AMD presents future plans at investor meetings

[2timer]

Oh I think they knew exactly what they were getting into. Remember, the guy in charge of negotiating the agreement also negotiated himself a multi-million dollar exit from AMD to become the CEO of GLF. How else to ensure your success as CEO of GLF than to setup this kind of agreement? He guaranteed himself a revenue stream.

Hector and the others guys that transferred from AMD to GLF knew exactly what they were doing - personal enrichment.

Now people are going to say where was the BOD? Most BOD's aren't that involved frankly. You meet a few times a year and make your 100K. They only get involved when the institutional shareholders make their displeasure known. I also fully believe that Hector and his team fed them some very rosy numbers to get the whole deal to go through.

Remember, Hector was fired for his involvement with insider trading. That speaks the whole book about his character.

Assuming this were true, then you've characterized AMD as basically a pawn at the whim of corporate profiteers. Is that right? Surely someone was looking out for AMD's best interests.

I'm still leaning towards "pie in the sky" agreement on AMD's part, myself.

 

[mrmt]

Even though I try to retain some optimism for AMD, the more I learn about their situation and history (including GF) - I can't help but think that their only way forward is going to involve Chapter 11. Aside from many other problems, it just seems like their upper management and the BoD need to go and the company needs to be put under the leadership of a new management team, preferably as a privately held company.

Bankruptcies work very well when you have a sound operation burdened by debt and other obligations. In a bankruptcy, you can get rid of the burdens and keep the operation running. GM, once rid of the UAW obligations, became profitable again. We can think of other cases such as United Airlines or LyondellBasell, but they all will follow this trend.

But in AMD's case, is the WSA or debt the factor that is pushing the company down into losses? No. AMD's problem is that their operation is losing money. Throw the WSA and debt away and you still have a money losing company. Chapter 11 does bring another complications. Who will want to partner with a bankrupt company? How many of the best and brightest would wait helpless for the grim reaper?

The WSA is a liability for AMD, a huge liability for what matters. But until AMD sort out their revenue side, they are pretty much stuck on the agreement.

 

[Ajay]

The WSA is a liability for AMD, a huge liability for what matters. But only when AMD sort out their revenue side, they are pretty much stuck on the agreement.

At N-1 and then N-2, AMD will never be able to sort out their revenue side (or slide, as it seems to be).

I've seen a company, not burdened by debt, but by a sub-par management; brought back to life by a private equity firm that wasted no time in installing better management. The company had some excellent products, but no focus. It shed ~ 5500 job, including mine, before being taken private.

The problems began once "corporate profiteers - e.g. what 2timer said" were brought in to re-org the company. They did so buy breaking the company up into divisions, buying one small company and part of DEC's networking business (both of who's products formed a bridge to profitability for the main corporation). The person who did this made a ton of money and then took off, but his job wasn't meant to be permanent anyways. Then things got worse...until they were bought out.

 

[jpiniero]

Even though I try to retain some optimism for AMD, the more I learn about their situation and history (including GF) - I can't help but think that their only way forward is going to involve Chapter 11. Aside from many other problems, it just seems like their upper management and the BoD need to go and the company needs to be put under the leadership of a new management team, preferably as a privately held company.

And what exactly would they sell without the x86 license? That's the rub. Bankruptcy isn't happening. It's survival or liquidation.

 

[mrmt]

I've seen a company, not burdened by debt, but by a sub-par management; brought back to life by a private equity firm that wasted no time in installing better management. The company had some excellent products, but no focus. It shed ~ 5500 job, including mine, before being taken private.

If AMD could get rid of the sub-par management team running the company, get rid of GLF and received a sizable cash infusion, it could shine again. But the question is, how much money?

Globalfoundries should have received more than 7 billion in cash infusions since acquired by ATIC, they are almost one node behind TSMC, let alone Intel. How much cash AMD would need? Probably more than enough to build a bleeding edge ARM manufacturer or buy Nvidia.

 

[Idontcare]

If AMD could get rid of the sub-par management team running the company, get rid of GLF and received a sizable cash infusion, it could shine again. But the question is, how much money?

Globalfoundries should have received more than 7 billion in cash infusions since acquired by ATIC, they are almost one node behind TSMC, let alone Intel. How much cash AMD would need? Probably more than enough to build a bleeding edge ARM manufacturer or buy Nvidia.

