8.08.2007

Countdown To Disaster?

Having reached the top of PowerPoint leadership in creativity and innovation, AMD has decided to expand its new core business into Web publishing. Very recently launched is AMD's new website that is purely devoted to its struggle against the evil monopolist - Intel.

Here you will find a website that tries to look busy and comprehensive but after spending a few minutes clicking several different links to the same limited content, you'll find that there isn't a lot to see and learn. AMD simply created a site that should act as a central repository of Intel’s bad business practices before we all start forgetting. I have to admit, the idea is clever considering how short everyone attention span is these days. Bear in mind that the trials for the anti-trust lawsuit against Intel will only begin sometime in 2009. This website is an important reminder why AMD is struggling to survive today.

Or maybe that is what AMD would want us to think? The timing and the intensity of this new anti-Intel media blitz by AMD gives me an eerie feeling that there is something serious going on that is about to blow up. Although the timing is coincidental to the European Commission’s announcement, AMD will see no benefit no matter how the verdict goes. As it stands today, the market is already as free as it can possibly be. AMD has more than enough customers while the disastrous margins from both companies prove that competition is healthy. Pouring money into advertising and dubious studies won’t improve the market environment today, nor generate more revenue for AMD.

So you need to ask yourself the question why so much money and effort is spent TODAY. What is it that AMD wants us to think or feel? When Microsoft was labelled as a Monopoly by the Justice Department, Netscape’s significance as an internet browser has diminished. The significance of AMD’s PR stunt today will mean nothing when the verdict of the lawsuit is given many years from now. AMD knows this so again, why all this noise?

Think "scapegoat". We’ve seen Penryn engineering samples out in the wild while Barcelona should be announced later this month. But where are AMD's samples? Critically, where is AMD’s restructuring plan? AMD’s massive debt and fixed costs are crippling the company while investment commitments are prohibiting the company from making any meaningful adjustments. Scapegoats and pointing fingers are the visible symptoms of difficult and trying times.

It’s easy to see how AMD managed to paint itself into a corner. With the recent credit downgrade followed by the alarming credit crunch in the financial markets, there won’t be anyone bailing AMD out this time around. The possibility of an AMD collapse is stronger than ever and I just have the strange feeling that AMD has started giving us answers to questions that we may be asking sometime in the future. So one day if you find yourself asking the question,“Why did AMD collapsed?” Don't forget that AMD already made this website: BREAKFREE.

16 comments:

Anonymous said...

What do you do when you can't compete? Point the finger!

BTW, Wolfdale on load is cooler than Conroe on idle. Using 30% less power in idle and load.

Tick

Anonymous said...

This is funny, the nooby tech commenters of Engadget are ripping on AMD for this. HAHAHA.

AMD's underdog story is getting tired, 22% global unit share, 50% US retail share. Customers demand speed and speed they get with Intel.

Anonymous said...

Come on roborat, you don't see the end game here?

AMD is trying to pretty itself up for one last run at private equity / buyout... Throw out some long term roadmaps, EU speculation, lawsuit speculation and hope something catches someone's eyes...

Unfortunately the US credit market has seriously corrected so the favorable loans / rates that were driving the M&A process over the last couple of years is no longer around... (I'll speculate this is also why AMD's stock dropped at a greater rate during the recent market decline, as the only thing propping this stock up for the institutional buyers is the possibility of a buyout which is now much lower)

Have you seen AMD's ASP's (I posted it 2 blogs down)? With those ASP's it doesn't matter what happens with market share or PR unless they somehow manage to double or triple! AMD needs to strengthen its brand, trying to weaken Intel's brand would only help if they were ALREADY profitable. (i.e. we can't make money so we'll try to get our competitor to earn less - this is a strategy that would only work if AMD was the one being chased)

Their best bet is to try to settle and infuse cash to help AMD stay afloat a little while longer.

13ringinheat said...

Having reached the top of the PowerPoint leadership in creativity and innovation

HAHAHAHHA that line is a classic. Another great post Dr Roborat.

Anonymous said...

Looks like AMD is playing credit musical chairs. The debt holders must have called AMD to repay its loan, given the jittery credit market outlook.

Advanced Micro Devices, Inc. to Offer $1.5 Billion of Convertible Senior Notes
http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20070808006212&newsLang=en

Giant said...

AMD is trying to pretty itself up for one last run at private equity / buyout.

Didn't you see the details of the X86 license agreement between Intel and AMD I posted here and at Sharikou's hilarious blog a while ago?

Basically, it states that if either company files for bankruptcy or is acquired by another company, then either company may choose to terminate the license. Since I highly doubt AMD will terminate their own license to produce X86 CPUs it's down to Intel. If AMD files for bankruptcy or is acquired by another company Intel will pull the plug.

SPARKS said...

‘Break Free’ from what, $271 Quad Cores? This entire website/propaganda machine is reminiscent of some extreme socialist/communist tactic employed by the former Soviet Union during the last part of the 20th century just before their economic and social collapse.

For those of you who don’t follow history, the tactic was designed to shed, by any means possible, America as the evil, imperialist/capitalist nation in the worst possible light. To the extreme left, it sometimes worked. On the whole, however, it didn’t.

