AMD lays out new multi-corpse roadmap
Boy, for a few years there, it looked like Advanced Micro Devices was going to really start pushing bigger rival Intel with products that offered more bang for the buck. These days, not so much. The late discovery of a design flaw in the quad-core Barcelona chip derailed its planned launch almost a year ago, and the chips are coming out only now. In the interim, AMD’s stock has lost about half its value, leaving its market capitalization around $3.8 billion. For perspective, when AMD bought graphics chip maker ATI almost two years ago, it paid $5.4 billion (since written down in an acknowledgment that it overpaid).
Obviously, some changes needed to be made, and Monday, AMD, in the course of warning investors about another disappointing quarter, said it would start addressing costs by cutting 1,680 employees, about 10 percent of its worldwide workforce, by year’s end. The reduction “will be global and will span all groups and all levels within the company and be based on business needs,” said AMD spokesman Drew Prairie. Fine, said the analysts, but hardly enough to offset what an EETimes analysis shows to be one of the highest cost structures in the semiconductor industry. Something more dramatic, like going fabless, may be required.
Still, if you’re in a gambling mood, it might not be a bad time to pick up some AMD stock on your next bargain-hunting jaunt. Fortune Senior Editor David Kirkpatrick says the company’s latest server and mobile chip offerings are strong, and the ATI acquisition, troubled as it was, has some payoffs left in it. Even more importantly, he says, a big chunk of the computer industry, including Intel itself, is strongly motivated to see AMD continue in good health. “In the old days, a powerful Intel might mean AMD was doomed to merely limp along,” says Kirkpatrick. “But something has fundamentally changed in the marketplace. … Today, every major PC maker but Sony and Apple buys from AMD and most of them purchase a variety of products. The market has shifted to one based on price-performance, and the two companies continually jockey for business. PC-makers love it. It would be a disaster for them if AMD were to disappear. Without AMD to keep it on its toes, Intel would innovate more slowly and charge higher prices.” Adds Anders Bylund at Motley Fool, “AMD is the Apple to Intel’s Microsoft, hanging around even in the worst of times to keep the market leader on its toes. Regulatory bodies here and overseas might have issues with a complete monopoly situation, and major customers such as Hewlett-Packard and Dell certainly like to see a competitive supplier situation as well.”
Also many of us system builders prefer AMD because it provides a platform that is easier to assemble, and still offers more bang for the buck.
Speculations about AMD going fabless are a type of creative writing you see in trade magazines. This is not simple logic or LM324 opamp production. We are talking immersion lithography, hafnium, etc. Going fabless implies you are a full partner with the fab, that he knows as much as you do, and that therefore he has as much equity as you, perhaps more, based on IP. This might happen to survive. But as an independent event, it is like saying BMW should go fabless.