It is a big difference between AMD/GloFo and TSMC/Intel. TSMC and Intel have the luxury of having their customers pay for their R&D for them.

AMD and GloFo don't have that luxury, they need external cash sources to fund R&D. Makes for an unsustainable business model for both of them.

 

[Ajay]

If AMD could get rid of the sub-par management team running the company, get rid of GLF and received a sizable cash infusion, it could shine again. But the question is, how much money?

Globalfoundries should have received more than 7 billion in cash infusions since acquired by ATIC, they are almost one node behind TSMC, let alone Intel. How much cash AMD would need? Probably more than enough to build a bleeding edge ARM manufacturer or buy Nvidia.

Don't know, I think they would need to sell of some assets as well, probably graphics and Sea Micro (plus whatever IP they've developed in the ARM space). Insure they have a good cross licensing deal with whoever they their GFX group to. Move to another Fab for their remaining product line. Then complete their commitment to server CPUs through Excavator while delivering Kaveri and a follow up to Kaveri (transitional products that should at least generate cash flow for continuing OPS) - if they can make profits here continue, otherwise make look for other solutions. Continue to develop Jaguar in two paths, mobile and for Ultrabooks, laptops, etc. (they could fork the architecture such that the Jaguar core eventually covers everything from mobile to desktop and maybe even HD servers - three products).

Basically, back to the basics for AMD with a new focus on low power x86. Eventually, x86 will be a viable alternative to ARM. They will be back to a business competitor they know (Intel), but as a smaller more agile company, they would have an opportunity to outflank then repeatedly, so long as they have a good fab partner. x86 is AMD's wheelhouse, they don't need to abandon it, they just need to become a lean and mean competitor. They can leave big cores to Intel and focus on higher growth markets, including emerging markets in India, China, etc. Dirk wasn't wrong about sticking with x86, he's was only wrong in sticking to the old business model and not moving quickly to lower power and competing with Intel in big cores where they foolishly spent five years developing an entirely new architecture instead of developing a new micro architecture to improve on Thurban (they could have gotten out a tock and a tick in that time frame).

That's my two cents.

 

[Ajay]

And what exactly would they sell without the x86 license? That's the rub. Bankruptcy isn't happening. It's survival or liquidation.

This has been brought up a few times. I basically believe that a new cross license could be negotiated with Intel while AMD is in Chapter 11. I doubt any judge would allow Intel to shackle AMD, so AMD would just need good lawyers and smart managers looking towards AMD's future success and nothing else. I think that they would likely be able to break ties with GF and get out of the WSA. They can position themselves to be bought out while in CH 11 via some divestitures as I outlined above.

I don't know if this would work, but I seriously doubt the path that AMD is taking will work. It's better to try and get on a better path narrower path than stay on one that AMD cannot possibly sustain because it is two broad for their narrowed shoulders.

And they company I mentioned above that I worked for was Cabletron/Enterasys - and they managed to keep some very talented managers and engineers through all the difficult times and are having very good success in the markets that they target. I think AMD could do the same.

 

[Third_Eye]

The problem is that 20% of AMD's shares are owned by Mubadala a Abu-Dhabi SWF
http://www.mubadala.com/en/what-we-do/investments/advanced-micro-devices-amd

What is ATIC? Advanced Technology Investment Corporation is wholly owned subsidiary of the Mubadala Group. Global Foundries is 100% owned by ATIC.
http://www.atic.ae/

So Mubadala can very much be parasitic ("Romney Style ;D") on AMD. That is the reason the WSA being tilted enough to put enough conditions on AMD rather than the latter.

This has been brought up a few times. I basically believe that a new cross license could be negotiated with Intel while AMD is in Chapter 11. I doubt any judge would allow Intel to shackle AMD, so AMD would just need good lawyers and smart managers looking towards AMD's future success and nothing else. I think that they would likely be able to break ties with GF and get out of the WSA. They can position themselves to be bought out while in CH 11 via some divestitures as I outlined above.

The problem is that for a buyer the main thing AMD has of value to offer is x86. The 2009 xLicensing with Intel just says that the agreement the terms of the 10 yr agreement can be revoked by Intel in case any entity owns 50% or more of AMD.
This is only in relation to the x86 CPUs and ISAs.

I think cleverly AMD is trying to use ARM as well as its HSA based architecture to move away from the "x86" lineage of its CPUs/APUs. So when a CPU contains both ARM and x86 cores, AMD can claim in legalese it is a ARM product first and x86 second and so the rules do not apply and so on...
Already AMD had licensed its x64 ISA to Intel and hence it can revoke that which keeps Intel in check.

