Here is an extended version of the latest article I wrote for Custom PC Magazine. It’s an eye opening story mostly directed at people inside and close to AMD. Let me start by saying that I have always been a fan of AMD because of their committment to innovation. This article may come off as brutal, but I hope they take it for what it's worth. I am concerned because I love the company, and I have many friends there -- and I don't claim to have all the answers. Hopefully this will be a wake up call to those who are abrasive to change.
Since AMD landed the big deal with Dell their performance has left much to be desired. Their stock is trading below the 52 week low, their numbers are below expectations, they just swallowed ATI along with some mega debt, and they misfired on their new video card launch. The price war between Intel and AMD is eating away at their margins, and I am guessing that they lost some market share in the high end. In fact, things are so bad that AMD’s market cap is near 7 billion (I think?). What a mess.
No doubt AMD has seen better days, much better days. I feel for them because I really believe in their story. I believe that the concept of Fusion has potential – though at this point it is merely a concept. Wouldn’t it be nice to be able to jam the power of three chips into one on a mobile product? The potential is huge; the vision is compelling, now it’s just a matter of the execution.
If AMD didn’t have enough problems ATI had many of their own, and trying to mash to two together is no easy task. As Michael Brown from FEMA once put it during the aftermath of Katrina, “…just ask Karla from IBM how hard it was to merge IBM with Compaq.” -- Yeah he actually said that…just a little comic relief for you.
In any case the optimists at AMD will tell you that they are not running the one hundred meter dash - it’s the Tour de France, and they have only reached the first mountain stage - they still have a heck of a long way to go. Others may tell you that they are running out of ideas.
If I didn’t know the management team at AMD I would probably lose all hope for them. Though to some it seems like a company falling apart – I really believe there is light at the end of the tunnel. Perhaps not by choice, the company is retrenching and getting ready for the next big battle. The reality is AMD is no stranger to struggles – they have always been the underdog and even when they were on top they remained the underdog. That’s a pretty profound but true statement.
If you ask me, AMD is preparing to unleash a wrath unlike one they have launched in the past. It won’t happen anytime soon (definitely not), but I can almost envision the urgency in their internal meetings. These guys are pissed off; trust me when I say guys like Henri Richard and Hector Ruiz are NOT satisfied with the stock price at under $14! They certainly don’t need money, but their pride is at stake. Their word and commitment means more to them than all the money in the world (something like that), and they aren’t alone. ...but blah blah blah, this doesn't change anything, the challenge to fix the company is still massive.
AMD is staffed with like minded people stemming from the top – these guys are on a mission, and they just reached phase one. The trouble is its tough being the underdog all the time, and it can be somewhat demoralizing when you’re the underdog and struggling.
This is where loyalty matters – and people with strong stomachs will reap the rewards. Others will jump ship and look for the next easy ride. My point is AMD has faced more adversity than many companies could ever dream of. Sure there are people in the company who are somewhat discouraged, but now is not the time for them to run away.
Being the underdog is in AMD’s culture, it’s their lifeline, and it’s what will make them successful again. Next time they make it on top they must retain an underdog “non-arrogant” culture internally. This is the key to their ongoing success.
It is challenges like this that separates successful people from the rest of the pack. Perhaps I am directing this article to those people who are floating resumes around -- the pressure is on -- now is the time for you to give back to your company and reap the rewards from a turnaround.
The bottom line is lazy people don’t get rich. It’s time to take broad look at the landscape around you and think strategically. It’s time to change the way your people think about sales and innovation. It's time that you focussed on power and thermals and not marketing spin. It’s time that you think way outside the box and get to the core of what “Customer Centric” innovation means. It’s time that you realized competing head to head against a giant isn’t the way to win the battle. ...and it's time to leverage the core competencies within your talented engineering teams and start executing. I would venture to say that you are involved in an asymmetrical war - perhaps getting your people to understand what that means will help.
There are many companies out there that depend on the competition between AMD and Intel to be somewhat healthy. So I guess the point of this article is to point out that AMD will be back - whether someone will acquire them from underneath them is yet to be seen.
