AMD's Annus Horribilis
In previous Hubs such as How AMD's Failures Are Triggering An Intel Monopoly, AMD's Hector Ruiz: Floundery Company's Slyest Rat Of All, and AMD's Dr. Ruiz Pathetically Pleads To Survive, I've outlined the sheer baldfaced incompetence of AMD's management, including the very special poisoned dart directed towards Dr. Hector Ruiz who has consistently fiddled while AMD burned. At the end of the most disastrous year that any high technology company has suffered since the creation of silicon by the Big Guy Upstairs, let's take a look back at the comedy of errors that has been the world's number two CPU manufacturer.
From a high of almost $41 a share in 2006, AMD's stock has drooped all the way down to under $2, bringing its market cap to a laughable one billion dollars. Yes, the market has not been kind to high tech firms (or pretty well anyone else) in 2008 but while arch-competitor Intel is down about 50% from its highs, AMD is down more than 95%. And most of the fault can be directed like an arrow at the heart of the boardroom.
AMD has made some stupendously horrific mistakes lately, and it's actually surprising that their current market cap is now not a baseball cap. Their acquisition of Canadian video card manufacturer ATI for almost $6 billion dollars turned out to be a mutual murder suicide pact. The value of ATI has been absolutely ravaged, and given the fact that they actually have seen some long-overdue market success lately with their Radeon 48xx series of cards, it is not difficult to imagine that a standalone ATI would now be worth many times more than the joint AMD-ATI morass. Dr. Ruiz's reverse Midas touch has managed to drag down the value of the only even remotely worthwhile part of the combined company until there is effectively no shareholder or consumer value whatsoever.
Then there's Phenom. Yes, it was "supposed" to beat Core 2 Quads by staggering percentages, but it turned out to be the Edsel of the CPU industry. The first versions of Phenoms and their Barcelona server sisters were crippled by a serious TLB errata, missed delivery dates, and more jokes thrown in their direction than shoes at George W. Bush. Their hurriedly revised 9x50 series of processors squashed most of the errata, but by then it was too little too late. Core 2 Quads were now in the Yorkfield mode and laughed heartily at Phenom's outdated 65nm process.
At the edge of desperation, AMD decided to chop itself into two halves, creating The F(l)oundery Company to actually make the chips, separated from the rest of AMD which is apparently lamb for the slaughter. The wily Dr. Ruiz plunked himself at the head of The Big Flounder figuring that even though AMD was beyond help, at least he might be able to keep the millions of dollars of executive compensation coming in by subcontracting out his fabs to other chip companies which benefited from management decisions that didn't suck more than a Closeout Sale at the Dyson factory.
All through this debacle of a year, AMD kept harping on about its Shanghai and Deneb CPUs which were supposed to get them back in the race. Although neither of them have been formally available to the public yet, an analysis of their engineering, plus the benchmarks smuggled out from under the stifling weight of Non Disclosure Agreements show that Shanghai can barely keep up with a mid-range Core 2 Quad, and Deneb (which was supposed to be AMD's Core i7 killer) is marginally better. Intel's bottom of the line Nehalem the Core i7 920 is likely to blow Deneb into the weeds, and if we try to factor in the 965 Extreme Edition 3.2 GHz Core i7 it turns out that we're comparing a Lockheed Martin / Boeing F-22 Raptor with a De Havilland Tiger Moth Cropduster. The sad truth is that AMD has fallen a good two years behind the competition in a CPU universe where weeks can make the difference between success and failure.
For some reason known only to a few select inhabitants of Abu Dhabi, and possibly as a side effect of sunstroke under the Arabian Peninsula desert sun, AMD keeps tapping into what seems to be an inexhaustible supply of money from a petroleum super-billionaire whose idea of a good time is to buy the world's largest commercial airliner, an Airbus A380, and spend an additional $150 million to turn it into the world's biggest private jet. Take that, Donald Trump and your weenie DC-9! However, he could certainly take some investment lessons from The Donald, as the majority of the money he's sunk into AMD so far has evaporated, and his investment today is worth a bare fraction of what he's put into it. So why is the money still flowing into AMD's coffers? Who knows? Maybe the Sheik thinks Dr. Ruiz has a pert and adorable derriere.
What will be of AMD in the Grand Shake-Out Year of 2009? Believe it or not, I think that AMD will actually beat the odds, as well as all logic, by surviving, if barely. The recession world of the next few years is not a place for a single CPU manufacturer, thus the only competitor will stay alive, whether it deserves it or not.
But if the U.S. government counts it into the TARP fund bailout/handout of billions of taxpayer dollars, I'm gonna scream bloody murder!