What happened to AMD?

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

This was not always 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 chip design. AMD led consumers to 64-bit computing by introducing Athlon 64, and shortly thereafter, the company headed the transition to dual-core processors. And with the acquisition of ATI for 5.4 billion dollars, they got not only the graphics accelerator business and several talented employees, but also a number of markets in addition: 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 even a bunch of Dell computers.
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It was the heyday of AMD, but not the only glorious period in recent times. In late 2009, AMD managed to get compensation from Intel in the amount of 1.25 billion dollars for anti-competitive actions, and launched the GPU, overtaking the competing nVidia in one fell swoop. In 2010, Sony began installing AMD chips in VAIO, and in 2011, Apple chose AMD as a graphics provider for both laptops and stationary systems. After a complete three-year disregard of the netbook market, AMD slumped, eventually releasing the AMD Fusion APU on a host of inexpensive laptops. In the desktop segment of Core 2 and Core i from Intel, they managed to maintain the leadership in performance, but allowed the 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?

SUNSET PC ERA
The AMD board basically refers to the macroeconomic situation, which, roughly speaking, means “personal computers are not selling as well as they used to be.” Whether this is a general recession, or a lack of components due to flooding in Thailand, or people tend to acquire tablets and smartphones - you can rely on many factors - not even mentioning a reduction in spending ahead of the launch of Windows 8, because people and companies are in no hurry to buy computers that may become obsolete overnight. The AMD manual is very clear on these industry-wide recessions. But that is not all.

MANAGEMENT ERRORS
The main thing here was the periodic AMD blunders in trying 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 has failed to impress customers with either conventional servers or desktop systems. When nVidia spun the hybrid graphics in laptops, AMD was not able to release an opponent in time. The launched Llano chips did not make good sales, partly because of the need for a new chipset for motherboards, with deliveries that AMD failed to cope with. As a result, the company has accumulated a large supply of Llano, which they can’t sell, because its follower Trinity has already been launched. However, Trinity also has problems - it didn’t have time to launch Intel Ivy Bridge, so notebook manufacturers developed the latest generation of thin laptops and systems for Windows 8 focusing on Intel, and AMD remembered the last.

INTEL EXCELLENCE
At the time, while AMD was trying to get out, Intel goes on the thumb. 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 by advancing on AMD's APU field, Intel maintained a good performance advantage, making Trinity an outsider. If you're interested, Trinity still wins, either in graphics performance or in energy saving, but not in that and at once - as they say, this GPU is quite voracious. Intel, moreover, manages to entice manufacturers for its chips, offering millions of dollars to help design and promote its standard ultrabooks, which AMD cannot, or simply does not want to afford.

NONSIZE WITH BRANDS
Over the past couple of years, AMD has rejected all of its brands, completely eliminating the ATI badge in 2010, and replacing the Athlon, Phenom and Sempron lines by replacing the C-50, Z-60 and A8-3850 series of alphanumeric products. 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 brands mentioned above. Intel's product naming schemes are not very user friendly either, but they have a certain amount of meaning, while the names promoted by AMD seem rather random.

STRUGGLE FOR LEADERSHIP
The leadership of AMD 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 in late 2009. In January 2010, the board of directors expelled CEO Dirk Meyer because that he did not show aggressive vision regarding tablets and mobile devices. CFO Tamas Zifert served as CEO for 7 months until a replacement was found. In September, Sifert again descended to the CFO position, lowering for himself the company's valuation. Former president and COO from Lenovo, Rory Reid became CEO in August last year, but a quick turnaround didn’t particularly raise confidence in the company.

We heard rumors from AMD employees that the collapse looked like a domino track, immediately after Dirk Meier left, because it was with him that the company’s return to profitability had been linked several years before. The company found itself in a multi-billion dollar debt after acquiring ATI, and later acknowledged that it had overpaid for the graphics card manufacturer. Under Mayer, the company singled out Globalfoundries and sold part of the divisions, including the sale of Broadcom digital TV, and mobile graphics - Qualcomm.

Anyway, a source inside AMD says that despite the company's great benefit, Meier 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 computer graphics units for almost nothing, Qualcomm uses Adreno to create it - the graphical part of its successful Snapdragon platform (and recently poached Erik Demers from AMD to manage it).

However, the same AMD insider says that AMD’s confusion followed not because of a lack of a leader, but because of a lack of leadership. Despite Rory Reid's characterization as a fanatic on a crusade — by retiring old AMD footage and replacing them with co-religionists, blindly striding for innovations like modular chips — he does not blame Reed for the problems AMD faced. On the contrary, there was a “leadership gap” due to a seven-month gap between Mayer's resignation and Reed's arrival. Our source speaks about this gap like this: “a lot of people were just hanging out in the dark”, he believes that AMD’s current strategy - focusing on the server, embedded and gaming markets is not really a bad idea, and supports the development of modular chips, but notes that AMD may simply not last long enough to achieve these goals without a better plan for the near future.

LACK OF FUNDS
Analysts feared the same last month. They compared the declining company finances and its expenses, coupled with the $ 2 billion debt, but the company itself and other analysts insist that there are more ways out. Despite the loss of control over Globalfoundries, they still have connections through chip manufacturing contracts, and AMD may have enough influence to renegotiate these contracts - after all, AMD's problems will affect Globalfoundries. Vijay Rakesh, an analyst at Sterne Agee, issued a report in which he believes (among other things) that AMD may sell or sell its campus with the option of leaseback, and also sell or license some of its patents, valued at 2.2 billion dollars.

RIDE ON HORSE
So, we’ve come back to where we started: AMD is likely to make difficult decisions, including the sale of important assets — intellectual property — that they believe will be critical to future strategies. AMD wants to lead the microserver market using the new 64-bit ARM cores, and offers to choose the favorite chips for embedded applications. But what will AMD do while waiting for these markets to take off?

Nathan Brookwood, analyst at consulting company Insight64, says that for some time it may be necessary to simply run a traditional business. “Managerial blunders 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 in a desperate situation the last time,” recalls Brookwood, “[the ATI] acquisition was the cause of problems in the company. In 1995, when the 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 oversaw the development of Apple-on-a-chip A4 and A5 systems. In addition, despite the fact that many people left, it does not seem that the company ran out of employees. AMD still has about 10,000 employees. This is a big company. ”

Despite the belief that the company’s management is saying 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 hard for AMD buyers to implement their plans because of Intel lawyers who will see the sale as an opportunity to cancel a special x86 architecture license that allows AMD to develop chips. Brookwood also indicates that Intel also depends on the license for AMD 64-bit extensions. Such relationships are mutually beneficial and mutually destructive at the same time, and, according to Brookwood, this could theoretically protect any company buyer.

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