On a related note, the sheer velocity that tech stocks go through is absolutely insane. You rarely see such volatility in other industries, but the tech industry is a tough one to pick. That said; if you’re a savvy investor you’re probably raking in big cash in good times and in bad – good for you :)
Just keep in mind that a world without AMD would be a boring place. Without tough competition there would be no innovation. AMD woke Intel up.
Don’t forget to get your subscription to Custom PC Magazine!
21 blogger comments:
i think you are dead on. I am a buyer with a fairly large channel company and dealing with AMD is a joke right now. They dont seem to be as customer focussed as they once were. Probably shock from their valuation dropping to 1/3 of its value a few months ago.
I, myself, believe that AMD is more focused now than they ever were. Their worst enemy right now are the especulators. These are the ones confused and spreading confusion out there. Patience is an art. Learn to acquire some or be doomed.
Like you (Rahul Sood) say, AMD has just reached stage one of their pursuit (whatever it is).
What AMD achieved for the last three years have NEVER been achieved by any other company in INTEL's history: shake their (Intel's) bases.
Considered AMD's financial situation (before and after ATI), I believe this company has made miracles. And it continues to do so on small steps.
[bashing] Comparisons abound but, every basher fails to ponderate. They make the comparisons as if both AMD and INTEL had the same power (financial, personel, fab capacity, etc, ...).
AMD is just 1/10th of Intel's and, even so, has LEAPED ahead even temporarily. Well, AMD knows, now, how to get their piece of the pie. The recipe has been writen and tested. Now they are working on making that the best cake ever baked (so I want to think).
Once again ..... patience ....
Interesting perspective. AMD is a bit of an enigma - I find them hard to fathom. During the K8 days when the competition didn't have a viable product, AMD really seemed to have got it together. It puzzles me that their excellent management did not plan adequately for the transition "gap" between architectures - that's really why Intel has been able to put such a wide space between themselves and AMD now.
I feel AMD missed a significant opportunity when they launched AM2. It was an opportunity to bridge the gap between socket 939 and Core 2, performance wise. That would have done a great deal to assure a credible AMD solution. Instead we saw a chip that gained nothing except for DDR2. In that context, the time span between AM2 and K8L is much too long. A genuine 10-15% improvement over S939 would have gone far in bridging that gap and springboarded them to K8L very nicely.
Next point is the their rather silly response to quad core. 4X4 seemed like a good idea, but the execution was laughable. It would have been far far better for AMD to not respond at all, than release it as a 'solution'. It may make some sense in the future, but that future seems a long way off, and it certainly doesn't make any sense in the present. The power and thermal issues should have been anticipated, let alone the platform situation. Poor judgement again.
Although the tactical picture looks grim, the market needs to focus on the strategic picture, and AMD should be doing everything to assure confidence in the long term outlook. I am a keen buyer of AMD products because I WANT them to be around. So consider this a heartfelt call from a supporter who would like to believe that AMD can rebound and become competetive again. If there was no AMD, we would be still using Pentium IIs or IIIs because Intel would have no incentive to progress. That's a fact that many seem to miss.
Rahul, I work at Dell and I am an avid reader of your blog. You are bang on with this article, I also feel bad for AMD.
I used to work for AMD and moved on when AMD was at its peak. I was and am an AMDer at heart. And that is why my heart aches when I say that I do not see AMD coming back. I see things could get much worse before they get better (if ever). Market share could be as low as 10-15% with key partners abandoning them (Dell in particular).
At AMD, we used to talk of the year of Hammer. Well, 2007 is the year that Intel strikes back. They are doing very well on both the process and the architecture front. I don't think AMD can keep up with this counter attack. They have been struggling with thier roadmap.
I agree with Rahul, AMD has a culture of struggle. However, a lot of AMD is new. Hector pitches it as the new AMD. And with ATI joining the new AMD, I am not sure how many people are a part of the culture of struggle. I really respect Hector, his intentions and his vision. However, he is not Jerry and I don't think he can fight back an energized and a more aggressive Intel.
anonymous said...
