AMD has hired JPMorgan to "explore options"

[guskline]

To paraphrase Simon & Garfunkle's "Oh where have you gone Mrs. Robinson" I say Oh where have you gone AMD from when you had a 386DX40 while Intel only had a 386DX33 to now! Sad.

 

[Idontcare]

I get the distinct impression Scott Adams is lampooning Rory Read and AMD with today's comic:

 

[ViRGE]

I get the distinct impression Scott Adams is lampooning Rory Read and AMD with today's comic:

Given that it's Scott Adams it's more likely he's lampooning Microsoft, but eerily a lot of that works for AMD too.

 

[mrmt]

To paraphrase Simon & Garfunkle's "Oh where have you gone Mrs. Robinson" I say Oh where have you gone AMD from when you had a 386DX40 while Intel only had a 386DX33 to now! Sad.

They are where they always have been: a year late, a dollar short.

While AMD was selling 386DX40, Intel was selling 486DX66.

 

[mrmt]

I get the distinct impression Scott Adams is lampooning Rory Read and AMD with today's comic:

Don't forget Bruce Claflin. The guy was in the BoD in every single AMD bad decision in the 2000's and since taking over the board five years ago AMD situation didn't improve very much.

While Rory Read and his team should be bashed for things like the last EC, where they signed their certificate of incompetence in front of the financial community, it is ultimately on Claflin's shoulders that responsibility should rest.

BTW, the guy took 3com to the end, he is doing the same with AMD.

 

[ctsoth]

I've worked for several companies with poor quality managers, where the managers were hired from business that had gone bankrupt/out of business. I don't really understand it. If you want to thrive hire people who thrive.

A's hire A's, B's hire C's -Donald Rumsfeld

 

[beginner99]

Obviously management sucks. I mean spending probably millions on useless consultants won't help them in any way.

It's the same with politicians. Anyone actually capable of doing as good Job will never ever even dream about being a politician except in night mares.

 

[BigDH01]

I've worked for several companies with poor quality managers, where the managers were hired from business that had gone bankrupt/out of business. I don't really understand it. If you want to thrive hire people who thrive.

A's hire A's, B's hire C's -Donald Rumsfeld

It's a principal-agent problem. The principal (represented by the stockholders) has an agent or agents to represent itself. It's in the principal's best interest that the agents take the steps necessary to make the company profitable. However, the agent(s) is interested in making its own money. Sometimes these lead to decisions that benefit both but in other it means the agent (BoD, etc) takes steps to increase its own wealth. In the case of CEOs and board of directors, it's a fairly small and intertwined community. Why do bad CEOs get hired? Because they often sit on other boards and have given/received favors to enhance their own wealth. Must be nice playing with other people's money.

 

[sequoia464]

Why do bad CEOs get hired? Because they often sit on other boards and have given/received favors to enhance their own wealth. Must be nice playing with other people's money.

We wouldn't be talking good old boys club here would we?

 

[pablo87]

Don't forget Bruce Claflin. The guy was in the BoD in every single AMD bad decision in the 2000's and since taking over the board five years ago AMD situation didn't improve very much.

While Rory Read and his team should be bashed for things like the last EC, where they signed their certificate of incompetence in front of the financial community, it is ultimately on Claflin's shoulders that responsibility should rest.

BTW, the guy took 3com to the end, he is doing the same with AMD.

Completely agree, he's ultimately responsible. Scary stuff considering how few shares he owns.

 

[mrmt]

Completely agree, he's ultimately responsible. Scary stuff considering how few shares he owns.

The number of shares he owns isn't important, as the director's role is ultimately represent the shareholders, not be a shareholder inside the company.

But the fact that he is there supervising this long losing streak is impressive. It means that despite the losses he still has the confidence of the shareholders, or that nobody wants his chair. Given the time that AMD spent without a CEO and the level of the person they brought to occupy the chair, I wouldn't be surprised that the reason of his long tenure is that nobody wants his place.

As a matter of curiosity, Claflin is also an IBM guy, like Rory. Claflin has an opportunity that not every executive out there has: To oversight the destruction of two formerly great corporations.

 

[pablo87]

The number of shares he owns isn't important, as the director's role is ultimately represent the shareholders, not be a shareholder inside the company.

But the fact that he is there supervising this long losing streak is impressive. It means that despite the losses he still has the confidence of the shareholders, or that nobody wants his chair. Given the time that AMD spent without a CEO and the level of the person they brought to occupy the chair, I wouldn't be surprised that the reason of his long tenure is that nobody wants his place.

As a matter of curiosity, Claflin is also an IBM guy, like Rory. Claflin has an opportunity that not every executive out there has: To oversight the destruction of two formerly great corporations.

Of course it matters that the CoB owns shares, it aligns interests.

You do make a good point on nobody wanting his place though...