 

[SocketF]

If AMD could get rid of the sub-par management team running the company, get rid of GLF and received a sizable cash infusion, it could shine again. But the question is, how much money?

Lots of money. Because the contract is still valid for more than 10 years:

The WSA terminates no later than March 2, 2024. GF has agreed to use commercially reasonable efforts to assist us to transition the supply of products to another provider, and to continue to fulfill purchase orders for up to two years following the termination or expiration of the WSA. During the transition period, pricing for microprocessor products will remain as set forth in the WSA, but our purchase commitments to GF will no longer apply.

http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTY0Mzk1fENoaWxkSUQ9LTF8VHlwZT0z&t=1
The only thing we can hope is that the new Fab in NY will have less problems and that future research, also GF's own R&D (somebody wrote that GF will start its own in NY) will pay off in ~5 years.

 

[mrmt]

Don't know, I think they would need to sell of some assets as well, probably graphics and Sea Micro (plus whatever IP they've developed in the ARM space). Insure they have a good cross licensing deal with whoever they their GFX group to. Move to another Fab for their remaining product line. Then complete their commitment to server CPUs through Excavator while delivering Kaveri and a follow up to Kaveri (transitional products that should at least generate cash flow for continuing OPS) - if they can make profits here continue, otherwise make look for other solutions. Continue to develop Jaguar in two paths, mobile and for Ultrabooks, laptops, etc. (they could fork the architecture such that the Jaguar core eventually covers everything from mobile to desktop and maybe even HD servers - three products).

Big core is exactly where they are losing money, so why would you heavily invest there?

 

[mrmt]

The problem is that 20% of AMD's shares are owned by Mubadala a Abu-Dhabi SWF

(...)

So Mubadala can very much be parasitic ("Romney Style ;D") on AMD. That is the reason the WSA being tilted enough to put enough conditions on AMD rather than the latter.

The original WSA was to safeguard Mubadala investment, not to generate a parasitic relationship. Had AMD performed at 2009 levels, the WSA would be a non-issue, as they didn't we have the troubled relationship of lately. And once you sign an agreement worth billions, how can you justify to your owner that you are going to waiver the agreement just because it isn't fair to your customer?

While we can understand the amount of caution from Mubalada part, it is hard to not fathom a scenario where the WSA could be at least more flexible, and this can be directly blamed to AMD management that negotiated the deal. It was the same mixture of arrogance and incompetence we could see in the ATI deal, in pushing Bulldozer until the end, in delaying 65nm on purpose, etc.

The man that negotiated the deal thinking that AMD wouldn't fall under the safeguard clauses on the WSA was the same man that thought that AMD could take 6 billion in debt on the market and be business as usual.

I think cleverly AMD is trying to use ARM as well as its HSA based architecture to move away from the "x86" lineage of its CPUs/APUs. So when a CPU contains both ARM and x86 cores, AMD can claim in legalese it is a ARM product first and x86 second and so the rules do not apply and so on...
Already AMD had licensed its x64 ISA to Intel and hence it can revoke that which keeps Intel in check.

Not gonna happen. Intel needs just one x86 patent on a non-x86 prduct to generate a huge legal problem for AMD and whatever AMD licensees. It is the patent that is important, not the preponderant architecture of the chip. The x64 patent is different. Intel is using it for 10 years already, no judge would allow AMD to simply stop the settlement because AMD wants and kill Intel, as no judge would stop AMD building x86 processors because Intel doesn't feel like to.

What I do think is that AMD is trying to generate "saleable" IP outside of the scope of the agreement with Intel. That IP AMD would be able to easily monetize.

 

[Ajay]

The problem is that 20% of AMD's shares are owned by Mubadala a Abu-Dhabi SWF
http://www.mubadala.com/en/what-we-do/investments/advanced-micro-devices-amd

What is ATIC? Advanced Technology Investment Corporation is wholly owned subsidiary of the Mubadala Group. Global Foundries is 100% owned by ATIC.
http://www.atic.ae/

So Mubadala can very much be parasitic ("Romney Style ;D") on AMD. That is the reason the WSA being tilted enough to put enough conditions on AMD rather than the latter.


