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Advanced Micro Devices officials have a plan for how to get the chip maker back into sustainable profitability, a strategy that they laid out for financial analysts and journalists during a meeting in New York City last month.
However, spinning off a business or breaking the company in two reportedly is not part of the plan.
Citing three unnamed sources “familiar with the matter,” Reuters reported June 19 that CEO Lisa Su and other executives were in the early stages of reviewing whether to spin off a business or split in two, including possibly separating its graphics and licensing business from its server chip unit.
AMD had gone so far as to bring in a consulting firm to help with reviewing its options and help develop plans for how a spin-off or break up could happen, according to the report. The sources cautioned that there is no guarantee that either option would happen.
According to an AMD spokesperson, neither a spin-off nor a breakup is in the works. Spokesperson Sarah Youngbauer told ExtremeTech that “while we normally would not comment on such a matter, we can confirm that we have no such project in the works at this time. We remain committed to the long-term strategy we laid out for the company in May at our Financial Analyst Day.”
During the session with the financial analysts, Su and other executives outlined a strategy that they said will bring the company back to profitability in the second half of the year, and enable AMD to sustain the profitability going forward. The chip maker will go after the gaming, immersive computing and data center infrastructure markets as the foundation of the recovery plan, leveraging AMD’s expertise in such areas as high-performance CPUs and GPUs, visualization and power efficiency, and taking advantage of new technologies such as high-bandwidth memory. Among the segments the company is aiming for is high-end PCs.
A key to AMD’s plan is to decide what the vendor does best and not worry about other markets—like low-end PCs, smartphones and devices for the Internet of things (IoT)—that do not offer a good return.
“We don’t need to do everything,” Su said during the meeting in May. “We need to pick the things we can do very well.”
AMD has seen its stock price fall in recent years and in October 2014 said it was cutting 7 percent of its workforce. It continues to try to expand its reach into new growth areas and to lessen its reliance on the stagnant global PC market. The PC market has seen shipments worldwide decline since 2011 as more business and consumer dollars are spent on new devices, including smartphones and tablets. In 2012, about 90 percent of AMD’s revenue came from PCs. Last year, that number was down to about 60 percent. The company also is still trying to compete with larger rival Intel, which has significantly more resources and dominant shares of such markets as server processors.
At the same time, AMD is competing with other chip makers that use ARM’s low-power systems-on-a-chip (SoC) architecture for small, highly-efficient systems that run in Web-scale and cloud environments. AMD is embracing the ARM architecture to complement its traditional x86 chip business, but the move puts it into direct competition with the likes of Qualcomm, Applied Micro and Cavium.
A number of tech vendors are planning to break in two or spin off businesses—while others are facing pressure from some shareholders to do so—to better compete in a rapidly changing industry. Most prominent among those is Hewlett-Packard, which on Nov. 1 will split into two new companies—Hewlett-Packard Enterprise, which will sell products like data center hardware, cloud technology and services, and HP Inc., which will focus on PCs and printers. Meanwhile, Symantec is separating its security and storage businesses, while eBay is spinning off PayPal.
In addition, EMC is being urged by some investors to shed VMware and break apart its federated business model, while Qualcomm is feeling similar pressure from shareholders.
AMD could have particular challenges if executives pursued a breakup, including how it would impact the cross-license agreements it has with Intel.