What was never realized or completely recognized is the collapse was brought on by a policy of complete technological superiority that the Soviet Union could not possibly win, hence, ‘Star Wars’. It was big budget and big science, all in the fast track. Sound familiar, like Intel’s ‘tick tock cadence’? Similarly, as the walls were crumbling around them, and they got more and more vocal, right up to the very end.

Indeed, we now have ‘Chip Wars’. AMD took an awful BIG gamble on buying ATI, cutting deals with huge insatiable OEM’s, betting the house on an inherently flawed technology (SOI), leaving technologically sound and financially successful platforms behind (939), underestimating the power and strength of their opponent, and over estimating their own position. Further, THEY HAD NO MONEY. They borrowed more money. It wasn’t enough. So, they saddled themselves with massive debt and drastically cut personnel and spending. These are, after all, the real reasons why AMD has failed so miserably.

Not satisfied with the, historically, 15 to 20 percent market share, top management saw a window of opportunity to ‘BREAK FREE’ into the 30 percent or better market share. Opteron was that window of OPPORTUNITY. Rather than addressing each of the above slowly and deliberately over time, they jumped all of the above, all at once, far too quickly, with extraordinarily bad timing, ON ALL COUNTS. AMD called it the “Perfect Storm”.

In the final OBJECTIVE analysis, marshalling sympathetic allies to rally support against Intel is not the answer and will not work. The U.S. will not cripple its last world market leaders (the only ones we have left), Microsoft and Intel.

AMD’s August give away price cuts to maintain artificially high market share numbers for prospective buyers/investors won’t work either.

Finally, deliberately inducing a self defeating, self crippling price war with Intel is very much like the Doc’s analysis of Kamikaze tactics, supreme acts of desperation. We all know what Kamikaze pilots did, and why they did it, don’t we? We just didn’t hear their screams before they augured in.

SPARKS

Anonymous said...

*clap*

BTW, look what this breaking free has done.

Anonymous said...

"Didn't you see the details of the X86 license agreement between Intel and AMD I posted here and at Sharikou's hilarious blog a while ago?"

Yes I read it (good find by the way); however given Intel's position in the industry they'll have no choice but to OK the license transfer if AMD ever got bought. While technically Intel could pull the plug, the FTC, or EU, or fill-in agency of choice would not likely allow x86 processors to be made by only one company. Intel would be in a much better position strategically to have a wounded competitor than tohave various governmental agencies regulate the heck out of them. (California power? Telco's?) Sure there's risk that the wounded competitor will get healthy but it's a choice between the devil you know vs the devil you don't...

Anonymous said...

The issue with AMD has always been the 'me too and we can do it cheaper' attitude.

Rather than saying why people should purchase AMD chips they focus much of their ads on 'we're cheaper than Intel', 'we're better than Intel', 'Intel is evil', 'Intel copies us' ... in virtually all of these cases there is no reason for me to pay EXTRA for an AMD chip or even the same amount as AMD touts it's value proposition...

If you look at AMD ASP's right now it is ~$66 AVERAGE ASP (this includes server, desktop and mobile), it doesn't matter if the world hates Intel because AMD will continue to lose money until ASP's go up. So perhaps their ads and PR should focus on why people should pay MORE for AMD chips rather than continuing with their Napoleanic complex. Rather than 30% market share at all costs, the strategy should be as high a market share at a profitable price.

I can try to cut into McDonald's hamburger market by offering hamburgers at $0.50 vs McD's $1.00, but how long is that realistically sustainable? If I offer at $1.00, I may get a few people saying McDonald's is an evil empire so I'll buy the other guys hamburgers, but most people won't care. So the question then becomes how do I make a better hamburger, or have a better dining experience, or package it with some special fries that McD's doesn't have... or I can keep banging my head into the wall and try to sell my burgers at a cost lower than someone who's been doing this forever and has economies of scales working for them....

Look at many of AMD's directions right now...

1) DTX - how can we make things CHEAPER? If DTX takes off is this going to allow them to INCREASE the price of their chips, or just enable them to sell more of the LOWEST priced segment of parts they offer? Scientia keeps arguing this will give them a cost advantage in the low end space and he's right... except A) if it takes off mobo folks will make Intel based DTX boards B) This expands their low end (lowest profiitability) segment, and if they raise prices on the CPU here then they lose the
cost advantage - the problem is the cost advantage only occurs if AMD keeps their chips at a discount.

2) $100 (or $175) laptop - enough said? (Hard to raise a chip ASP of $66 when the whole damn computer is $100)

3) Focusing K10 launch on "value" chips at low speeds... OK granted on this one AMD doesn't have a choice on this as their process / stepping is not ready...but they spin this as if it is the "right approach" in launching the low end chips (oops I mean "energy efiicient" sorry about that) FIRST! Early adopters usually are willing to pay a premium and AMD is shooting themselves in the foot by launching the low end product first/ The folks willing to pay highe end prices will either wait or buy the lower end parts and not bother re-buyuing parts 6 months from now when AMD gets around to releasing faster parts.