The problem is that for a buyer the main thing AMD has of value to offer is x86. The 2009 xLicensing with Intel just says that the agreement the terms of the 10 yr agreement can be revoked by Intel in case any entity owns 50% or more of AMD.
This is only in relation to the x86 CPUs and

IIRC, the new company has 90 days to begin re-negotiations in the case of a buyout, if the AMD goes CH 7, Intel gets all x86 IP, so no other company can buy AMD's x86 IP.

 

[Ajay]

Big core is exactly where they are losing money, so why would you heavily invest there?

No, mismanagement of big core and a lack of foresight (lower power) is what got AMD in the trouble they are in now. And I personally wouldn't 'massively' invest in big core - it's mainly a cash flow instrument for now that could help stabilize customer impressions of AMD and support transitional APU products for a few years. I would invest heavily in jaguar successors. Not that I'm qualified to run AMD or anything - but there has to be a good sales pitch ahead of any successful change that AMD makes - I'm just proposing a sales pitch, which by nature are optimistic, ahead of changes that I think AMD could make.

 

[ams23]

This gets to the root of the problem. Cash balance already went down by about 20% from Q3 to Q4 2012 in part due to an $80 million penalty payment to GF. And between Q2 2013 and Q1 2014, AMD owes another $240 million to GF (with $40 million due in Q2 2013 and $200 million due in Q1 2014). So of course AMD expects to be cash flow positive in 2H 2013 when no penalty payments are due to GF, but then they will be cash flow negative again in Q1 2014 due to the heavy rear-loading of the GF penalty payment.

At the risk of quoting myself, there is more to the story after 2014. As of year end 2012, AMD had about $2.1 billion in long-term debt. $580 million is due in 2015, $500 million is due in 2017, $500 million is due in 2020, and $500 million is due in 2022. The sad part about the GF penalty payments is that it gives AMD less time and ability to pay off these debt obligations without further reducing their cash balance.

 

[sm625]

Future plan: design a cool low power chip that no one uses and thus it only ends up in low volume niche products that cost an arm and a leg (ie All in one systems that cost $100 more than a similar specced notebook VESA mounted to the back of a monitor.)

 

[Maximilian]

Sounds like a plan! :awe:

 

[inf64]

That "joke" is really getting old... Don't know who can find it amusing any more.

 

[mrmt]

That "joke" is really getting old... Don't know who can find it amusing any more.

The "joke" you are referring was the core of AMD marketing strategy, specially on the server market, until the marketing team was dismantled by the personnel cuts in 2011/2012.

But I agree with you, nobody finds it amusing anymore, specially AMD server customers that discovered that some companies would adopt AMD marketing message by the letter and consider a "core" a Core, and charge twice the money in licensing fees than for comparable Intel processors.

Edit:

Just to refresh your memory, here's an excerpt from a John Fruehe's blog post:

http://blogs.amd.com/work/2012/01/31/oranges-and-cores/

(...)

The Dell PowerEdge R415 is a great product for those small and medium businesses that need the expandability for their growing business but are also short on space. While it only occupies 1U in a standard rack, it still packs the power of two 8-core AMD Opteron 4200 Series processors. With business growth being a common concern for many SMB IT shops, a total of sixteen cores in this server, at an aggressive price, helps ensure that as the business grows, this 1U platform can keep pace. This is a perfect solution for web serving, smaller databases, network services and other applications that demand processing power but still need to fit into a small rack footprint.

==================================

You know, it wasn't funny at the time too, but he used to get paid to write these pieces.

 

[inf64]

With your expertize I seriously think you should apply for a job there.

 

[mrmt]

With your expertize I seriously think you should apply for a job there.

Sorry, I can't, unless I was allowed to burst into laugh whenever Rory Read uttered words of wisdom in a Q&A.

 

[Abwx]

Sorry, I can't, unless I was allowed to burst into laugh whenever Rory Read uttered words of wisdom in a Q&A.

He understand the market better than you , that s for sure.

He was right to reduce the wafer supply since numbers say that
PC shipment collapsed by 14% during Q1 2013 , so last year slump
was just the tip of an iceberg that he saw coming , contrary to you....

 

[frozentundra123456]

He understand the market better than you , that s for sure.

He was right to reduce the wafer supply since numbers say that
PC shipment collapsed by 14% during Q1 2013 , so last year slump
was just the tip of an iceberg that he saw coming , contrary to you....

Wow, that post is almost like a person saying he is glad he has a serious illness just so he can say "I told you so" to someone who thought he was not sick.