Can AMD's heir apparent turn its fortunes around?
Published: 03 Jan 2008 15:38 GMT
…protect their investments in the chipset and motherboard technology used in AMD's earlier designs, according to executives. AMD representatives repeatedly declined to comment on Meyer's role in Barcelona's development, but he's been the man in charge of the processor division since 2005.
Barcelona was originally supposed to arrive in mid 2007, but a steady stream of problems has pushed most of the shipments well into 2008. AMD shipped Barcelona processors to select customers in the fourth quarter of 2007 after introducing the chip in September. However, after the first customers started getting their chips, a serious bug was uncovered that required the chip to be reworked before it could be sold to the general public. Performance is expected to suffer as a result.
As a result, lots of customers who were looking for all-out server performance in 2007 went with the competition — Intel. That company's decision to build a quad-core processor by assembling two dual-core chips into a package — derided by AMD executives as an inelegant hack far beneath their "true quad-core" design — meant that Intel has enjoyed much more than a year with the quad-core server processor market to itself.
Intel has gone on to release the second-generation of its quad-core chips, and has a third iteration, Nehalem, planned for later in 2008. Nehalem borrows many of the design techniques that made the original AMD Opteron such a hit, namely the integrated memory controller and the point-to-point interconnects that directly link cores to their neighbours. Those features allowed AMD's processor cores to enjoy fast connections to memory and to their fellow cores on a multicore chip, improving the overall performance of a chip.
The combination of problems doomed AMD's financial performance, especially after it was forced to severely discount its aging dual-core chips to compete against Intel's products. The company promised financial analysts in December that it would break even by the second quarter, but they seem sceptical: Bank of America's Sumit Dhanda cut his rating on AMD to "sell" on Wednesday, citing an expected slowdown in the economy in the first half of the year and AMD's own internal troubles.
Chief executives at other prominent technology companies, such as Motorola, Yahoo and Dell, have slinked off stage for performances far less fraught than AMD's. The company has seen more than its share of troubles, including a distribution gaffe that alienated channel partners; the reorganisation of its sales organisation following the departure of former sales chief Henri Richard; plus a pending write-off of some portion of the $3bn in goodwill associated with the October 2006 ATI acquisition.
Intel's staffing and marketing budget dwarfs AMD's resources; AMD must be nearly perfect just to keep pace
But it's not clear in AMD's case where the blame should be directed. "It's hard to discern among the executives, since they present a unified front," said Ross Seymore, a financial analyst with Deutsche Bank.
Ruiz told CNBC Europe on the eve of its December financial analyst conference that he had no plans to step down in 2008, and sources familiar with AMD's succession planning say that the company's performance last year has not accelerated the timing for Meyer's ascension to the chief executive spot, pinned at late 2008 or early 2009. Still, sources familiar with the board's thinking note that just like any other chief executive, Ruiz serves at the pleasure of the board.
Often when a company president is named to the board of directors, that executive is named as chief executive within six months to 12 months of joining the board, and 18 months at the latest, said Stephen Miles, managing partner of leadership consulting in the Americas for executive search firm Heidrick & Struggles.
There's a reason for that. The practice of naming a number-two executive to the board of directors is fairly uncommon, occurring in roughly less than one percent of companies in corporate America, Miles said. Intel and New York Life Insurance Company have used that strategy in recent years, but the number two generally only gets to sit on the board once they become the number one.
"When a company is under siege, they know the number two is likely to exit, so this is a way to lock them in as a retention manoeuvre. It signals that a succession plan is in place and the clock is ticking," Miles said.
A Meyer administration
While AMD needs leadership as much as the next organisation, it faces a number of unique hurdles.
Modern PC and server processor development is a two-company game, and Intel's manpower and marketing budget dwarfs AMD's resources; AMD must be nearly perfect just to keep pace. Intel can afford to throw away billions of dollars on peripheral products and acquisitions and tear up its technology roadmaps and still remain profitable. AMD doesn't have that luxury; when it places a bet, it needs to make the right call.
That also means that it has to take risks, and not all of those will work. The original Opteron design was a huge risk in 2002, but…
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