AMD's new leader has some work to do.
CEO changes at AMD have always had some drama associated with them, and they have always been something special. Co-founder Jerry Sanders, for example, stayed with AMD for 32 years until he handed over the company to his apprentice, Hector Ruiz, in 2002. Ruiz’s fate was closely tied to the acquisition of ATI in 2006, which almost sunk AMD financially in 2007. Ruiz was instrumental in spinning off the manufacturing arm in 2008, which gave him an opportunity to leave AMD with grace at a time when he was not the most popular employee there.
Dirk Meyer succeeded Ruiz in July 2008 but was terminated in January of this year amid speculation that he clashed with the Board of Directors concerning what direction the company should take. It was rumored that Bruce Claflin, who previously was CEO of 3Com from 2001 to 2006 then became AMD’s chairman in 2009, was unhappy with Meyer’s slow reaction to the tablet market. Therefore, the Board of Directors felt that a new face would be needed to proceed in that direction.
Given Meyer’s background, the decision was surprising. He knew AMD inside and out and was well-respected within the company. Hector Ruiz was instrumental in bringing Meyer to leadership in various executive roles. In addition, Meyer had the engineering credentials for this job. He was the executive lead behind the Athlon design that had pushed AMD through its greatest business phase yet. The decision to get rid of Meyer did not only indicate that there must have been a big clash, but that AMD had surely lined up a terrific replacement.
I felt that AMD needed a celebrity CEO with huge credentials who fit the paycheck AMD traditionally gives to its CEOs. In the end, you can’t find qualified CEOs for a CPU company on every street corner. At one point, a well-informed source told me that AMD was interested in Pat Gelsinger, a long-term Intel executive who was the design lead for the 486 CPU at Intel – and was one of the very few Intel employees who were mentored personally by Intel co-founder Andy Grove. Gelsinger told me in 2004 that he dreams of becoming Intel’s CEO, which has not worked out so far as he is currently president and COO at EMC. A CEO role at AMD may have killed that Intel dream for him forever. However, another rumor states that AMD looked at Qualcomm and Freescale for potential candidates, which did not work out well either. Last week, AMD said that Rory Read is the company’s new CEO. Rory who?
I have been a tech journalist for 17 years, but Mr. Read is not someone with whom I am familiar, and there is a good chance that you may not know him either. AMD’s conference call was not exactly enlightening regarding Mr. Read’s credentials, so I have spent some time reading about him. Before accepting the CEO position at AMD, he was president and COO at Lenovo. Before Lenovo and before 2006, he worked for 23 years at IBM. Wikipedia tells us that he drove Lenovo’s tablet and smartphone strategy … aha! I am glad that I discovered this note, as it was not mentioned during AMD’s call.
I still think that the firing of Meyer was rather odd. AMD is currently profitable, based on products envisioned by Ruiz and Meyer. The product lineup is solid, even if the company isn’t competing in the CPU market above $150, and there is no explicit smartphone / tablet product at this time. However, AMD is taking the market share from Intel with some products, showing a confidence that I haven’t seen in at least six years. Intel doesn’t have a strong tablet contender either, and AMD told me earlier this year that the current product lineup would allow the release of a tablet processor later this year. Conceivably, AMD’s current lineup is much stronger than it has been in five years.
AMD has not answered the exact need for a new CEO so far, and Claflin still evades direct questions about why Meyer was fired and now why Read was hired. During the CEO appointment call with the press and analysts, Claflin said that the replacement was necessary to increase shareholder value. He noted that he expects from AMD’s CEO that the company will expand in the markets in which it currently competes and will improve execution. He also anticipates new strategies for new opportunities. I would have loved to hear what opportunities those could be, but all I heard from AMD’s interim-CEO, Thomas Seifert, Claflin, and the new CEO, was how great the synergies are, how much they agree on their visions, and how excited they are about the opportunity for AMD. If you were to interpret this as one big love fest, you’d be right.
Commenting on AMD’s opportunity, it puzzled me that Read focused almost entirely on the current APU lineup and AMD’s sales success in the past quarters as well as the coming server opportunity. Did he talk about upcoming ultramobile processors? Nope. There was a question that targeted a possible ARM partnership that was quickly shot down by Read, which could hint that there is something in the works – or not. With Read’s background, which I now know is especially strong in tablets and smartphones, I would have expected a bit more detail relating to the opportunity for AMD mobile products, but there was zero information. Claflin highlighted the fact that Read is qualified for the job when he was a buyer of AMD products at Lenovo, because he represented the customer voice. But even in this case, Read could have commented on a possible gap and an opportunity for strategic expansion – since it really isn’t a big secret that Claflin apparently wants many more mobile products.
I can’t quite say that I have ever been short of questions when I attended such a conference call. From a journalist’s perspective, it is always exciting to get a first impression from a new key executive in this industry and see where a company might be going. This was one of the occasions where I had no idea where I would even begin to ask questions, as we are missing the foundation as to why Meyer had to go and why Read is more qualified to do a better job than Meyer. Don’t get me wrong, I don’t feel sorry for Meyer; I just don’t quite understand the reasoning. Sanders’ departure made sense and Ruiz’s resignation made even more. Meyer’s firing does not. I believe that Claflin and Seifert have introduced quite a bit of uncertainty to AMD’s roadmap. They told investors that they will change something, but have not yet said exactly what, how, or when it will be changed.
During the call, Read told participants that he has joined AMD “to win” and that “he can’t wait to get started.” For $1 million a year, I guess AMD shareholders would agree with that. In the end, AMD has never had a more expensive CEO (as far as base salary is concerned) than Read. That fact alone puts tremendous pressure on Read and Claflin. Whatever they come up with, they don’t have any room for failure.