fast and didn't have the right processes in place," Allen said.
After an exhaustive review of what went wrong, management devised a more thorough system where seasoned engineers look over the team's work, rather than relying so much on computers to do the checking. But Meyer will face plenty of challenges besides glitchy chips.
Intel is not only the dominant company in the chip business; it has a sophisticated marketing operation to match. The giant's "Intel Inside" co-marketing program makes it convenient for PC makers to choose its chips over AMD's, and orchestrated confabs like the Intel Developer Forum, coming next month, give it a platform to assert its technology supremacy. A couple of years ago AMD crashed Intel's IDF party, setting up an ice cream stand outside the convention recalls Richard Doherty, analyst with Envisioneering Group. But that sort of thing only works once.
"They've got to get back to their success in 2004/2005, when they totally surprised Intel with their chips for desktops and servers," Doherty said.
How long a honeymoon will Wall Street grant Meyer? It looks like the pressure's on from Day One. AMD stock plunged more than 7 percent after hours to less than $5 per share Thursday when the company announced earnings; if the stock stays at those levels, it will be the lowest point since 1992.
Even so, Meyer isn't backing off of his promise to restore AMD to operational profitability by the end of the year. If he wants to start out on the right foot with Wall Street, delivering in spite of the economic turmoil would be a nice way to do it.
I don't have high hopes for a master chip designer to lead a company that needs to focus on marketing and execution. Other chip designers like VIA and Transmeta had very viable designs but where are they today?
Another sore point I have with AMD is that they bought ATI and I have yet to see any real synergy coming from that deal.
And AMD has always lagged behind Intel in advances in chip manufacturing process (making the nanometers smaller) which is critical for low power and energy efficient chips needed for the future.
It will be sad to see AMD go – I am a PC builder and have used two generations of their chips and even though they may be cheaper and sound better on the spec sheet – they just don't feel as snappy as the Intel processors.
If AMD would ever catch up it would be after a prolonged period of Intel dominance leading them to blunder on bloat and inefficiencies, like what happened the last time.
I have a strong feeling that AMD will be making a huge comeback in the next couple years. The problem is just getting the momentum to do so. The chip market is a back and forth volley and always will be. AMD released the Athlon 64 chips and blew Intel away then got the Conroe Core 2 Duo chips in response.
From the looks of things AMD purchased ATI to merge for future plans of mimicing Apple. They want to have the compatibility advantage of all their hardware or at least 2 of the strongest performance components in the PC, CPU & Graphics. Just as Apple slaps their products together and runs their own software to run with it, all made up to be as compatible as possible with each component. So for now everybody will sit back and wait see what a new CEO and company structure produce for AMD
AMD has good products for a reasonable price. It's unfortunate that the public doesn't compare price vs. performance. In certain businesses the performance aspect is important and extra cost can be justified. However for the general public and non-graphic intense business applications, AMD will fill the bill at a much lower cost. These savings would help the bottom line and free up revenue for other uses.
I think a contracting economy could end up helping AMD. Both individuals and companies, looking to reduce cost, might choose adequacy over unneeded extra performance.
You guys are all the same bashers that downed AMD before and during the Athlon years… Wake up kids…. AMD will kill intel within the next two years.
AMD will be upwards of $30….
If you look at the financials for the last several quarters and the current balance sheet, you have to assume that without some kind of major cash infusion, AMD cannot survive more than a few quarters.
Even if they could find the cash somewhere, it would be so dilutive to the stock it would be a disaster for current stockholders. I think their only hope is to try to sell the ATI business and use that cash to try to resurrect AMD as a second tier X86 CPU supplier with no intention of trying to conquer Intel on all fronts. I also think they need to review their legal spending and convert almost all of that into operational or engineering spending.
I use a variety of AMD and INTC products, and I can't tell the difference. Both have features and bugs. The only noticeable differences are the logos and their stock prices. In the old days, AMD's new processors were often big, late, and slow, so they completely replaced the engineering organization. Now, AMD's problems are finance and management. INTC is now doing a better job in all of these areas. It's nice to have a choice between two suppliers; I hope they make it through these straits.
