Well This Can't Be Good: AMD Axes Carrell Killebrew & Other Employees

[iCyborg]

Ummm...in the overall mobile phone market? Yes! Seriously!. :biggrin:

Source

Like I said, it's perfectly fine to have low market share as long as that market share is very profitable:

From the link (Nov 4, 2011): "With 4% market share, Apple's iPhone rakes in 52% of mobile profits. The iPhone dipped from a 5.4 percent market share to its current 4.2 percent as Samsung is estimated to have led the industry in smartphone shipments for the quarter, though its profits shrank."

If AMD only had 5% market share in severs and 20% in PCs, but occupied the upper high-end echelon and had very high profitability, no many would be complaining. But AMD has low market share and low profitability.

That's all phones, a market way larger than CPU & GPU combined. I mean 390 million units shipped in just one quarter FFS, that's a huge market.
For smartphones it's 17%, and it's still 17.1 million units. In just one quarter.
Although something smells fishy to me: http://www.itworld.com/218717/ios-market-share-leaps-october
17% smartphone market share, but iOS has 62% share, 4x Android. What gives? Do they sell 5 iPads for every iPhone or something?
Anyway, not many companies have ardent followers who would buy garbage if it was packaged in a box with a half-eaten apple...

NV charges $499 for a GTX580, do they not? What about GTX280/285, 8800GTX, GTX260 216, etc. NV always charges more $ because the business is too risky to engage in a price war. NV was only forced to go into price war because AMD thought it was a good idea. How is that strategy working for AMD's GPU division?

They also charge ~$350 for GTX 570 which is at the level of 6970 performance. What should AMD do? Charge $500 because nVidia charges that much for their top-tier card too? 6990 and 590 are similar and go for about the same price...
Bulldozer is AMD's top CPU and it's priced less than performance tier 2600K, and people still (rightfully) complain it's not well priced.

Of course nVidia cut its price, they didn't want to lose the market share at the expense of lower margines and because gtx 280/260 were probably way overpriced since 3870 couldn't even beat the previous generation.
Remember 8800GT? They priced it at $250 even though it was beating the crap out of 8800 GTS 640 that cost $400. Why do that, since in your own words "NV always charges more $ because the business is too risky to engage in a price war". Who forced them into a price war with themselves there? AMD didn't have a proper competitor until 48xx.

Because 2600k is considered a Performance CPU platform (S1155) for Intel not Enthusiast platform CPU (X79 platform). They'll sell you $400-1000 CPUs if you want --> Socket X79 launches soon. Also 2700k is $370 on Newegg.

Intel has > 60% gross margins. By selling 2600k at $320, they achieve their target since they have a more efficient cost structure and the die size for 2600k is much smaller than it is for HD6950/6970 or any of the previous HD4870/4890/5850/5870 cards. So Intel doesn't have the same need to have higher prices to achieve profitability. Also, the GPU chip needs a PCB, Ram, a more expensive cooling solution, power circuitry, etc. A GPU is so much more complex. And yet, AMD sells a much more complex HD6970 videocard for what it Intel sells the 2700k chip with a $3 heatsink. :sneaky:

Why can't AMD's CPU division make a good CPU when it's so much simpler than a GPU?
And nVidia's 570 is even larger and has more transistors and it also fetches the same price. And they came out before 69xx, so they were free to set the price.

Anyway
1) I'm still not convinced their pricing is/was fundamentally wrong.
2) Even if you can find valid arguments, your reasoning seems to include a lot of Hindsight bias.

 

[SirPauly]

Instead of compute the focus is fusion, which is a big shot in their own foot. You cant see how this hurts the graphics division along with AMD as a whole? Fusion may be innovative but its low margins are a slow starvation.

Their largest growth potential is Fusion, imho. How do you figure low margins?

 

[Bateluer]

Their largest growth potential is Fusion, imho. How do you figure low margins?

Selling a lot of them doesn't necessarily mean they make a lot of profit on each one sold.