4) Fusion - to me this is making graphics/CPU cheaper rather than better (at least initially)... as they sell each part discretely are they going to make more or less combining these together in the low end market? Unless they are targetting high end market with this, but that doesn't seem to be the case.

5) Cost cutting/asset light - very few companies in history have cut their way to growth. Generally you grow by growing the market or offering new capabilities.

Finally just look at MCM approach - AMD mocked this as an inelegant solution...and while AMD's native solution may end up being the better technical solution, Intel got a distinct time to market advantage and sold over a million of these in 6 months and the majority of people honestly people just didn't care whether there's duct tape holding these together inside the package...

Let's say Intel (conservatively) averaged $500 per chip; that's a half a Billion in revenue in 6 months with an "inelegant" solution, simply because Intel was able to read the market better. AMD mocked this as a "pittance" of quad core chips and a paper launch - this pittance would have accounted for ~20-25% of AMD's revenue in 6 months had they been able to do it!

AMD clearly now seems to "get it" as they will look at MCM both for 8 cores solutions and initial fusion work. To me this is just plain reasonable business sense - if fusion takes off then they scale a "native design" if it doesn't, well they spent less resources and silicon putting an MCM approach together than starting with a native design. This will give them time to market and may allow them to understand the market better before finishing up on the native approach.

Of course if I'm Intel I'm going to dig up EVERY quote from Richards and Ruiz and shove it down their throats if/when these products are released... maybe even put together an MCM for dummies book...

Anonymous said...

Another 1.7Bil in convertible notes for AMD? WTF!?!?

http://www.tgdaily.com/content/view/33291/118/

Are institutions really this STUPID!?!? I wonder what the stock price will need to get to to make these convertible notes convertible to stock?

Makes you kind of curious about the timing around the "monopoly profit report" - look we can sue Intel for 60Billion! No, make that $80 Billlliiooon dollars! (said in my best Dr Evil voice)

Also makes the pushout of the analyst day interesting - but hey that was all due to DTX and F30 conversion right (wasn't that Scientia's reasoning?) It is good to see AMD taking no extraordinary measure to raise cash as they are comfortable so long as cash on hand is above 600Mil right?

Anonymous said...

I think you meant to use the term "scapegoat" instead of "escape goat". A scapegoat refers to someone or something that is used to deflect blame from the real source of blame (in your example, AMD blaming Intel for problems that are primarily or entirely of AMD's own doing).

I agree that this website that they created is a waste of time. AMD's problems cannot be solved by convincing people that Intel is a criminal monopoly. "Breakfree" websites will not fix process problems, capacity problems, financial problems, etc.

I really hope that AMD can get Barcelona out the door and that it scales quickly and performs very well. Watching these moves that AMD is making, however, gives me reason to worry. If you're that busy trying to misdirect my attention, that makes me think that you don't have much to show me in the area that I am most interested... CPUs.

Roborat, Ph. D. said...

anonymous said: ~I think you meant to use the term "scapegoat" instead of "escape goat".

thank you for the correction. The entire post have been corrected.

Interestingly, I didn`t realise that `scapegoat` had a biblical reference to it.

again, thank you.
scapegoat

Anonymous said...

Someone post the following on Sharidouche, Scientia, and other AMD pumper blogs with a reminder of the consequences of having poor credit debt ratings on their arrangements with all of the sugar daddys.

Fitch Rates AMD's Convertible Sr. Notes 'CCC+/RR6'; Affirms IDR at 'B'; Outlook Negative

http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20070809006225&newsLang=en

Anonymous said...

Scientia is desperate. He once prided himself in not linking to the INQ and now he references Fudzilla, master of story at all angles, and of course, Scientia only references the positive ones XP

Anonymous said...

http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=AMD:US&sid=ak38mX0ckWaU

"Ruiz said that struggles at two of his biggest customers, Motorola Inc. and Dell Inc., hurt Advanced Micro's financial performance and forced the company to change its plans for repaying debt taken on when buying ATI Technologies Inc."

Just as I suspected, clearly nothing is AMD's fault, it's Dell and Moto's fault! And to just think I was reading it was Intel's monopolistic tactics fault... or was it the full moon that occurred on the 3rd Wednesday in February?

Just so we all understand, had it not been for Dell and Moto's troubles, AMD would not have been forced into a 2.2Bil followed by a $1.5Bil Bond offering? Do you think AMD's price cut strategies, in a desperate attempt to abate market share erosion, may have factored in at all to their current financial situation?

"Ruiz also said his company may seek an outsider to own part of some assets. "

"He declined to give further details because Santa Clara, California-based Intel might use the information to ``screw me up,'' he said."

Translation - we're just winging it here, I need some more time to make something up. At least he got back to the "it's Intel's fault" strategy... Just think of how much AMD has gained by suppressing benchmarks so Intel doesn't "copy Barcelona" - that strategerinessment is paying HUGE dividends.

Exactly how is the board allowing this joker to continue as CEO? Are they having keggers in the board room? Pretty soon they'll be lighting cigars with share of AMD stock!