 

[blastingcap]

Of course it matters that the CoB owns a small number of shares, it aligns interests in theory but perhaps not so much in practice.

Fixed that for you.

 

[mrmt]

Of course it matters that the CoB owns shares, it aligns interests.

All BoD positions are ultimately dependent on the trust of the shareholders, either implicitly because they trust the management to chose the members BoD and leave the matters to them, or explicitly if they deliberately put someone there, but trust, thus alignment, exists one way or another.

Suppose that a CoB does not owns too many shares but he is the man the biggest shareholders want there because they trust him. His term as CoB will be very aligned with these shareholders are regardless of his individual shareholder position at the company.

 

[pablo87]

All BoD positions are ultimately dependent on the trust of the shareholders, either implicitly because they trust the management to chose the members BoD and leave the matters to them, or explicitly if they deliberately put someone there, but trust, thus alignment, exists one way or another.

Suppose that a CoB does not owns too many shares but he is the man the biggest shareholders want there because they trust him. His term as CoB will be very aligned with these shareholders are regardless of his individual shareholder position at the company.

There is an ownership guideline for Directors at public companies like AMD. Here's an excerpt from AMD's:

"The ownership guideline for the non-management Chairman of the Board will be the lesser of (i) the number of shares equivalent to three times the then-current annual retainer divided by the average of the closing stock prices of the Shares for the 30-day period immediately preceding and ending with the date of the annual meeting of Stockholders or..."

Clapfin who was paid $750,000 in 2011, appears to be under water on those guidelines as he only owns 256,000 shares and will need to purchase at least another 750,000 at current sp - maybe that's why JP Morgan was hired?

 

[mrmt]

There is an ownership guideline for Directors at public companies like AMD. Here's an excerpt from AMD's:

"The ownership guideline for the non-management Chairman of the Board will be the lesser of (i) the number of shares equivalent to three times the then-current annual retainer divided by the average of the closing stock prices of the Shares for the 30-day period immediately preceding and ending with the date of the annual meeting of Stockholders or..."

...(ii) 45,000 shares

So, Claflin is not underwater, quite the opposite, he is well above his stated target. Those rules are self imposed and self enforced, it is a no-go to release an audit report disrespecting those guidelines, nobody would ever do that except on the most exceptional case. It would be too much, even for AMD.

Regarding JPM, AMD killed whatever chances of an asset sales, so this leaves us with a few possibilities: (1) Bogus (likely), (2) restructure their debt (not likely), (3) launch more debt on the market (likely) (4) provide advice in licensing deals (not likely), (5) Provide advice in hiring Idontcare for the CEO position (almost certain).

 

[Idontcare]

I was thoroughly convinced AMD was in negotiations to be bought out when Dirk was fired. I assumed he was fired because he refused to further the negotiations with a suitor and the BoD decided to remove the impediment.

Naturally I was wrong.

Which is of no surprise, I also thought Larrabee was a shoe-in for securing the discrete GPU market on the basis of Intel's node advantage.

So I really have no preconceptions at this time on the whole JPM thing, but I will say that mrmt's proposition #3 (more debt) is the one that makes the most sense to me.

It could be tied up with a M&A in some way as well, more debt in addition to acquiring some small player in the ARM SoC space so they can really shorten their timeline to getting products into market. (like when they bought NexGen for the K6 to replace their lagging K5)

How much would it cost AMD to acquire Calxeda?

 

[mrmt]

It could be tied up with a M&A in some way as well, more debt in addition to acquiring some small player in the ARM SoC space so they can really shorten their timeline to getting products into market. (like when they bought NexGen for the K6 to replace their lagging K5)

How much would it cost AMD to acquire Calxeda?

That wouldn't be possible because, as Seeking Alpha disclosed, Lisa Su acquired AMD stock a few days ago and were AMD to buy someone that would amount to insider trading. That's why I also put (4) as a low probability event.

If they are going into more debt, it cannot be for anything out of the ordinary. It has to be to keep the operation running, something that could be labeled "business as usual".

I don't think AMD is even remotely thinking about acquiring any other company. They don't have the required cash flows to significantly invest on the company after they acquired, and they don't make an attractive partner either, as they have neither the cash flows nor the access do debt markets to develop the business.

 

[Genx87]

I was thoroughly convinced AMD was in negotiations to be bought out when Dirk was fired. I assumed he was fired because he refused to further the negotiations with a suitor and the BoD decided to remove the impediment.

Naturally I was wrong.

Which is of no surprise, I also thought Larrabee was a shoe-in for securing the discrete GPU market on the basis of Intel's node advantage.

So I really have no preconceptions at this time on the whole JPM thing, but I will say that mrmt's proposition #3 (more debt) is the one that makes the most sense to me.

