New AMD chief sees clear path to recovery

[Idontcare]

New AMD chief sees clear path to recovery

Executives have essentially guaranteed Wall Street that AMD will achieve an operating profit in the second half of the year.

And Meyer says the company is just months away from a major restructuring that will spin the manufacturing operations off into a separate company, wth new ownership.

Without the expensive manufacturing operations, AMD can concentrate on designing, marketing and selling chips that compete effectively against its two tough competitors - Intel Corp., the largest and richest company in the semiconductor industry, and Nvidia Corp., the foremost maker of graphics chips.

?Hector said he will be the most disappointed man on Earth if it is not done by the end of the year, and I will be the second most ? disappointed, Meyer said. ?It certainly needs to happen to remove this cloud over our head relative to the financial viability of the company.?

http://www.statesman.com/blogs...f_sees_clear_path.html

So AMD is going fabless by end of year, just as ATI was when they bought them. It doesn't take long for capital intensive companies to realize how juicy their margins can be if they dump that capital intensive part of their operations.

Just look at the margins for Qualcomm (fabless) versus Texas Instruments and you'll see why TI is doing what it can to become fabless.

Once AMD management got to see the intimate details of how ATI operated their business as a fabless business it was only be a matter of time before they could no longer justify holding onto their fabs...the temptation is just too great and if you don't do it then you really can't argue that you are maximizing your shareholder value given all the data at your disposal.

The snag for AMD, I'm sure, is how to transfer the x86 license to the new manufacturing spin-off. The way they do this is probably to not call the manufacturing entity a new company but rather to structure it so the new spin-off is actually the design portion of AMD.

So the manufacturing group remains AMD with their x86 license, and they become a foundry for whatever the design house of AMD calls themselves post spin-off. GPU's foundered at TSMC, CPU's foundered at AMD.

Alternatively maybe they structure the spin-off with a negotiated x86 license from Intel as a way to settle out of court with the current anti-trust litigation?

 

[aigomorla]

so honestly IDC how do you project AMD right now?

you think they ever have hope in catching up to intel like everyone is praying for?

I know this will bring issue to larbabee on intel. I heard because intel has the fabs, even tho larabeee more primitive in design would out perform AMD because Intel can apply tweeks in fabs?


Or is my konwledge all off??

 

[Idontcare]

Technology-wise AMD needs massive cash infusion to support/justify staying in a foot-race with Intel to develop 32nm and beyond technology nodes.

This is the fundamental problem with AMD's CPU business model.

This is also true of IBM and their "big iron" server business with Power6/Power7.

SUN microsystems has shown that you can compete as a fabless CPU vendor. Although the viability of your entire business then depends on the foundry delivering on their process technology timelines in a competitive manner.

I believe AMD is going to adopt a similiar business model to SUN's business model.

Legally I don't know what happens to the entire business segment were AMD to recede from the marketspace.

Intel would be hard-pressed to argue that it's monopoly didn't have something to do with AMD's downfall, and it stands to reason to assume Intel would actually do something behind the scenes to prevent AMD from receding from the marketspace simply to avoid the risk of being broken up ala AT&T.

 

[AmberClad]

AMD says that Dirk was misquoted. His original quote mentioned radically transforming the way wafers are manufactured, but nothing about spinning off fabs.

The INQ

 

[Extelleron]

Originally posted by: AmberClad

AMD says that Dirk was misquoted. His original quote mentioned radically transforming the way wafers are manufactured, but nothing about spinning off fabs.

The INQ

It's the same AMD that insisted that recently stated Kuma wasn't cancelled and last year that Barcelona was 40% faster than Clovertown.

But this doesn't sound right and I have my doubts as to the authenticity of this rumor. Even if that is what AMD is planning, if they were ready to make an announcement, there would be more fanfare than this. And Dirk made it very clear in the CC that AMD was not ready to announce anything as they were waiting till the details are finalized. I doubt he would come out one day later and spill the beans.

 

[Gillbot]

I'm all for the underdog and I wish AMD the best, fact is though at this point in time they just cannot keep pace with Intel.

 

[krnmastersgt]

It was strange for me to find out they replaced the AMD CEO in the paper because of a sexism issue here in the silicon valley lol. Anyways yeah, let's hope AMD can bring itself back up to par with Intel, oh how long ago the days AMD was the enthusiast processor seem to have been.

 

[Vee]

Originally posted by: Idontcare
Intel would be hard-pressed to argue that it's monopoly didn't have something to do with AMD's downfall, and it stands to reason to assume Intel would actually do something behind the scenes to prevent AMD from receding from the marketspace simply to avoid the risk of being broken up ala AT&T.

