AMD: Company break-up is not an option

One report said that Advanced Micro Devices Inc. (AMD) is considering spinning its graphics business. However, that prospect totally goes against its long-term strategy. There is a reason AMD issued an unusually prompt and forceful denial when a recent report claimed it had engaged a consulting firm to help explore options for breaking up the company. Simply put, considering such a move would run 180 degrees counter to the actual AMD strategy that executives just laid out to the financial community.

A June 19 report by the Reuters news service said AMD was at the initial stage of reviewing whether to split up the company and that AMD had engaged a consulting firm to help it review such options. Some speculated that the AMD was considering spinning off its graphics chip business.

Frequently, reports about boardroom level deliberations on drastic moves solicit a "no comment" from the company involved, or some boilerplate corporate speak about that company's policy to not comment on rumour or speculation. But AMD responded quickly and definitively, saying through a spokesperson that the company had not hired an outside agency to explore breaking up the company and that AMD was committed to the long-term strategy it laid out for analysts in May.

That strategy is essentially to grow in markets outside the traditional PC, where the bulk of AMD's revenue has always come from. The company is looking toward gaming, where it's had success; data centres, where it currently derives less than $300 million in annual revenue; and what AMD executives call "immersive platforms," basically devices that connect to the Internet of Things (IoT) as opposed to the data collection sensors that sit at IoT endpoints.

AMD has made significant progress in non-PC markets over the past few years. In 2012, 90 per cent of AMD's revenue came from the company's computing and graphics segment. By last year, that number was down to roughly 60 per cent, with the remaining 40 per cent coming from the enterprise, embedded and semi-custom products segment.

(Note: AMD cut its second quarter sales estimate Monday (July 6), saying it expects sales to decline by about eight per cent sequentially. The company, which previously guided for sales to be down about three per cent, blamed weaker than expected PC sales.

It's been more than four years since AMD rolled out its first accelerated processing units (APUs), which feature CPU and GPU cores on a single chip. Last month, AMD rolled out its sixth generation of APUs, previously codenamed Carrizo. The ability to develop advanced CPUs and GPUs is central to AMD's ability to develop future APUs and the dual threat capability is still at the heart of the company's strategy for differentiation and further penetrating new markets.

AMD is still investing heavily in developing advanced CPUs and GPUs. The company is now at work on both x86 and ARM CPUs as well as Radeon graphics chips.

Mark Papermaster, AMD's CTO, likes to use the phrase "sustained innovation." He said AMD is investing heavily in CPU and GPU technology, as well as the capabilities to put the two together efficiently.

In a recent interview with EE Times, Papermaster said industry trends are driving the need for increased CPU and CPU capabilities. The trend toward rich, high-resolution displays on all manner of consumer electronics products creates the need for more advanced graphics capability while the explosion of data created by the IoT and the explosion in the number of connected devices drives the need for more and more processing power, he said. "The industry is moving our way," Papermaster said.

"AMD has a bunch of interesting technologies," said Bob O'Donnell, founder and chief analyst at TECHnalysis Research LLC, noting that AMD is the only company simultaneously developing both ARM and x86 cores. "The question is: is that just an interesting science experiment, or something that has practical value?"

Papermaster likes the technology that AMD has developed and says he is proud of the innovation and tenacity displayed by the company.

"We're uniquely positioned to have a leadership CPU capability, graphics capability and the ability to put them together in a very seamless way," Papermaster said.

Papermaster went on to say that AMD's success is not just about "the engines," the hardware CPUs and GPUs, but also about investing in the software and accelerators that unlock the value of the company's cores. "It's not just about putting out great engines and saying, 'Here, industry, have at it,'" Papermaster said. "We've got to enable it. We've made significant advances."

"They continue to look at ways to take the technology they have and move in a variety of directions," said O'Donnell said. "The ability to do graphics and do parallel computing I think is ultimately going to be valuable. It's just a question of how long it takes to take off."

Clearly, AMD has a lot of irons in the fire. To what degree the company will succeed in these new endeavours is an open question. AMD is still a distant second in PC processors, a distant third in graphics and the new areas of focus for the company are swarming with competition from old rivals and new. But it's clear that AMD has no immediate plans to spin off part of its business or otherwise alter the fundamental structure of the company.

Papermaster said: "We have been focusing on reloading our war chest of technology and we are ready for the fight."

- Dylan McGrath
??EE Times