I used to work for AMD and moved on when AMD was at its peak... I see things could get much worse before they get better (if ever).
I don't think AMD can keep up with this counter attack. They have been struggling with thier ...
Complete nonsense!!!
AMD has been winning share from INTC with ONLY 2 fab using 90nm process with 200mm wafers.
Now they are getting all 3 Fab with 65nm process on 300mm wafers.
AMD's been gaining share from INTC even without big partners like HP, Dell, IBM, CRAY etc...
Now AMD got all these 1st tier OEMs. That's a HUGE change from yesteryears.
AMD is not to be underestimated...
While the last few years have seen a fairly competitive AMD, based on the history of the company I wouldn't consider them an Innovator but more of an oppertunist. With technical improvements coming out for Barcelona that read like the difference between K8 and Core2 it doesn't leave much to be excited about. But here's a bit of background on AMD.
AMD of course started off making your run of the mill logic followed a few years later by a reverse engineered 8080 micro. At this time AMD also tried a few other things like their own processors (29K) and a few other items but ultimately only found success with their series of Intel clones.
In the early 80s IBM forced Intel to license their 286 technology to AMD so IBM would have a viable second source as required by their government and industry contracts. Eventually as Intel was able to expand their business beyond simply being an IBM supplier (something AMD having started off on the same footing as Intel couldn't manage to do) and built enough fabs in various geographic areas as to certify to the government and corporations they could act as a sole supplier without worries of supply interuption. In 1986 Intel terminated their contract with AMD and stopped the flow of technical information that would eventually become the 386.
Eventually through arbitration AMD was able to obtain a few concessions which allowed them to release a semi reverse-engineered 386 part which sold surprisingly well to many OEMs. AMD followed with their 486 clone that also was used by numerous OEMs.
As process and product cycles became shorter in the 90s AMD was forced to develop their own processors instead of relying on wafer slicing and micrographs of Intel samples.
By this time Intel despite having several competitors (Cyrix and AMD chief among them with lower cost and higher performing products) became the dominate force through better branding and higher reliablity. In 1995 AMD launched the K5 which even when released was ridiculed before it even hit the street. As excitement grew with Windows 95 it became apparent that it was a very unstable processor with poor performance. Even though the Pentium bug should have provided oppertunity for AMD and Cyrix, ultimately Intel ended up being praised for their handling of the situation instead.
Following the K5 was the K6 and shortly thereafter the K6-2. K6 and K6-2 also suffered from stability and process control issues early on that made them less than desirable except in the beige box market. During the k6 and k6-2 years Intel was embroiled in an ongoing fight with DEC over several Alpha patents.
At this point Sanders made a huge strategic gamble that kicked off AMD's rise to its current status. He partnered with motorola to devel the copper interconnect as well as getting Dirk Meyer (one of the Alpha architects) to lead the K7 development team. Meyer brought several engineers over from the Alpha project to lead various teams. And thus was born the hammer.
With the Athlon, AMD not only enjoyed a strong architectual advantage it also got a process advantage via the engineers it obtained with Dirk Meyer allowing for significantly higher transistor density than was Intel was able to produce.
AMD was later able to obtain Fred Weber to help architect the K8 opteron and to integrate a large chunk of IP optained from Intel in their settlement (including advanced EV6/EV7 technologies that later became hypertransport).
As the DEC engineers have moved on and conceeded to the fact that the Alpha was no more it isn't surprising that AMD is currently floudering as well and countered with the purchase of ATI with the hopes that integrating a GPU and CPU together would usher in a new kind of processor. The results of this gamble have yet to be seen, however unlike Sander's gamble, Ruiz's doesn't involve adapting an already existing technology.
Barcelona better save them, BADD seems to have affected them.
I admit I almost always support the underdog, especially when the top dog appears arrogant, greedy, self-interested, and prone to abuse their power. Consequently, all the computer systems I've put together over the years have been AMD systems.
