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AMD CEO downed by lost server-chip business

Kindness of HP, Dell and Intel not enough

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There's a lot of speculation about why Dirk Meyer, chief executive for more than two of the most tumultuous years in AMD's turbulent history, was shown the door last week.

Everyone is speculating that it was about AMD not fielding a proper processor to ride the tablet wave like a stoned-out surfer dude. But if you read between the lines in AMD's financial report for the fourth quarter and listen carefully to what interim CEO and current chief financial officer Thomas Siefert said on the call with Wall Street analysts on Thursday, then it becomes pretty obvious that server processors were also an arrow in Meyer's back.

Or more precisely, they were not AMD's savior and therefore weren't Meyer's either

It was during Meyer's reign, after all, when Intel woke up and delivered better Xeon 5500s in 2009 and then 5600 and 7500 processors in 2010. AMD's Opteron 2400s and 8400s were alright, but the Opteron 4100s and 6100s from last year had chipsets only from AMD and required server makers to switch to new sockets as well.

And during a recession, server makers decided to put most of their energies into designing, making, and selling Xeon-based products and largely ignored - except for some decent boxes from Hewlett-Packard and Dell and one decent box from IBM - the new Opteron lineup.

And that is why Intel's server processor sales throughout 2010 and especially in the fourth quarter of last year pushed the company to new revenue and profitability heights.

Seifert did not offer any excuses about the Opteron quandary in the Q&A session with analysts. "I am not going to make any secret about it, we were disappointed in the segment in the fourth quarter, and this is one of the areas we see with room for improvement," Seifert said. "We have to work on go-to-market strategies, and this will be one of the areas of emphasis going forward."

Seifert said that server processor revenues were slightly down in the fourth quarter, but AMD had "higher expectations" for the first quarter of 2011. One reason for optimism is because the first quarter of last year was ahead of the big Intel and AMD chip rollouts, and this is an easy compare.

For AMD overall, Computing Solutions revenues - that's chips and chipsets across PC, workstation, and server platforms - were flat sequentially and year-over-year, with CPU average selling prices down sequentially and flat compared to the year-ago period.

So Opteron servers chips did not necessarily do worse than Phenom, Athlon, Fusion, Turion, and Sempron chips. It is just that server chip sales were not the hero that they were over at Intel in the same quarter.

In Intel's fourth quarter, sales in its Data Center Group, which makes CPUs and chipsets for workstations and servers, had revenues of $2.5bn, up 15 per cent sequentially from Q3 and up 24 per cent from the year ago period. All of Intel's other product lines were flat sequentially, so the server bump was really obvious.

AMD is not expected to get its 16-core Interlagos Opteron 6000 series processors for G34 sockets into the field until the third quarter, with the eight-core Valencia Opteron 4000 series chips for C32 sockets coming sometime after that.

This is a long time, with Intel readying its ten-core Westmere-EX chips for the second quarter and revving Sandy Bridge Xeons for entry and midrange servers for the third quarter as well. AMD needs to beat Intel to market to recapture the affections of server makers. This is the underdog's raison d'etre and only practical strategy, as AMD well knows from its initial experience lining up server makers with the original Hammer Opteron chips, the first 64-bit processors that used the x86 instruction set.

As it turns out, there will be another server chip coming out from AMD earlier than the third quarter. Seifert said a variant of the Orochi workstation processor, due in the spring, will be made available for servers in late summer. The Orochi chip is based on the Bulldozer core module, which has quasi-cores, and in fact packs four of these onto a single die.

This makes it, for all intents and purposes, an eight-core processor. The Orochi chip will plug into the AM3+ socket, not the G34 or C32 sockets used by the Opterons and may find some use in the micro tray servers that are increasingly popular among hyperscale data center operators.

The server market is spoiling for a fight between Intel and those who are tweaking the ARM RISC chip for use in micro servers, and there has been plenty said about how AMD needs go back into the ARM chip design business and take Intel on in an oblique rather than direct attack.

When asked about the possibilities of doping ARM chips, Seifert did the usual I-don't-want-to-be-the-CEO dance that a CFO does when they get put in the hot seat on an interim basis. "You have to realize that the expertise in x86 and GPUs that we have in the company is very broad," Seifert said in professor mode, adding that it could, in theory, be applied to other areas.

"We will embrace any changes that happen in our ecosystem," Seifert said, but made it crystal clear that AMD was focused on delivering to its CPU, GPU, and APU roadmaps as well as trying to get a new CEO to plot a new course to a new future. ®

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