 

[SirPauly]

http://www.xbitlabs.com/news/graphi...ill_Kill_Low_End_Discrete_Graphics_Cards.html

“In the long run, parts of [graphics cards] business will be cannibalized and the low-end discrete GPUs will be replaced with Fusion-type products. This is all goodness for us because it replaces low-cost margin revenue with high-gross margin revenue,” said Thomas Seifert, interim chief executive officer of AMD, during the most recent conference call with financial analysts

 

[busydude]

Selling a lot of them doesn't necessarily mean they make a lot of profit on each one sold.

Well I cannot find a link now, but AMD predicted increase in ASP due to fusion.

 

[PlasmaBomb]

Is the GPU division doing better or worse since AMD bought them? Was their market penetration better before or now? Were their products more successful then or now? Were they more competitive before?

The GPU division of AMD was the only part consistently posting profits...

 

[LiuKangBakinPie]

Luckily they paid 10 Bil cash for ATI. Can imagine the interest and payback installments on that loan

 

[RussianSensation]

Apple ONLY sell smartphones, so you can't compare overall marketshare. They have 14% smartphone marketshare, and only recently fell behind samsung.

You guys are missing the point I was making in the first place. Arguying over 5% overall mobile or 14% in smartphones is not that important. The point, outside of tablets and iPod, Apple has low market share in some key markets (this includes smartphones/laptops and desktops). However, it still manages to have very high profits. In other words, it's perfectly OK to have low market share if you have become a leader in a very profitabile market niche (like > $1000 laptops, or say in professional graphical applications like NV has) In AMDs case, it doesn't do well in a single profitable segment - not GPUs, not laptops, not desktops, not servers. On the GPU side, they have high market share but low profitability. On the CPU side, they have about 20% market and still so-so profitability. In other words, the dollars behind their market share are very small.

This is business school 101. You never measure success of a business by only looking at market share. You need to look at "market share dollars." In AMD's case, the 20% CPU market share @ equal market dollars to Intel would result in AMD having 1/5th of the value of Intel; and that's without AMD's graphics division. Yet, AMD is worth about 1/26th of Intel or so. This is because AMD makes far less $$$ per each market share % due to:

1) Higher costs, lower economies of scale, worse efficiencies
2) Lower profit margins (lacking market share in profitable markets like servers, high-end desktops, etc.)
3) Lower average selling prices (pretty much this is a problem for all of their products, both across GPUs and CPUs).

 

[boxleitnerb]

I don't get why AMDs GPU divison is so inefficient. Sure, their products are often cheaper than that of the competition, but should they not also be cheaper to make because of their smaller die size? Or does the problem lie elsewhere. Waterhead management, marketing etc.

 

[Silverforce11]

AMD's gpu division spend a lot of $$ on APU R&D, that is costed to the GPU division. APUs sell very well, but the $$ gains are attributed to AMD's CPU division. See why AMD's gpu division have been hovering around break even?

In effect, they earn a lot of profit, its just no accounted that way. They are subsidizing the cpu division. That just goes to show how BADLY the CPU division has been hurt by their terrible releases in recent years.

 

[3DVagabond]

I wonder how much "profit" goes to paying down debt?

As far as the cost of their products, the bigger more robust PCB, more RAM and faster RAM are all more costly parts than nVidia uses.

 

[bryanW1995]

ATI wasn't really up for sale and was doing fantastically at that time -- their market cap was around 4.2 billion dollars -- so AMD may of decided to pay a premium before any other suitors may enter the fray. If Intel entered a bidding war with AMD -- who would win?

AMD could pull it off and did pull it off and the best move for their company for growth, moving forward to me.

The company is falling apart right now bc they couldn't afford to make this gamble and lose. Great move, what a joke.

 

[SirPauly]

The company is gaining revenue and posting profits. Far cry from falling apart!