I honestly feel like it is my duty to support AMD, even though my little bit counts for basically nothing in the big picture, because it is important for all consumers to have more freedom of choice. We need to be able to partake of the benefits that result from competing CPU companies. So I do my part in the hope that we all will get to benefit.
In my opinion, AMD is in tolerable shape right now and their situation will be looking much better in autumn. Many people think AMD is out for the count, but I think this is a form of optical illusion, a trick of perspective resulting from AMD's rapid gain of mindshare in 2005, followed by its rapid deflation in 2006. Yes AMD is down now, but it's not out. It's unbelievably far ahead of where it was in 2004, and it's going to pick up steam and forge ahead again soon. I think the AMD company theme song goes, "I get knocked down, but I get up again, you're never gonna keep me down." ;)
In 2H07 AMD's new core architecture will emerge, and it sounds like it will put AMD ahead of Intel until 45nm comes out, at which point AMD and Intel will be roughly even. Also, AMD's ATI division is practically guaranteed to do better in 2007 than it did in 2006 or 2005, and that division should account for about 1/3 of AMD's revenue for 2007.
Of course, both Intel and AMD are going to see lower margins and lower stock prices (esp. compared to 2005) as their war intensifies, so if you measure that way, AMD will look like it is in trouble. However, AMD will actually be selling considerably more product, selling a greater variety of products, opening new vendor channels, gaining market share, gaining mindshare, and putting more pressure on Intel.
As for enjoying the benefits of competition, I invite you to join me in buying an inexpensive computer (either AMD or Intel) at some point this year. :)
Since I bought an AMD powered computer some time ago and found the computer to be so slow, I have never looked at AMD anymore!
Rahul,
Great article.. But it is about time you admit that part of AMD's trouble is YOU! Wait, do not kill the messenger yet!
You motivated Michael Dell to sign up AMD at a time when you knew Dell will suck the $hit out of their profitability.. As a result, AMD lost credibility with its channel partners because it deprioritized their needs in favor of Dell's need.
AMD was not ready to play with big boys, yet.. It was on its way but slipped in a deep hole as it was looking up and not watching its steps.
Do not forget you also championed the ATI move. It was a good move but not a good time. I agree with you, AMD must compete on its core competency, if they know what it is.. They failed in the platform propaganda war..
One more thing, AMD's trouble has been execution.. It is still is.. Intel realized their arrogance and now they are changing their ways.
The future look dimmer for AMD, unofortunately.
I think you are dead on - AMD should spend more time trying to carve out NEW areas while maintaining current market share at a more healthy margin to finance this (not undercutting prices in a questionable strategy to achieve >30% market share at ANY COST).
Folks blame Intel for the price war but have the Core2 desktop prices been changed since the introduction back in July? AMD shot themselves in the foot by getting in with Dell too early (before they had enough capacity) and shifted a lot of their product mix to low end, low margin parts in efforts to win market share. As a result their cash flow, profitability, ability to grow capacity more quickly and invest in new development activities has all been lessened.
Now apparently (according to the INQ) they are working with Apple...why?
AMD seems to be as interested in competing with Intel in ALL areas as growing a business. Do they really need to compete with Intel on all fronts or perhaps they should pick and choose the battles and look for unique opportunities which match their capabilities.
Intel is already readying their price cuts for when barcelona arrives.
I would be most surprised if AMD were not able to give Core 2 a good spanking this Autumn.
From what I have read, The Barcelona chip will be 40% better than Core2. That's a big margin if it's true!
Like most of the rest of you, I am hoping to see AMD make a strong comeback this year.
Fingers crossed!!!
The more focused a company is on their core competency, the better they are. You know, it took Toyota very many years to be the # 2 in the US and they used every opportunity they got to expand their share.
In the 70s, people considered Japanese cars were made for poor people. 1978 proved them wrong as people's priorities changed from luxary to gas economy. Toyota surely used that to their advantage. Then, people realized quality and fall in love with even more with Toyota. Years after that, Toyota introduced luxary cars and defeated the Cadillacs and Mercedeses.
