At the end of last week, AMD announced that the weak PC market in Q3 and tough economic conditions in Europe and the US have had a predictable impact on the company’s financials. Sunnyvale now expects gross revenue to decrease by around 10 per cent. Gross margin is expected to fall to 31 per cent rather than the previous 44 per cent “due to lower anticipated future demand for certain products.” Those “certain products” are all the Llano CPUs that Rory Read tried to claim were piled up in Q2 thanks to an inventory mismatch.
As bad as this performance is, macroeconomic conditions made it likely that AMD would report a terrible quarter. What’s stunning is that AMD has, for a second time, waited until the last possible second to sneak this announcement under the wire. Intel announced that its third-quarter results would be weaker than expected back on September 7. AMD waited until a week before its earnings call, and the markets responded accordingly; AMD’s stock sank 10 per cent the very next day.
As hardware geeks, we’ve an understandable tendency to focus on underlying components and leave the business to sort itself out. On the hardware front, AMD has been improving. Trinity is a step forward. Vishera, which launches soon, will be a step forward over Bulldozer. Steamroller and Jaguar both look like good hardware. On the business side, this latest stunt caps almost two years of executive and engineering departures.
The company’s old CFO and interim CEO, Thomas Seifert, left in September. Bob Feldstein, the man behind AMD’s Xbox 360 and Xbox Durango (720), left in July. Ben Williams, one of the original Opteron developers, left at the same time. Demers, CTO of the graphics business, left in February. All of this comes after AMD’s decision to fire 12 per cent of its workforce last year, including some of the engineers that were critical to its success in the turbulent 2007-2010 period. And those are just the biggest names; our sources across the industry tell us that AMD resumes have poured in at every level.
Rory Read came to power talking a big game about execution and optimisation. Certainly he’s slashed company costs. He’s had to make hard choices. But he’s done virtually nothing to reassure investors that AMD will be able to execute a roadmap. AMD and GlobalFoundries remain partners, but the ownership agreement that was supposed to ensure joint development going forward and preserve AMD’s IDM capabilities is dead as of this year. Rumours we’ve heard – and they are, let us stress, just rumours – are that AMD’s Kaveri tapeout was significantly delayed. If true, this would likely push the chip’s volume launch back into 2014. Worst-case, it means AMD’s first 28nm APU would launch against Broadwell, not Haswell.
Kabini is reportedly on a better track, and could still see the light of day by mid-to-later 2013, assuming AMD survives at all.
Because folks, that’s what we’re down to. Executives, including executives in charge of long-standing projects and major relationships, have fled. The core of engineers and designers who worked in the trenches on K7, Opteron, and ATI cards are mostly gone. Read has publicly given up on keeping pace with Intel. AMD and GlobalFoundries have dissolved the bonds of ownership at a time when Intel claims its IDM status is what allows it to build cutting-edge hardware. Most ominously, AMD has begun acting like a company that’s terrified of its own investors rather than partnered with them.
Barring a miracle, Read is going to stand up this Thursday and deliver terrible news. Then he’s going to blather a lot of nonsense laced with meaningless corporate buzzspeak about maximising opportunities, building momentum, positive conversations, and communicating value. Unless someone has bought the man a thesaurus, he’ll use the word “strong” a lot. He’ll point to some positive choices and interesting technologies AMD has created without confronting the actual crisis of whether or not the company can maintain the sales volume it needs to grow those technologies quickly enough to challenge the likes of Intel and Nvidia.
Maybe I’m wrong. Hopefully I’m wrong. But if AMD’s executive team stays on this path, it’s throwing away whatever vestige of trust it still deserved. It’s not fair to blame Read and his team for the problems that existed long before they took the helm, but Advanced Micro Devices is foundering. Man the boats.
Full Disclosure: I own no stock in Intel or AMD.