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What's really happening at AMD?

by Scott Bicheno on 1 April 2008, 11:21


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Greatly exaggerated reports?

Recently the web has been abuzz with a rumour that AMD was cutting five percent of its workforce.

In spite of the usual policy of not commenting on rumours and speculation, AMD did state, when the rumours first came out, that there hadn't been any cuts.

This didn’t stop the rumour mill from turning, however, and by the start of last week, the speculation ante had been upped to ten percent.

AMD spokespersons recently confirmed to that: 'We have not had a workforce reduction, as the stories have suggested'. As before, they didn’t want to discuss what might happen in the future.

While is happy to take the above statements at face value, we also have every conviction that there’s more than a kernel of truth in the rumours. So we decided to take a more in-depth look at the current state of play at AMD.

The current state of play

Everyone knows 2007 was a tough year for AMD. There’s no doubt that a big reason for this was Intel getting its act together with its Core 2 architecture processors and mainly taking the horsepower-performance lead away from AMD.

When Intel's 'Conroe' processors finally blasted onto the market, and despite Intel seemingly giving AMD the 'courtesy' of a heads-up of some four months or more, they presented a major setback to AMD. But while Intel's progress wasn't something AMD could control, some critical strategic decisions it made around that time seem to have exacerbated its problems...

One was an apparent (almost overnight) shift in strategic emphasis towards increasing market share in the enterprise sector, to the detriment of AMD’s traditional strength – the channel. Several sources have indicated to HEXUS that this was a directive effectively issued by AMD boss Hector Ruiz himself.

There seemed to be a willingness to forsake AMD's hard-won consumer desktop business in exchange for the hope of a larger slice of the enterprise pie

Perhaps the thinking was that it must divert the lion's share of resources towards tier-one enterprise solution providers – and thus sell more Opteron processors for servers and workstations – while the channel, where its desktop Athlon products were very successful, would take care of itself.

But our sources went further, explaining that the plot seemed to be a willingness to forsake AMD's hard-won business on the consumer desktop and the channel relationships that went with it, in exchange for the hope of a larger slice of the enterprise pie.

So we saw AMD take on executives with a strong enterprise background and launch channel programmes designed with Opteron in mind. By 2006, we had Microsoft’s Steve Ballmer and HP’s Mark Hurd publicly cheering on AMD’s enterprise efforts and then, we had the big one...