It took Toyota more than 40 years to be what it is now. It did not compete on every platform all at once. AMD needs to learn that lesson.
One more thing, the faster you go up, the faster you go down. You can fight an army with another army but you will loose if you are weaker. You could win by being selective. AMD needs to use gurrilla war fare.. But who is listening!
Hey Rahul,
Long time lurker here. I felt compelled to post about this article.
I agree with 100% on this one. To echo your setiment. AMD has seen better times, for sure. I think what happened is that AMD has kept their eyes on the puck and got checked by Intel.
AMD is definitely on the downstroke here, but if history is any indicator, they will pull through it.
Although I don't have the insider knowledge you have, I think AMD is going to come out of the corner swinging with their next gen of product.
Thanks for the insight!
Hi Rahul,
i like to read your blog and comment. But i dont understand why you have so much angerness towards Intel. Do you have share in AMD and not in Intel? what Intel need to do to convince you that they are try their best to turn their fortune compare to worst year in 2006. comment?
regards,
KY
Regarding the last post about Rahul's "angerness towards Intel," I'd like to point out that this latest blog is about AMD struggling in the marketplace after merging with ATI and gaining Dell as a major customer. Intel is mentioned just three times and in the context of being a competitor in a climate of price war.
Nothing bad is being said about Intel in this blog entry, though other entries have noted that competition from AMD has spurred Intel to greater achievements.
If you're an Intel guy and you're complaining about how Rahul handles Intel in his blog, you must be someone who sees Intel as the rightful holder of the entire market. If you are against the idea of competition in an open market, then sure I guess you have reason to complain about Rahul, because he isn't single-mindedly focused just on Intel products.
wise investor said:
"AMD is not to be underestimated... "
don't you wish you could have said the same thing to AMD a few years ago?
Intel makes mistakes. It doesn't underestimate anyone. It competes against itself. It has internal stretch goals that will make you weep. If you'd work for Intel, you'd know this. Big difference with AMD who's always had someone too look up to for guidance. Being in front doesn't come naturally for AMD. They will always be 2nd.
Nothing bad is being said about Intel in this blog entry, though other entries have noted that competition from AMD has spurred Intel to greater achievements.
Reality check here: Even in their darkest days Intel was making money. They are extremely profitable -- they certainly don't need my help :)
Hi Rahul,
i like to read your blog and comment. But i dont understand why you have so much angerness towards Intel. Do you have share in AMD and not in Intel? what Intel need to do to convince you that they are try their best to turn their fortune compare to worst year in 2006. comment?
regards,
KY
you must be reading another blog. There is nothing on this one that says anything bad about Intel.
Beeing one of the new AMDers, coming from the ATI side, I must say many people underestimate the factor of the different cultures between the two companies. It was said officially - We do perfectly fit together - We do not! It fits whereever enthusiasm comes into play. The thing that stalls the new company most - at least in the middle managament - is that no decissions are beeing made. Acting is just tacticts, with no strategy behind it. There´s often no knowledge (and sadly no motivation to change this) of all the new products and technology the company has today and will have tomorrow, to have a proper overview to develop an overall long term strategy.
AMD is a new AMD now. Many (I still talk about middle management) still want to keep focus on old AMD stuff as #1 with some ATI stuff coming next... or never. What´s missing is setting the new way approach AMD can do now. Evolving platforms, promoting platforms. Combine things. Educating people inside the company. Setting strategies - and more imporantly have the will to accept that this is the right way to go (and stop using the energy to play internal politics, obtain power and headcounts for egoistic reasons and avoid making descisions and staying in "CMA" mode). I only talk about the AMD side at this point and not so much the about ATI side, since the AMD side is where the power is - where the budgets are.
I won´t run away. There´s two main types of people in the new company. Ones that are willing to form a new company or get everything together to benefit from the new possibilities this merger allows - and the ones who try to go on in the old way, getting us nowhere. I will stay as long I see the chance that the first ones succeed.
I think the top management has realized it now. I just hope they have the ability to watch through all the dust to see what´s going on in the middle management and clean up.
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