Fair comment on the trolls and the 'problems' but after building a x2 6000+ with 4gb of memory and having to fiddle with bios settings to bring up linux and set them back for Windows is the worse I have encountered. I agree with the comment that Intel has surpassed AMD in quality and engineering. Try running two monitors on a ATI 2600XT with Flight simulator on Vista and observe how pathetic the refresh is. I guess we can point to Vista or drivers or who know but it becomes very very tedious to perform as much monkeying around today to get software to work especially when the vendors provide NO help in finding out the source of the problem. AMD needs alot more work in all areas in my view
Quote
"How can any entity be successful if the focus is playing dirty tricks, show-boating, bragging, and filing endless, specious lawsuits? Meanwhile, INTEL focuses on quality, research, production, service, and reliability. We specify only INTC products and have no rational expectation to become involved with the likes of AMD."
You are correct.
Would you like to testify to the FTC, and the EU on our behalf?
Thanks
Paul Otellini
Lots of Trolls on this comment list. Note that:
1. AMD/ATI has Crossfire, not SLI. Same thing.
2. One poster wants to slam AMD on lawsuits yet claims Intel is innocent? Don't think so. Do your research.
3. Been using AMD and Intel since the early 90's & both have had issues with some chips and excellent products in others. For compatibility, nVidia used to be best at driver support, but that has now dropped a bit with ATI now having the upper hand at driver support.
Note that I have never used an ATI card and have both Intel and AMD based PCs.
Can't count um out yet…you forget a few years back when this is a company that defied unbelievable odds by taking a design Intel gave up on and beat Intel's best new ideas with it, for less money. What bad management can cause, good management can fix. I'm buyin some while it's low. Fair bet to profit. America needs compitition in this sector. Would be bad for consumers if they fail.
Another tech man for a company that need a marketing genius for getting free from Intel's grip of the market. Is Meyer the one? I have big big doubts on that
AMD has been one of the greatest things to happen to the chip market. Prior to AMD, intel was the only major chip maker and without any competition the end users are the losers. AMD chips are cheaper and faster and hopefully this shake up brings AMD back up on its feet.
Been a long time supporter of AMD since the 80186 days but have encountered alot of compatability problems recenetly and ATI graphics cards as well. So it's time to give Intel a try since my money seems to be a wasted folly with AMD products
How can any entity be successful if the focus is playing dirty tricks, show-boating, bragging, and filing endless, specious lawsuits? Meanwhile, INTEL focuses on quality, research, production, service, and reliability. We specify only INTC products and have no rational expectation to become involved with the likes of AMD.
amd needs to do something with ati.
right now, i still prefer nvidia…and it is hard to find an amd motherboard that does sli.
It's about time that they got rid of Hector the Wrecker. He was a disaster Moto and then Jerry brought him to AMD to do the same. Jerry probably shorted AMD stock when he hired him.They need to clean out the most of the Board. For example,pretty boy, Robert Palmer needs to go back to Texas. Palmer destroyed Mostek, Digital Equip. amd helped Hector to repeat at AMD.
Former Mostek and Moto employee
AMD rode the wave with advanced products 5 years ago,now after Intel have grabbed the reins with both hands and have the most desirable products allied to increased profits while AMD is tipping in to negative profit he is going to pull a very trick rabbit out of the hat and soon.
He is not promising net profitability by the end of the year. Only OPERATIONAL profits in that timeframe. (Which may slip back into operating losses in H1 of 2009 due to seasonality.)
I hear rumors that make sense. One jumped at me almost as a matter of fact. The headline was "Microsoft to buy AMD". Hey it makes sense… This way Microsoft could control chip development to match it's software or better yet, let AMD's R&D go wild and then design the software to support the CPU's. This would also let Microsoft get 3 slices of pie from each computer sale (The Operating System, The CPU and The Graphics Card)With controlled development the AMD Microsoft team up could easilly overrun Intel and steal a significant part of the market share..