Under-the-weather chip maker AMD is denying that it is mulling a break-up or spin-off – but both analysts and channel customers agree something has to change if the firm is to survive prosper.
A report in Reuters told the world that Lisa Su, the latest top exec at AMD, is exploring all possibilities to steer the company toward sustained profits and maybe even once again snap at Intel’s heels.
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In the world painted by the report, an unnamed consultancy was recently hired to help with this, and one outcome could involve splitting graphics and licensing from the server division.
Not so, an AMD spokesman claimed yesterday.
Usually we do not comment on rumours and speculation but in this case there is no such plan in the works, and we are committed to the plans that we presented to financial analysts in May.
Gartner research director Sergis Mushell reckons any break-up would not be straightforward.
“If you look at the IP AMD holds, it is very specific to the lines of business they are in – there is no IP they can license out or sell off that would not impact existing businesses,” he told us.
The PC market is in decline – the double whammy for AMD being that Intel continues to take share. And stats show AMD's good run in gaming systems has slowed because the market has slowed. In servers, AMD accounts for just two per cent of total market sales, so its operation there is sub-scale, or “meaningless”, as the Gartner man puts it.
“To invent or develop next generation IP, AMD needs scale that it no longer has,” said Mushell. “They need to make moves but unfortunately every move that it makes will be somewhat painful and it would be a divestiture of a business, not simply a sale of IP.”
The size of the company’s total available market is shrinking, and just weeks ago AMD rationalised it base of distributors in Europe, reducing Microtronica's contract to server chip sales.
System builder sources believe AMD’s product roadmap is 18 months behind Intel at the top end of the range.
“Things are so desperate that corrective action is required, something has to happen,” said another senior channel source at a large AMD customer.
Despite all of Intel’s skulduggery in the noughties and the resulting anti-trust cases brought against Chipzilla, Intel needs AMD to exist.
“It is in Intel’s interests to keep the AMD alive, they have a technology monopoly but Commissions will start to scrutinise this heavily if anything happens to AMD,” a system builder source told us.
AMD ships integrated GPUs and CPUs. It has sold the narrative that this improves performance – divesting one would compromise the other.
Mushell at Gartner lobbed a seemingly wild idea out there, that Intel acquires the CPU/GPU business from AMD. Intel already owns the x86 license and the GPU business is the only major competitor to Nvidia.
Surely not, (back to) the competition regs for one thing.
Mushell said AMD has needed to make bold moves for the past three years, and suggested the comms market could be an area ripe for development.
Former LSI and Intel exec Jim Anderson joined AMD to lead its combined computing and graphics business at the start of this month. Previously he led the LSI team that built chips for Ericsson so has a track record in the communications space.
Another possible opening is in networking following the $37bn acquisition of Broadcom by Avago. “A gap was created there”, said Mushell.
Either way, AMD can’t keep reporting financials that more often than not give off the faint odour of decay.
In 2012, sales fell 32 per cent year-on-year and operating losses were $1.06bn; sales fell two per cent in 2013 but operating profit was $103m; revenues staged a relative recovery in 2014, growing four per cent, though AMD again slumped to an operating loss of $155m. ®