Monday, June 20, 2011

Wanna be AMD's CEO? Here's your checklist

AMD's got a problem: Nobody wants to be its CEO, or at least those that have been pre-selected as prime candidates appear to be uninterested. According to reports, that list includes: Apple CEO Tim Cook, Oracle copresident (and ex-HPer) Mark Hurd, EMC COO and ex-Inteler Pat Gelsinger, and Carlyle Group managing director Greg Summe. Interim CEO (and current CFO) Thomas Seifert has said he doesn't want to be considered for the permanent job.

One thing an AMD CEO candidate will want to know is the BoD's dynamics: is there consensus on a strategic direction, and how much input will the new exec have in setting strategy? "In this case the search is not just about finding a proven CEO who fits into the culture, but much more importantly, a transformative leader," Louis Gerhardy, a former exec-search consultant and market analyst, told Bloomberg. "The selection will have a profound impact on shareholder value at AMD."

It can typically take six months to a year for high-profile position like this; "finding the right candidate is important, more important than hitting a specific time window," Siefert said in the company's 1Q11 call. But "if by the end of the summer they haven't done something, then they've got a problem," Raymond James analyst Hans Mosesmann told Bloomberg.

So what else should the new AMD CEO -- whoever it is -- expect to deal with? Uche Orji of investment bank UBS has a checklist:

Clear the air. One challenge that wraps over all others: the need for a stronger strategic view that moves AMD beyond a current perceived role (justified or not) as just an alternative to Intel, Orji says.

Mobile strategy: "religious" roadmap, beyond tablets. Its rivalry with Intel aside, AMD has not been seeing growth inroads into mobile devices (tablets and smartphones), which apparently was the key sticking point between the company's board and ex-CEO Dirk Meyer. AMD's first-gen product gives it a toehold in tablets, but it's a good start, "especially as AMD can differentiate on graphics," Orji notes. But adopting the ARM architecture (either organically or through M&A) may not be the way to go, as it "could dilute resources that would hurt its ability to compete in its core x86 market," outside of which it hasn't executed well.

Unfortunately, everyone else is pursuing those markets too, so AMD needs to also take care and not become "the umpteenth chip firm" with a me-too ARM-based processor."

Leverage graphics. Better microprocessor/graphics integration was the reason AMD took over ATI back in 2006. Now, the company needs to take its fight with Nvidia in the consumer space and push harder into professional graphics, Orji argues.

Server focus. Going fabless has had some advantages (e.g. no exorbitant spending on next-gen process and fab facilities), but at the same time there's a concerning trend: AMD's share sunk to 7% in 1Q11, down from 22%. ("The lesson: owning server marketshare is more important than not owning a new fab," summed Credit Suisse's John Pitzer.) Orji thinks the new AMD CEO needs "a more viable go-to-market strategy" that approaches server chips as "a service business," with appropriate sales and support underpinnings.

Elsewhere, get friendly. Partner on baseband, connectivity, and software.

Reduce debt. AMD's long-term debt is around $2.2B (total debt almost $2.3B; that's half of what it was from 2007-2009. But with ~1.75B in cash, that's a debt-to-equity of 143%, way way above peers (single-digits) and 5-year return-on-equity is in the red.

No comments:

Post a Comment