 

[SirPauly]

AMD's gpu division spend a lot of $$ on APU R&D, that is costed to the GPU division. APUs sell very well, but the $$ gains are attributed to AMD's CPU division. See why AMD's gpu division have been hovering around break even?

In effect, they earn a lot of profit, its just no accounted that way. They are subsidizing the cpu division. That just goes to show how BADLY the CPU division has been hurt by their terrible releases in recent years.

How do you know the break-downs of R&D? You have repeated this a few times; is there a link or data for your claim?

 

[Silverforce11]

How do you know the break-downs of R&D? You have repeated this a few times; is there a link or data for your claim?

There was, but i can't be arsed to find it now. Thats how its been since they bought ATI.

 

[Anarchist420]

I think it's obvious why the new CEO was hired. He is a pawn of the board. They want to go full force into tablet/smartphone/mobile offerings. They could care less about anything else because AMD has struggled to get shareholder value off the ground in the last 10 years.

It probably doesn't even matter what Bulldozer II or AMD HD8000 will be like. I think the board is determined to completely change direction. Since the firm has very little resources, it's not really feasible for them to keep investing the same amount of $ into GPU and CPU design. If they are going to move into an entirely new market, then the $$$ has to be taken from somewhere, right? Something will likely be getting less priority at AMD, whether its CPUs or GPUs or a combination remains to be seen.

I hope I am wrong on this but if AMD goes all ARM on us and waves goodbye to producing competitive x86 CPUs, it's going to be a full blown Intel monopoly at $200+ price level.

There won't be an intel monopoly unless the Federal government somehow protects intel. Also, software has gotten too advanced for there to be an intel monopoly.

This really does suck. Even for nvidia fans, I can't imagine anyone being happy about this news, competition really does drive the market forward.

If AMD's graphics division falls, someone will challenge nvidia. Don't know who, but someone will unless the Federal government protects nvidia.

 

[ocre]

http://www.xbitlabs.com/news/graphi...ill_Kill_Low_End_Discrete_Graphics_Cards.html

Would you expect anything different coming from AMD. "IPC increases!" lol. These APUs are very cheap. Always expect the sugar coating. Its a double edge sword. Their fusion touting has also caused intel to step up to the plate. PPL are gona be surprised at the quick advancing intel will make in this field. They will push this route to the max. In future generations AMD will have to out do intels cpu/gpu combos or face the embarrassment. As AMD makes more capable APUs, this will take more and more chunks out of their GPU division. It cannot happen any other way. Fusion just doesnt seem like the greatest thing to me at all. AMDs big dream just took them way to long to exicute. So long that intel beat them to it even after they wasted yrs tring create their own high powered dGPU larrabee. AMD took soo long with fusion. This is why ppl believe it was a mistake to buy ATI. Why did they take so long, funds? In this light, ATI cost them a lot more than they could afford. How can you be sure the BD result wasnt because of lack of funds? Many many different possible directions and they took this one. Currently, its far from a success story.

Its way to early to claim much of anything still. AMD may not be in as bad of shape as some ppl think, but you must realize things arent just rosy. To me its sort of like a long silent moment. It remains to be seen how any of this plays out. AMD has been stumbling, i am not so sure they are on their feet yet. Lots has changed and real quick like. Maybe its all for the better, i can be hopeful but i cannot say it for sure is!

I am fearing the next core GPU too. AMD would say its the bomb. I hope it is cause i imagine nvidia will step up to the plate for a space blasting kepler. Core sounded very interesting a while ago, but i have heard some concerning things now. Its something that interest me. I am hopeful they can make something wonderful but i heard the power cap and it will be very limiting is f it holds true.

Again, its too early for me to conclude anything really. But from what i do gather, it twists my gut.

