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AMD to 'reset' goals: servers, embedded, ultra-low power

CEO Read promises 'clear and decisive action'

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After his company announced a $157m loss and its plans to lay off 15 per cent of its global workforce on Tuesday, AMD president and CEO Rory Read explained how he and his brain trust plan to pull Intel's only x86 competitor out of its spiral.

First, AMD will "reset and restructure" its business model to reduce expenses by 25 per cent, with a goal of hitting a quarterly break-even point of $1.3bn in revenue by the third quarter of 2013.

Second, it will expand its efforts, as Read told analysts and reporters during a conference call, "beyond the traditional PC market," and put more emphasis on "fast-growing and adjacent markets" such as chips for servers; embedded cores and SoCs for communications, industrial and gaming platforms; and ultra-low-power chips and platforms for devices such as tablets and "ultrathins" – which is AMD-speak for what Intel has trademarked as Ultrabooks.

"Today, approximately 85 per cent of our business is focused on the legacy PC portions of the market projected to have slowing growth over the next several years," Read said. "Over the next three years we intend to drive 40 to 50 per cent of our portfolio to the faster growth markets where our IP is a differentiator."

In addition to the "macroeconomic issues" that each and every industry player has commented on as contributing to the ongoing PC sales lethargy, Read cited another common explanation for softening PC sales: the impending launch of Windows 8.

In addition, he also cited the cannibalization of PC sales by tablets, which he said "continue to grow as a consumer device of choice."

As did Intel president and CEO Paul Otellini during his remarks after his company's disappointing third-quarter financial results earlier this week, Read says that the microprocessor market is in transition. Unlike Otellini, however, he said that the drop-off happened faster than he had expected.

"Shortly after joining AMD, I talked about the fundamental changes occurring in the PC industry," Read said, "These trends are occurring now at an even faster rate than anticipated. We underestimated the speed of this change in our industry and expected to have several years to transform AMD's business."

Those several years simply don't exist. Read doesn't see struggling, sluggish, soggy PC sales – both consumer and enterprise – reviving anytime soon. "We do see the PC market as one that will continue to be under pressure for the foreseeable next several quarters," he said.

And for a company losing money as AMD is, waiting until that market revives is a non-starter.

Read promises "clear and decisive action," but transitioning a PC-centric company to one that does half its business outside of the "legacy PC space" is fraught with challenges – and the way ahead is misty and murky, at best.

As Read reminded his listeners, "A lot of the historical forecasts and trend lines have broken over the past two quarters." Whether AMD can "reset" those forecasts and "restructure" those trend lines will almost certainly decide if Read and his company will be around in, say, three years to paint a rosier picture during a post-results conference call.

Perhaps the most concise summation of AMD's current situation was heard in the final two words of the call, spoken to Read by one of the analysts: "Good luck." ®

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