Intel has soo much to gain by killing off AMD. When they're finally so close to their elusive goal they won't let up.

Nor can I see that they would be in any danger. Since AT&T, US has gone a long way towards a more Soviet style economy, with big monopolies catered for directly by the political establishment.

Sun? Transmeta is a better example. Like AMD, their product was a x86 CPU.

 

[Foxery]

Originally posted by: Gillbot
I'm all for the underdog and I wish AMD the best, fact is though at this point in time they just cannot keep pace with Intel.

Right, *but* if AMD's new business plan allows them to stay, say, 10% behind Intel's performance but cost 20% less to produce their chips, then the company remains financially viable and stay in business. They can make money without being the "best."

Originally posted by: Vee
Intel has soo much to gain by killing off AMD. When they're finally so close to their elusive goal they won't let up.

Care to elaborate, or were you being sarcastic?

 

[Soulkeeper]

it'll probably be nothing more than just outsourcing the production of a number of their chips, like they did awhile back with the duron and other low-end cpu's
they aren't going to close their fabs, infact they are still building the new one in new york

they might just outsource production of their lower end models, and keep their highend stuff in-house

hopefully they do what's right, whatever that might be

 

[Extelleron]

Originally posted by: Vee

Originally posted by: Idontcare
Intel would be hard-pressed to argue that it's monopoly didn't have something to do with AMD's downfall, and it stands to reason to assume Intel would actually do something behind the scenes to prevent AMD from receding from the marketspace simply to avoid the risk of being broken up ala AT&T.

Intel has soo much to gain by killing off AMD. When they're finally so close to their elusive goal they won't let up.

Nor can I see that they would be in any danger. Since AT&T, US has gone a long way towards a more Soviet style economy, with big monopolies catered for directly by the political establishment.

Sun? Transmeta is a better example. Like AMD, their product was a x86 CPU.

Intel has nothing to gain by AMD's downfall. What Intel really needs is for AMD to be crippled but still in the fight, just like they are now. AMD's current market is (other than in the server space) the low-end / low margin market, which is not really the market Intel wants to be in anyway since their focus is more on margins than market share. The minute AMD dies is the minute that government investigation into Intel's activities increases tenfold.

If this news is true, I don't know really whether it will end up benefiting or hurting AMD in the long run but I suppose something radical has to be done for AMD to get out of its current situation. But for AMD to go fabless is just the final sign that things are truly different at AMD, and that the current low period at AMD is not going to be temporary. As Jerry Sanders himself said, "Only real men have fabs." Going fabless is a sign that AMD is giving up the big fight against Intel, at least in my interpretation.

 

[badnewcastle]

Interesting... GM should or should have considered selling off their manufacturing to get out of their union contracts IMO. Maybe this will work well for AMD and others will notice and possibly save themselves. Not that GM and AMD have anything in common but the same solution could solve different problems. Either way AMD and GM have proven in the past to be profitable brands and can market themselves well they both need to cut manufacturing costs...

 

[Falloutboy]

Originally posted by: badnewcastle
Interesting... GM should or should have considered selling off their manufacturing to get out of their union contracts IMO.

gm did do this, this is where American Axle came from as well as several other of GMs current suppliers came from

 

[ShawnD1]

Originally posted by: Foxery

Originally posted by: Vee
Intel has soo much to gain by killing off AMD. When they're finally so close to their elusive goal they won't let up.

Care to elaborate, or were you being sarcastic?

Having a monopoly is always good for business, so it probably wasn't sarcasm.

On the other hand, Intel could pull a Microsoft on this one. If they purchased a large percentage of AMD, they would have a virtual monopoly on everything, and it would be perfectly legal as long as Intel is not the majority share holder of AMD. There's a lot of reason not to do this, but it's theoretically a good idea.

 

[The-Noid]

Originally posted by: ShawnD1

Originally posted by: Foxery

Originally posted by: Vee
Intel has soo much to gain by killing off AMD. When they're finally so close to their elusive goal they won't let up.

Care to elaborate, or were you being sarcastic?

On the other hand, Intel could pull a Microsoft on this one. If they purchased a large percentage of AMD, they would have a virtual monopoly on everything, and it would be perfectly legal as long as Intel is not the majority share holder of AMD. There's a lot of reason not to do this, but it's theoretically a good idea.

This is not even close to legal...SFAS 141 and 160 would be a good starting point on this.

