Print 33 comment(s) - last by reaperrr.. on Mar 2 at 2:15 PM

Meyer says "smart men have foundries"

AMD is struggling with returning to profitability at the same time it is fighting with Intel in the X86 processor market. The struggles have led to some hard decisions at AMD that have included layoffs and pay cuts.

As AMD prepares to shed its foundry operations and spin them into a new company, AMD CEO Dirk Meyer is opening up about the changes. AMD founder Jerry Sander has a maxim he lived by when AMD first started that stated, "Real men have fabs."

Meyer suggests that while Sander's was a smart man, the market has changed significantly since AMD was founded. Meyer suggests a new maxim, "Smart men have foundries." Meyer said during an interview with eWeek, "Jerry was a real smart guy but the industry has changed a lot since that time, so I think, ‘Smart men have foundries,’ is my new quote."

Whatever Meyer's new maxim for success is, the fact remains that spinning the foundry portion of AMD off into a new company was a good way for AMD to get much needed capitol and remove debt from its books at the same time.

EWeek reports that the spin off means AMD received $800 million in capital and was able to remove $1.2 billion in debt from its books. The majority of that debt was from the purchase of ATI, which continually haunts AMD.

Meyer continued saying, "Clearly it’s going to be a culture change for the company. There are a large number of capable manufacturing technologists and manufacturing people who will no longer be part of AMD, but the good news is they get to create a new company. Some people have asked me about the risk—as to imply there are big risks—but honestly I think we are on top of what we have to do both in terms of R&D and supply chain operations."

The spinoff of the foundry portion of the company was announced in October of 2008 and was temporarily called The Foundry Company. The spin off was finally approved by AMD shareholders this month allowing the process to continue.

Former AMD CEO Hector Ruiz will head The Foundry Company and the official name of the company will be announced soon according to eWeek. The split will allow AMD to focus on the design and marketing of CPUs to better compete with Intel.

Intel has moved well ahead of AMD in many markets and AMD has work to do to regain ground it has lost. AMD has been hit with a number of significant losses over the last several years that have impaired the company. The most recent loss came in 2008 with AMD posting a loss for the year of $3 billion.

Meyer also talked a bit about Intel and its claim that license agreements in place between AMD and it would not be covered for the new company. Meyer said, "I think it’s pretty clear that they [Intel] are trying to instill fear, uncertainty, and doubt in the minds of our customers, shareholders and other stakeholders."

AMD still maintains that the licensing agreements are in effect despite the spin off.

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RE: Not sure
By batman4u on 2/27/2009 2:28:24 PM , Rating: 2
he who doesnt risk doesnt win. as with all great oportunity their is a great risk (decisions go both ways) and in this case a great oportunity or risk decision gone sour because of the bad management of Hector Ruiz i think is the best explanation i can think for what happened and my own opinion the way ruiz steered the company move was not appropiate, sure at the time i was excited but after seeing how their was no real sense of direction i just though of a spanish saying (zapatero a su zapatos)"shoemaker let him make his shoes" i mean AMD should have focused making CPUS and ATI their VGA cards and not merging and making a mess against a company that is 10 times stronger, moves against a Behemoth company is made carefully

but then again their are no IF's

RE: Not sure
By yomamafor1 on 2/27/2009 5:22:26 PM , Rating: 3
You're right in the sense that risks are always involved in a business decision. And in this case, as others have pointed out, there's no "short run" if they don't transfer the debt to the Foundry Co.

However, I think the decision to acquire ATI was not a bad one, although it was done in a bad time. As more companies move to sell a package (platform) as opposed to just a single product, AMD would have a hard time competing if they also don't have a package to offer.

Take Apple's iPhone for example, Apple not only sell the phone to the customer, they also integrated iTune connection capability for people to buy songs and videos, as well as App Store to encourage 3rd party software development. I believe it is the package that Apple's iPhone a hot seller, not just iPhone itself.

Similarly, AMD needs to offer a platform of their own in order to get a bigger share in the pie of the market. However they couldn't have done it in a worse time. The acquisition was made when Intel's Core 2 was launched, while ATi's own 2900XT was a failure. If Hector actually had taken the time to evaluate ATi's product, I'm sure he wouldn't just come to the conclusion of purchase at 5x the market value.

RE: Not sure
By batman4u on 2/27/2009 5:46:08 PM , Rating: 3
i also agree on AMD/ATI was in its time an excellent idea

i still am an AMD Loyalist and buy and will continue buying AMD cpus with mobos with AMD chipset and ATI videocards hoping to contribute and not watch the Best competition iNtel has had ever and then after AMD disolves watching how Celeron cpus go skyrocket high prices

pointing this i also would like to see if VIA is going to do something interesting

RE: Not sure
By reaperrr on 3/2/2009 2:15:33 PM , Rating: 2
It was the right decision, just bad timing. 6 months earlier, and AMD wouldn't have had to make as much debt to buy them, because at that time AMD stock was worth much more.

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