It could be tied up with a M&A in some way as well, more debt in addition to acquiring some small player in the ARM SoC space so they can really shorten their timeline to getting products into market. (like when they bought NexGen for the K6 to replace their lagging K5)

How much would it cost AMD to acquire Calxeda?

Guess I dont know how ARM socs are developed. But I thought one could take their base design and add their own functionality? How hard would it be to take a pair of Cortex A-15s, slap a GPU on it, wireless, ect? Does that require purchasing another company to fast track it?

 

[Idontcare]

That wouldn't be possible because, as Seeking Alpha disclosed, Lisa Su acquired AMD stock a few days ago and were AMD to buy someone that would amount to insider trading. That's why I also put (4) as a low probability event.

If they are going into more debt, it cannot be for anything out of the ordinary. It has to be to keep the operation running, something that could be labeled "business as usual".

I don't think AMD is even remotely thinking about acquiring any other company. They don't have the required cash flows to significantly invest on the company after they acquired, and they don't make an attractive partner either, as they have neither the cash flows nor the access do debt markets to develop the business.

I agree with you and your synopsis, but the problem for me is that I was thinking exactly what you wrote when AMD went off and bought Seamicro.

Given that completely baffling acquisition, complete with known impending cashflow crunch and questionable strategic utility of freedomfabric and microservers, I have learned to expect the questionable from AMD's decision makers.

And for me that puts a calxeda (or some other lesser startup player) on the table for a host of reasons that otherwise should not or would not make business sense.

Guess I dont know how ARM socs are developed. But I thought one could take their base design and add their own functionality? How hard would it be to take a pair of Cortex A-15s, slap a GPU on it, wireless, ect? Does that require purchasing another company to fast track it?

It really depends on what AMD's plan are in terms of marketspace with their envisioned SoC.

If they intend to sell it to compete against Denver or Atom or Snapdragon then they need all the ARM-integration expertise they can find right now to have any hope of bringing themselves up to speed fast enough to represent any kind of a "me too" competition in that space.

Honestly though, given their relatively limited resources, declining employee moral, and deteriorating marketshare/cashflow situation I do not give AMD a snowballs chance in hell of shipping an ARM-based product that will ever attain more than the VIA equivalent of marketshare.

They are way too far behind in an otherwise crowded space that is full of far more richer companies. Had this been their plan/strategy with Fusion starting in 2005 (as Nvidia did with tegra) then they would have had time to prepare themselves for the uphill battle. Their only hope at this stage is to acquire someone with internal experience in getting ARM SoCs up and running, otherwise they are looking at a 3yr minimum timeline if everything goes perfectly.

 

[sequoia464]

There is an article at the Verge that about AMD's issues that might interest some.

http://www.theverge.com/2012/11/15/3646698/what-happened-to-amd

Probably nothing there that is new to most of the posters here, most if not all of their points seem to have been touched on in this thread, but the article was interesting to me in that it does seem to mirror comments made here.

 

[Ferzerp]

What I don't understand, and I've said it before, is why their reaction to being in such trouble is to lose focus even more. They were doing 2 things that weren't really working for them, so now, they appear to be trying to do "all the things" with limited funding (buying seamicro, trying to make ARM stuff, rebranding obscure software and trying to sell it like they're apple, etc)

 

[MrK6]

What I don't understand, and I've said it before, is why their reaction to being in such trouble is to lose focus even more. They were doing 2 things that weren't really working for them, so now, they appear to be trying to do "all the things" with limited funding (buying seamicro, trying to make ARM stuff, rebranding obscure software and trying to sell it like they're apple, etc)

From the outside it looks like they're still just as misguided/mismanaged as ever.

 

[Ajay]

Guess I dont know how ARM socs are developed. But I thought one could take their base design and add their own functionality? How hard would it be to take a pair of Cortex A-15s, slap a GPU on it, wireless, ect? Does that require purchasing another company to fast track it?

Well getting the cellular network stack up, and passing the certification test for each carrier is a big deal, at least it was for NV. I imagine a cellular solution can be licensed from another company to speed up development - that must be what AMD is doing.

The only ways I see AMD surviving, at this point, is:

A) A large transnational conglomerate with some solid semiconductor businesses buys 50% of AMD and is willing to pump a couple of billion into AMD to take a shot at a larger market (they would likely require effective control of the company to make a deal happen, they'd want to replace much of the executive staff and want the CoB as part of their half of the board).

B) Rory Read clicks his heels three times and something magical happens...

Pumping money into AMD (which is what the financial wizards at JPM may find a way to do) would only prolong the inevitable. It is possible that with enough cash to survive until the world economy gets moving again, AMD could make a comeback of sorts; but I think that is very unlikely.

 

[Ferzerp]

I don't think the shotgun approach to business can work when even if you do succeed in one area, the money you've spent in other areas insures that you're going to fold anyway.