 

[Dadofamunky]

In the last few quarters, you've also heard Thomas describe our initiatives to streamline our business processes. We will continue to explore ways to accelerate this effort, both to unlock these efficiencies and productivity to better compete in the current marketplace and also to enable our organization to better capture the trends for which our technologies are so well suited, namely the move to low power platforms, the continued rise of the emerging markets and the emergence of cloud and mega data center computing

What a load of marketing/MBA bullshit. Translation: Intel has crushed us like a bug in several of our previous key markets, partly because of our faulty execution, and some of our overpaid Prima Donna engineers must pay the price. We need to realign our company away from spaces in which Intel competes or we will be bankrupt within two years.

That's the story. "Unlock the efficiencies." "Capture the trends." The kind of talk that spawned Occupy Wall Street.

 

[RussianSensation]

2) Even if you can find valid arguments, your reasoning seems to include a lot of Hindsight bias.

The things I brought up such as:

- Too high acquisition premium paid for ATI, with questionable synergies
- A history of low average selling prices for CPUs and GPUs, and downward pressure on the CPU side due to lack of competitive product offerings
- Lower than expected profit margins in both divisions
- Declining server and desktop market share for years now
- AMD being burdened with massive debts after ATI buyout
- Poor execution on the CPU side (Phenom I/II/Bulldozer) --> Lower focus on IPC, and power consumption
etc.
- Market growth in tablets/smartphones will far exceed that of laptops/desktops/graphics cards in the next 5-10 years

^^^ All of these things have been described for years by Wall Street analysts, hardware gurus/hardware review websites and equity research resports on AMD. I didn't "invent" these ideas as mine, using some "hindsight bias" as you put it. This information was already stated by professionals, before I even brought it up.

I am simply providing that information in this thread to try to grasp why AMD's CEO/Board are actually considering a drastic change in strategy. To what extent will AMD change its focus on high-end CPUs and/or GPUs, if at all, will be revealed this week.

But there is NO question at all now that AMD will no longer pursue its current strategy to the same extent under new leadership.

 

[RussianSensation]

I don't get why AMDs GPU divison is so inefficient. Sure, their products are often cheaper than that of the competition, but should they not also be cheaper to make because of their smaller die size? Or does the problem lie elsewhere. Waterhead management, marketing etc.

This was supposed to be a successful strategy in theory. But in reality (See post #28) ATI's GPUs under AMD actually became larger than under ATI's management, while the selling prices fell 40-50%. So the exact opposite happened: (1) Manufacturing costs likely went up (2) while revenue per card fell --> and thus profit margins fell.

 

[boxleitnerb]

The problem was the price war at the time of the HD4000 series. It reverberated all the way through to today. Nvidia had to cut prices for their GT200 line and then AMD could not sell the HD5000 for so much more (like 500 bucks). And so forth. If you raise prices but your competitor does not, no one will buy your product. If you don't raise prices, you make to little money. Quite a pickle to break free of that cycle.

I have no problem paying a bit more for a Geforce because of features and compatibility/support (better AA compatibility, early good SLI profiles etc.). I feel that AMD has treated its enthusias segment quite stepmotherly ever since the HD2000 series came out. It's the image, that's a problem. AMD stands for value offerings (aka cheap) while Nvidia, retaining the GPU crown (single card) ever since 2006, has kind of a leader image. AMD could turn things around and raise prices if they actually beat Nvidia again, and care more for the enthusiast community. Do that 2 generations in a row and you can raise prices also on lower tier products.

Just my 2 cents.

Edit:
But I wonder, is it just image or is there something else? Nvidias Geforce business is very profitable compared to AMDs GPU segment, despite their large dies (and accordingly higher prices). If the die/price thing is breaking AMDs profitability, I would expect Nvidia doing worse than they actually are for the same reasons.

 

[Silverforce11]

NV's marketing is far far better than AMD. Also, CUDA > Stream for a lot of software, especially professional.

NV has street cred, everytime a noob comes on to tech forums asking for a GPU advice, they more often than not say "no ATI/AMD, i hear their drivers suck".

 

[Red Hawk]

The opposite has been true of late.

