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Opinion: What Does AMD's New CEO Need to Fix?

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.

  • pbrigido
    Two major things that needs to be adressed:

    1. Time to market with new products
    2. Performance competitive products

    Reply
  • JamesSneed
    Marketing or lack of marketing. AMD really needs to grow their brand specially now that they have fusion parts in the low end where consumers will choose by brand more often than not. They need to come up with something catchy like Intel Inside...ding..ding...diing.
    Reply
  • Onus
    Well, if the board wanted more of a focus on tablets and smartphones, perhaps that's what they got. Maybe they're trying to tweak, chop, and hack an APU for that market, specifically to compete with Tegra.
    While I sort of agree with pbrigido on #1, something can only be released when it's ready, otherwise it's a big fail. That may mean a tighter rein on the hype machine. I think people would rather have a firm date in the distance than a "next quarter" or "next month" date that keeps getting pushed back. As much as I've been anticipating Bulldozer, I sometimes think I should call it Bullpooper instead for these constant delays.
    On #2, I think AMD has shown that the APU concept works well, and IS competitive from an overall system perspective. Brought to the tablet market, I think it will do well. As to owning the top spot in CPU performance, I don't think that matters to a big enough piece of the market.
    Reply
  • beenthere
    While there are issues at AMD that need to be addressed, this story reads like sour grapes to me. It's as if some journalists are PO'ed that AMD did not explain the firing of Meyer and the journos know little about Read, so they are frustrated and want to tactfully bad mouth AMD until AMD tells them what they want to know.

    Yes AMD most definitely needs to improve execution. By doing so they will also become competitive technically or once again surpass Intel in CPU performance.

    What enthusiasts need to understand is that the mass market segments are what make a company profitable, not the latest bleeding edge CPUs. Thus a relatively small company like AMD (compared to a competitor like Intel), must focus it's resources on getting and maintaining the mass markets while still trying to offer enthusiasts some candy.

    Read seems to have the marketing and management experience to improve the situation at AMD. You can't make the effective changes that need to be made, overnight. It will take time, like 2-5 years, not months. With AMD finally releasing Bulldozer based chips for all market segments, things should improve financially which gives AMD an opportunity to accelerate new product development and production. I see a bright future for AMD and consumers but with the horrible economic conditions in the U.S. and Europe the road will be bumpy for the next 3 years or more IMO.
    Reply
  • kawininjazx
    The one thing intel will always have over AMD, intel chipsets.
    Reply
  • RazberyBandit
    there is no explicit smartphone / tablet product at this time.
    Well of course there isn't... AMD is essentially a chip-maker, not a full-scale product manufacturer. Their development focuses on individual processing components found inside full-scale products, not the product itself. Their primary competition is with Intel (and ARM, to some extent), which is also a chip-maker, and also not a full-scale product manufacturer.

    AMD does not (currently) compete directly with the likes of Samsung and Apple, who are full-scale product manufacturers. If they were to go down that route, then they may actually find themselves fighting product wars on far too many fronts. We're all familiar with the expression, "spreading oneself too thin." I worry that should AMD take on full-scale product development endeavors, it could very well be their undoing.

    I don't feel AMD needs to branch out and expand their products. Instead, they need to kick their current product R&D into high-gear and start competing at the top-tier again.
    Reply
  • verbalizer
    Fire AMD marketing team and start anew...
    Figure out what to do about GF..
    Reply
  • spentshells
    He needs to keep the company on time.
    Reply
  • working more on software side of the development process, something competitor to nvidia physx and CUDA. also on processor's instruction set.
    Reply
  • geekapproved
    Don't fix anything. AMD is on the right track finally. They got smart and moved to other markets and stopped trying to compete with Intel in the dying enthusiest desktop market.

    They shipped 15million APU's in the 2nd quarter alone and released 16core quad channel bulldozers for the server market already.

    Way to go AMD.
    Reply