Here is an extended version of the article I wrote for print this month - it's about the rise and fall and continuous trials and tribulations of AMD.
What happens when a company grows too quickly? AMD clicked and clacked along a fairly bumpy track for a few years before beginning a sudden, 90-degree climb. The company rose higher and higher, building up speed and picking up passengers on its way to the top of the hill. Then all of a sudden, the now massive green roller coaster crested the towering track it had climbed and plummeted downward to mediocrity at the speed of sound, perhaps accelerating even faster as a large, new group of riders jumped on.
This seems to be the story of AMD in a nutshell, and unfortunately, things are looking somewhat bleak for the moment. Some are quick to defend the chipmaker, pointing out that AMD has seen tough times before, and that’s true. The difference, of course, is that the company is now vastly bigger than it was five or so years ago. AMD has more people and greater manufacturing capacity than at any time in its history, and all the baggage that comes with them. And now, as it fights for survival, the company has also placed great importance on a very expensive legal battle with Intel. In the midst of all of this, it seems as though AMD has all but lost its focus on its core competencies. In the meantime, Intel has grown stronger, nimbler, and more competitive than ever before.
AMD acquired ATI on the way down the roller coaster, or later than would have been ideal. I am still a firm believer that the ATI move was a good one; the vision of Fusion is a compelling one, but it will require laser-focused execution to make that vision a reality.
To make matters worse, AMD took on new and demanding customers who all but forced it to increase manufacturing capacity, only to get caught in a price war with Intel, which caused some shifts in the industry that the company didn’t expect.
AMD may lose key customers in the near future, but maybe that’s a good thing. Some customers are absolute grinders at any cost. They’ll take out the biggest meat grinder in the world and press it hard and long against their suppliers to the point where it could be detrimental to the quality of their own product.
A wise man once shared an old Mexican proverb with me over lunch. He said, “Rahul, when you sup with the devil, use a very long spoon.” It seems AMD may have used a slightly shorter spoon than it should have when making some of its strategic moves and now finds itself involved in some unhealthy relationships that are likely costing more money than the company can afford.
Is the outlook all doom and gloom? Certainly not. I believe AMD can turn it around, but it’s going to take some work. I think it’s time AMD takes a look at articles I wrote about Intel a couple years ago and substitutes “AMD” for “Intel.” In other words, if I were CEO of AMD, here’s what I would say as we began to turn things around.
“It’s time to focus on what we do best; it’s high time we build and nurture key partnerships. Partners and how we structure our partnerships are going to be a key to our success going forward. We should also drop money-losing opportunities, scale back, and reignite the innovation team. We should bring ‘Customer-Centric Innovation’ back to the foreground. Coupled with the right partners, this may actually work to help us turn things around. And don’t worry about what Wall Street says when or if we lose a big account—as we turn things around, the numbers won’t lie. It’s time to go back and figure things out; we don’t have much time to mess around. It’s time to heal our wounds, back off from a head-to-head battle, and eventually we’ll be back.”
Of course, all of this is just my opinion, and as usual I wish AMD nothing but the best of luck in the future.
Anyways everyone, good cheers to a fantastic 2007, and on behalf of me and my family, I wish you all a safe and prosperous New Year in 2008!!
What happens when a company grows too quickly? AMD clicked and clacked along a fairly bumpy track for a few years before beginning a sudden, 90-degree climb. The company rose higher and higher, building up speed and picking up passengers on its way to the top of the hill. Then all of a sudden, the now massive green roller coaster crested the towering track it had climbed and plummeted downward to mediocrity at the speed of sound, perhaps accelerating even faster as a large, new group of riders jumped on.
This seems to be the story of AMD in a nutshell, and unfortunately, things are looking somewhat bleak for the moment. Some are quick to defend the chipmaker, pointing out that AMD has seen tough times before, and that’s true. The difference, of course, is that the company is now vastly bigger than it was five or so years ago. AMD has more people and greater manufacturing capacity than at any time in its history, and all the baggage that comes with them. And now, as it fights for survival, the company has also placed great importance on a very expensive legal battle with Intel. In the midst of all of this, it seems as though AMD has all but lost its focus on its core competencies. In the meantime, Intel has grown stronger, nimbler, and more competitive than ever before.
AMD acquired ATI on the way down the roller coaster, or later than would have been ideal. I am still a firm believer that the ATI move was a good one; the vision of Fusion is a compelling one, but it will require laser-focused execution to make that vision a reality.
To make matters worse, AMD took on new and demanding customers who all but forced it to increase manufacturing capacity, only to get caught in a price war with Intel, which caused some shifts in the industry that the company didn’t expect.
AMD may lose key customers in the near future, but maybe that’s a good thing. Some customers are absolute grinders at any cost. They’ll take out the biggest meat grinder in the world and press it hard and long against their suppliers to the point where it could be detrimental to the quality of their own product.
A wise man once shared an old Mexican proverb with me over lunch. He said, “Rahul, when you sup with the devil, use a very long spoon.” It seems AMD may have used a slightly shorter spoon than it should have when making some of its strategic moves and now finds itself involved in some unhealthy relationships that are likely costing more money than the company can afford.
Is the outlook all doom and gloom? Certainly not. I believe AMD can turn it around, but it’s going to take some work. I think it’s time AMD takes a look at articles I wrote about Intel a couple years ago and substitutes “AMD” for “Intel.” In other words, if I were CEO of AMD, here’s what I would say as we began to turn things around.
“It’s time to focus on what we do best; it’s high time we build and nurture key partnerships. Partners and how we structure our partnerships are going to be a key to our success going forward. We should also drop money-losing opportunities, scale back, and reignite the innovation team. We should bring ‘Customer-Centric Innovation’ back to the foreground. Coupled with the right partners, this may actually work to help us turn things around. And don’t worry about what Wall Street says when or if we lose a big account—as we turn things around, the numbers won’t lie. It’s time to go back and figure things out; we don’t have much time to mess around. It’s time to heal our wounds, back off from a head-to-head battle, and eventually we’ll be back.”
Of course, all of this is just my opinion, and as usual I wish AMD nothing but the best of luck in the future.
Anyways everyone, good cheers to a fantastic 2007, and on behalf of me and my family, I wish you all a safe and prosperous New Year in 2008!!