 

[ShawnD1]

Originally posted by: Yoxxy

Originally posted by: ShawnD1

Originally posted by: Foxery

Originally posted by: Vee
Intel has soo much to gain by killing off AMD. When they're finally so close to their elusive goal they won't let up.

Care to elaborate, or were you being sarcastic?

On the other hand, Intel could pull a Microsoft on this one. If they purchased a large percentage of AMD, they would have a virtual monopoly on everything, and it would be perfectly legal as long as Intel is not the majority share holder of AMD. There's a lot of reason not to do this, but it's theoretically a good idea.

This is not even close to legal...SFAS 141 and 160 would be a good starting point on this.

I'm not saying you're wrong, but how did Microsoft get away with this when they purchased a large share of Apple?

 

[secretanchitman]

if AMD brought out a c2d/c2q/nehalem killer...kudos to them. i'd probably get it.

 

[William Gaatjes]

The reason AMD is still competitive is because of their knowledge and control of how to manufacturer a cpu. They will probably license the tech more from IBM then do their own research or join the research group together with IBM. That will save some money.

They have a state of the art cpu producton facility in Dresden. Why would they want to get rid of it. And they are building in New York. That would be a waste.

If i look at how much power the new rv770 consumes compared to the amount of transistors. I am sure AMD's knowledge about how to build cpu's has to do something with that. Are the rv770 made by tsmc or chartered or AMD themselves ? Does anybody know ?

And they will just continue to outsource their low end cpu's to chartered as they did before.
Maybe something expired in the contracts with Intel. That they finally can outsource a bigger percentage of the lower end models more.


And Intel does not want AMD out of business. You always need a competitor, it makes your product shine more compared to a product from the competition.


Seperating your production facilities from your main business is just a way to achieve more insight in where the money goes.

It just looks better on paper. But in the end you get more administration. More killer contracts clausules for who is to blame when something goes wrong. And more mistakes.
If it goes wrong it goes wrong good. If it goes right keep your fingers crossed.

It is a quick and dirty way to achieve money and in the end you loose valuable insight.

I don't think AMD would do such a thing.

 

[aigomorla]

Originally posted by: secretanchitman
if AMD brought out a c2d/c2q/nehalem killer...kudos to them. i'd probably get it.

i would too

 

[twjr]

Originally posted by: aigomorla

Originally posted by: secretanchitman
if AMD brought out a c2d/c2q/nehalem killer...kudos to them. i'd probably get it.

i would too

I think so would most people.

But simply they haven't shown that they will anytime soon whereas Intel has allready shown Nehalem to be a step up over the Core processors.

 

[The-Noid]

My guess would be AMD will own 50.1 of the new company so they can still consolidate the financial statements into their own while taking some cash for the other 49.9%.

Makes perfect sense actually.

 

[badnewcastle]

Originally posted by: Falloutboy

Originally posted by: badnewcastle
Interesting... GM should or should have considered selling off their manufacturing to get out of their union contracts IMO.

gm did do this, this is where American Axle came from as well as several other of GMs current suppliers came from

Yep, yep I know they did some, I'm just thinking they should have done it with all there production/manufacturing. Anyways, this could be a good move for AMD.

 

[ShawnD1]

Originally posted by: Yoxxy
My guess would be AMD will own 50.1 of the new company so they can still consolidate the financial statements into their own while taking some cash for the other 49.9%.

Makes perfect sense actually.

This might be hard to do. If people are not currently willing to invest in AMD, why would they invest in AMD Jr? The people who are willing to invest have already invested.

 

[Idontcare]

The biggest non-starter issue I see with this potential plan is it does nothing to alleviate AMD's #1 looming issue - securing access to competitive process technology post 45nm.

Cost is the issue - development cost, tooling cost, fab cost. This is why fabless companies exist and why foundries exist. But being fabless only works if you have access to a foundry that has a competitive process technology.

ATI (pre AMD purchase) versis Nvidia...both were fabless companies who successfully secure access to competitive process technology by way of the foundries. The reason the foundry processes met the definition of being competitive in this case was because neither ATI nor Nvidia were competing with a company that had access to any more advanced process tech than what the foundries were already offering.

So while AMD can make their books look better by spinning off the capital-intensive mfg group, they do nothing about the fact that the spin-off stands no better chance developing and deploying a competitive 32nm node on a timeline that enables AMD to compete with Intel.

All this accomplishes is shifting the responsibility of developing the technology one more business degree from the company that needs the technology.

It's a downward spiral unless you convince all your competitors to follow suit, but I just don't see Intel doing that.