AMD's colorful CEO Hector Ruiz is stepping down after the chip maker posted a large second-quarter loss. AMD will replace Ruiz with company President Dirk Meyer as the Intel rival tries to return to profitability.Advanced Micro Devices CEO
Hector Ruiz is stepping down from his leadership post and President Dirk
Meyer will take over the leadership of the struggling chip maker.
The news that Ruiz would step down came after AMD
reported a $1.19 billion loss during the second financial quarter of 2008. In
addition to the quarterly loss, AMD
announced that it would divest itself of its consumer electronics division,
which the company inherited after the ATI acquisition in 2006.
Following a number of technical and financial missteps, rumors started to swirl
that Ruiz would be forced to step down from his CEO
position. In the last year, AMD
has lost a number of top executives and the chip maker now plans to cut 10
percent of its 16,500 person work force.
In speaking to analysts July 17, Ruiz
announced that he would step down as CEO but plans to remain as executive
chairman of the board. Meyer will immediately assume the CEO title. During his
tenure, Ruiz led AMD to develop some of its best processors and the company
managed to take market share away from Intel, but the continuing financial
losses, Intel's resurgence and the missteps with delivering the quad-core
Opteron chip in 2007 have put the company in a tough position.
"We have not been living up to that potential, but, looking forward, we
will," Meyer said, adding that the key to success of AMD
in the future is to "execute, execute, execute."
While Meyer will take day-to-day control of AMD,
Ruiz said he will help the company with its "asset-smart" strategy
and lead AMD's
fight against what he called Intel's "illegal monopoly" of the
worldwide x86 microprocessor market. The
European Commission filed additional complaints July 17 against Intel's
practices in the European market.
"On the one hand, they started planning this transition two years ago
to transfer the CEO title from Hector to
Dirk and this move was already on the way," said Roger Kay, an analyst
with Endpoint Technologies Associates. "On the other hand, AMD
has had a couple of tough years and this is a definitive changing of the
guard."
While Meyer, an engineer by training, can help AMD
change its fortunes in the marketplace, Kay said the company's financial
struggles have turned AMD into a potential
takeover target.
During the second quarter, which ended June 28, AMD
sustained a financial loss of $1.19 billion or $1.96 per share compared with
the $600 million loss or $1.09 per share it posted in the second quarter of
2007. AMD's revenues were $1.35 billion this
quarter compared with $1.3 billion a year ago.
Wall Street analysts had been calling for a 52 cent per share loss
during the second quarter with revenue of $1.4 billion. Intel,
AMD's main rival in the x86 chip market, posted a 25 percent net increase in
net income during the second quarter thanks to better-than-expected PC
sales.
Now, AMD plans to rid itself of its
Consumer Electronics division, although the company's executives did not offer
any detailed plans for the business. The loss from these discontinued
operations amounted to $1.52 a share.
In a call with financial analysts, Meyer said the company still plans to
return to some sort of profitability by the end of 2008. For now, Meyer said AMD
would focus on the strongest parts of its core business, which include
processors for servers along with chips and graphics for desktops and
notebooks.
Meyer said he expects notebook sales and back-to-school
sales to add much-needed profit to the company's bottom line during the third
quarter. AMD
launched its "Puma" notebook platform in June.
John Spooner, an analyst with Technology Business Research,
wrote in a July 17 research note that in addition to traditional notebooks,
Meyer is planning to develop a line of processors that will address the type
of low-cost laptops Intel is targeting with its new Atom processor.
"Meyer will work quickly to focus the companys product
development, marketing and sales efforts toward specific goals, including
expanding its share of the enterprise client segment and growing its share of
the global notebook market," Spooner wrote.
"We expect part of its efforts in mobile to involve
unveiling an Internet access notebook (aka netbook) strategy backed by an
as-yet unannounced product lineup, which Meyer referred to during the company's
July 17 earnings call. We believe that Meyer will also make increasing AMD's
share of the discrete PC graphics market with new, higher-performing products
a main area of focus as well."
Editor's Note: This article was updated to include additional comments from an analyst.
Desktops & Notebooks 
/ 3 
