AMD's Troubles Had Been Building

By Alex Handy

August 15, 2008 —  (Page 1 of 4)
An unending spiral of bad luck, poor management and hasty decisions added up to seven straight quarters without a profit at AMD. But the company’s troubles go deeper than that. They run so deep that even former employees could see them appearing well before the world came tumbling down around a former Silicon Valley success story.

In mid July, the company reported a US$1.19 billion loss, and that board chairman Hector Ruiz would yield his CEO duties to then-COO Dirk Meyer.

AMD’s myriad troubles have been building for a long time, but it wasn’t until it acquired graphics card manufacturer ATI in 2006 that things began to go completely sideways. That $5.4 billion purchase pushed the company into a heap of debt that has resulted in seven straight quarterly losses, broken fabrication processes and a forthcoming 10 percent reduction in its worldwide workforce. It also has again dropped behind Intel after once offering the first dual-core desktop processor.

“They’re competing with a company 10 times their size,” said James Staten, principal analyst at Forrester Research. But while AMD has had success in the past against Intel, it has, of late, been attempting to compete with Intel on all fronts, said Staten. The company needs to pick its battles wisely, said Staten, rather than rushing into every market, such as mobile, graphics and server CPUs with direct competition to Intel’s products.

New CEO Meyer will have a large task in front of him in the coming days. Gary Silcott, spokesperson for AMD, said that the new general has already addressed his troops. “Every quarter we have an internal meeting that’s Webcast around the world, and that’s usually after earnings. We had one of those after our most recent earnings where Dirk was welcomed by Hector as the incoming CEO,” said Silcott. Meyer’s message: execution, execution, execution.

Execution has certainly been a problem for AMD since Hector Ruiz took over as CEO in 2002. One of his first major moves was a major layoff . He expanded the company’s operations in Texas, effectively shifting the focus away from the Sunnyvale, Calif., headquarters, and oversaw the taking-public of the joint AMD/Fujitsu venture, Spansion, in 2005. That company acquired a large number of AMD equipment and employees as the calls came from AMD management to lighten the overhead.

Related Search Term(s): multicore, processors, AMD, ATI, Intel

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