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Change in leadership could revitalize AMD, analysts say

Product delays, lack of clear strategy hampered growth

By Agam Shah
July 18, 2008 12:00 PM ET

IDG News Service - The change in leadership at Advanced Micro Devices Inc. may have come late, but it is a kick the company needs to become more competitive in the microprocessor market, analysts said.

AMD yesterday replaced Hector Ruiz with Dirk Meyer as its CEO, as the company reported its seventh consecutive quarterly net loss. Ruiz will remain as chairman of the company, where he will continue to oversee AMD's "asset smart" strategy to reduce capital expenditure.

The company saw success in the early part of the decade under Ruiz but floundered after product delays and its inability to articulate a clear road map for its chips, analysts said. AMD has also lost significant market share to Intel Corp., but the new leadership should infuse new energy to compete with its main rival, they said.

AMD intends to unload some of its manufacturing assets and bounce back as a company more sharply focused on the design and development of its microprocessor technology, a direction for which Meyer might be the right leader, said Jack Gold, principal analyst at J. Gold Associates. Meyer, who was previously AMD's president and chief operating officer, is a technologically savvy, hands-on guy, Gold said, and will bring focus to delivering microprocessor technology to customers on a consistent basis.

Among Ruiz's questionable decisions at the helm was the triple-core Phenom processor, which was released earlier this year, Gold said. The triple-core chip was built on a quad-core chip, with one core on the chip disabled. Ruiz was focused on profit margins and failed to explain its purpose effectively, Gold said.

Another dud under Ruiz's leadership was the execution behind the design, manufacturing and delivery of the quad-core Opteron chip, code-named Barcelona, said Nathan Brookwood, principal analyst at Insight 64. The expectations for Barcelona were high, but AMD lost server market advantage to Intel in the two years it took to execute and deliver Barcelona, he said.

"Barcelona was an unmitigated disaster," Brookwood said.

Investors and the financial markets have been demanding Ruiz's scalp for a long time, Brookwood said. The markets were unhappy with his decision to acquire graphics chip maker ATI Technologies Inc., with its $5.4 billion price tag, in 2006. The acquisition has since weighed on AMD as it tries to cut costs and return to profitability, with the company taking an $880 million charge in the second quarter of 2008 relating to the acquisition.

"If you're the board of directors, you have to question [Ruiz's leadership], and the board concluded that he wasn't the right guy," Brookwood said.

AMD has been posturing for a few years to be a more technology-focused company, but it has taken a while to execute, said Dean McCarron, principal analyst at Mercury Research. As the company focuses on design and development of microprocessors, Ruiz can focus on the asset-smart strategy to offload its manufacturing assets and reduce capital expenditure to get AMD back on track.

"Fabs are expensive [and] require capital, and it takes money to keep building facilities," McCarron said.

Reprinted with permission from IDG.net. Story copyright 2014 International Data Group. All rights reserved.
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