 

[Ancalagon44]

People, its the new Boss doing this. Not BD, not HD7k. Nothing specific like lackluster BD or shrinking gpu market has anything to do with these cuts specifially. Its all about trimming the fat away you could say. This is all the CEOs doing.

True but that only makes me more worried about the company's future. They got rid of one of the brightest minds in one of their best performing divisions. Or only performing division? That is not a change that makes me confident about the future of AMD.

Heck, if they got rid of the chief engineer responsible for the cow pat that is BD I could understand it. But getting rid of Killebrew just makes no sense at all.

You know I hate to say this, because I always championed AMD in the days of Intel abusing its monopoly, but maybe its become apparent that AMD deserves to fail because they are not competitive as a company. They went ahead with BD despite all indications it would be a disaster except for some server applications, and now they get rid of Killebrew. What next, are they going to cancel their contracts with MS, Sony and Nintendo?

 

[Ancalagon44]

Not sure from which angle was HD3000 series good? It was one of the worst performances from AMD in years, only "bested" by the HD2900 flop. HD3000 was not competitive with GeForce 8.

As far as I remember it was a MASSIVE improvement over the HD 2900, enough for it to be very competitive with the 8800 series. In fact I think its the reason that Nvidia brought out the 8800GT at the price they did.

Regarding the popular HD4000 series: it's very easy to have a successful generation when you are practically giving them away at $199 and $299. From a business perspective, HD4000 generation was only to regain mind-share among gamers after the horrendous HD2900 and lacklustre HD3800 series. I bet it barely made any $ for ATI.

And how do you know that? What was its die size? As I recall, its die size wasnt bad at all compared to Nvidia's equivalent, so it sold well and didnt cost too much to make.

HD5000 series, pretty much the same thing. HD5850 was selling for $270 and HD5870 for $370.

As above, die size not too bad, prices good.

HD6000 series, here buy a $230-240 HD6950 and unlock it into a 6970. That alone pretty much cannibalized the sales of HD6970 series.

And repeat, die sizes much smaller than Nvidia's monstrous chips hence cheaper to produce. They stopped the 6950 unlocking pretty soon anyway.

AMD's current graphics card strategy is not at all like the "winning ATI" of the past, which often sold top-end single GPU cards for $400-650. ATI of the past had far higher cash flows, far higher profitability/margins, far higher average selling prices, and almost never resorted to undercutting its competitor on price by significant amounts (definitely not $100s of dollars). ATI of the past always wanted to have the single GPU performance crown. ATI was never regarded as the "budget" (i.e., cheaper) performance brand. ATI stood on equal footing with Nvidia and the firm's prices reflected their belief that their products were as good.

They also used to fix prices back then.

Historical launch MSRPs:

9700Pro = $399
9800XT = $499
X800XT = $499 and Platinum Edition for $549.
X1800XT = $599
X1900XT = $599, and XTX version for $649

By pricing their high-end cards at $400-650, ATI's mid-range cards sold for $250-300, not for $140-150 like HD6850 and HD6870 are today.....ATI was making more $$ in all desktop segments since it had a much more steep price curve. Today, HD6970 tops out at about $350, hardly anyone cares for HD6990 and AMD's mid-range sells for what historically was a price range for low-end cards.

But what makes you say $150 mid range is the equivalent to the $300 mid range? Seems to me that the prices still have the same range - from $50 or whatever to about $600 for the 6990. A 6990 is AMD's top end card, whether it is a dual chip card or not. Doesnt matter. Its just a different srategy that is more cost effective for AMD. But that doesnt mean they have shifted their prices down - as I said, the range of possible prices you can pay is still roughly the same, perhaps a bit lower in real terms because of inflation.

I dont see why this makes you think AMD is not making any money - I mean purely from examining their prices. As I said, you ignore die size and thus cost to manufacture, you ignore the fact that prices were fixed back then (there was nearly an investigation into that as I recall) and you ignore the fact that the 6990 is still AMD's top end card, whatever its architecture is. Thus, AMD's top end is still $600. Hasnt changed.