AMD: Ready to play ballAugust 30, 2010: 12:08 PM ET
After decades of being viewed as an inexpensive, also-ran chip manufacturer, AMD is in a better position to compete. Much of that has to do with CEO Dirk Meyer.
Dirk Meyer has been good for AMD.
While it's far too early to say whether the chip company will budge Intel's stranglehold over the x86-based processor market, Meyer, who started with the company as an engineer in 1995 to work on the Athlon chip, has made significant strides.
After years of bitter back-and-forth with Intel over an antitrust suit filed in 2004, Meyer opened up communications with the rival and settled his company's complaints for $1.25 billion last year. Months later, AMD's manufacturing division was also spun off into a separate entity, GlobalFoundries, so the company could focus solely on design and development.
His work seems to be paying off. AMD reported that 109 notebooks, powered by its company's chips, will launch throughout the year -- three times the number of releases last year.
Moving forward, the company plans to focus on its strengths, including graphics. In addition to retiring the ATI brand name, as announced this morning, the company is getting behind two new processor platforms that will play significant roles in its two chips-in-one Advanced Processing Unit (APU) strategy: the heavy-duty multi-core Bulldozer for desktops, workstations and servers; and Bobcat, aimed squarely at lower-powered devices like netbooks that, to date, have been powered primarily by Intel Atom chips.
We caught up with Meyer last week, who weighed in on the state of his company and where he sees it going.
How has the company strategy changed since you stepped in as CEO more than two years ago?
I think we've honed our focus in a much tighter way since then. We sold off a couple of businesses that came with the ATI acquisition, that were focused on consumer electronics and smartphones. We made the judgment that, given where we are as a company, we really need to focus on our core markets, PCs and data center servers. Those represent by far the biggest revenue and profit pool for processing technology.
I think the other change is an increased emphasis on the capabilities that our graphics technology bring to AMD, and the increased emphasis on making those graphic assets shine through in the product line and provide differentiation.
Last quarter, the company reported a net loss of $43 million, compared with $330 million in net losses the same time last year. What's causing these losses?
It's really attributable to our accounting for our equity ownership in GlobalFoundries. So if you put aside the operating results of GlobalFoundries, we actually made money at the operating level and at the net income level in each of the last four quarters. … Global Foundries is still losing money because they're very much in start-up mode. They're supplying products to AMD and investing in technology and capacity in anticipation of serving other customers.
When do you foresee GlobalFoundries turning a profit?
We don't address that because it's a company that's separate from us. Even with the investment community, we don't go down the path of providing guidance for GlobalFoundries just because it's a separate company.
Right now, one of the hottest areas of technology is mobile. Will there come a time when AMD competes with, say, ARM, for market share?
I don't foresee that day coming in the near term, and I'll tell you why. First of all, when we consider which areas to approach, we look at markets, we look at the technology capabilities we have, and we try to find an intersection point that really represents really big opportunities. As I've said, by far the biggest business opportunity we've got is in PCs and servers.
The market for silicon processing content is bigger than the smartphone market and is going to grow, in revenue terms, frankly faster than the smartphone market. And the other thing we really like about our core market is that there aren't that many competitors versus the cell phone market, where you've got Qualcomm is the big guy, Broadcom getting into the business and a lot of other incumbents that are already scrambling for shares. I'd rather focus on the big market, where there's a small number of competitors.
Having said that, I don't think we can ignore in the long term what's going on with mobility, the fact that people's eyeballs are spending more time in front of things like tablets and smartphones. And we are ensuring that we are developing the technology that will, over time, address these markets. It's not a 'not-ever,' it's just a 'not now' statement.
Some pundits have said that we're seeing a shift away from traditional computing to mobile computing. It doesn't sound like you agree with that.
I think the tapestry is just going to get richer and richer. The PC will continue to be a device that people will use to create content, whether it's media content or my daughter doing her homework, as an example. I think you're going to see a proliferation of devices like smartphones and tablets that are more around basic web interaction and media consumption. I don't view the tablet as being a replacement for a PC. I view it largely to be TAM [Total Available Market] expansion.
It's interesting, two years ago, netbooks were all the rage and people were saying that netbooks were going to completely replace notebooks. Well, what's happened is that the netbook market is about 20% of the notebook market and it was largely TAM expansion and you know, I think on the margin between netbooks and notebooks, there's some overlap: 80% TAM expansion, 20% cannibalization.
You're going to see the same thing happen with tablets, where, on the margin between netbooks and tablets, you're going to see overlap and cannibalization. But, largely, that's TAM expansion that is very good for us. And we view the tablet market as something we'll enter when the market gets big and we have the resources to appropriately address it.
What has the company's settlement agreement with Intel and the proposed consent order between FTC and Intel done for fair and open competition in your particular sector?
You put all that together, and I'd summarize it as saying we now have a level opportunity to play on a level playing field. I think the playing field only levels over years because, in some ways, the culture of the industry isn't going to change instantaneously. This is an industry in which the dominant supplier [Intel] really scared the heck out of its customers for years and intimidated those customers, and we found it, as a result, exceedingly hard to do business.
I think over time we've got the potential to see that culture change, and therefore AMD can compete on a more level playing field. But it'll take time.
It sounds like that's already happening. According to company numbers, 109 notebook models with AMD chips launched this season, nearly three times what we saw the year before. What do you think contributed to the uptick?
We started focusing much more intensively on notebook technology a couple of years ago, and the technologies that we introduced in the spring were the first noticeable results of that. These are machines that have much better battery life than we've had in the past.
Number two is, I think our customers are increasingly realizing the importance of graphics and video capability in the PC and notebook platforms, and what people are actually doing with them, and we look increasingly like an attractive partner to them.
The final piece is we've got notebook engagements with customers that we've never had relationships with at all … as a direct result of some of the antitrust rulings around the world.
Well, I don't want to point my finger at any specific customers. We've got design wins that I know we got because of the air cover we got because of the FTC.
There have been rumors of AMD CPUs eventually powering MacBook Pros. What would you say to such speculation?
I never respond to customer-specific rumors at all. We're a supplier of GPU chips to Apple today.