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New Advanced Micro Devices CEO Rory Read is getting a lot of high marks from industry observers for his work at PC vendor Lenovo, a significant player in an industry that is core to AMD’s business. However, they said, Read will need to find a way to ensure AMD remains a significant presence at a time when the PC industry is struggling.
That will mean not only continuing the company’s efforts in driving performance and energy efficiency in its PC and server chips, but also embracing opportunities outside its comfort zone, in new form factors like tablets and new enterprise areas like “big data,” according to analysts.
“Short term, they have to find a way to make AMD more relevant, which is becoming an increasing problem, given folks are talking about this being a post-PC Era and AMD is largely thought of as a PC parts company,” Rob Enderle, principal analyst with The Enderle Group, said in an email to eWEEK. “Long term, they need to get out of Intel and increasingly Nvidia’s shadows so they can shine with their own unique strengths. Their [Fusion] APU [accelerated processing unit] was actually a good start, but if they want to shine, they have to be seen as a real leader in a market that isn’t dying. Given the broad implications of the last part of this, it might have a bigger impact to fix the -dying market’ part first.”
After eight months of searching for a successor to former CEO Dirk Meyer, company officials announced Aug. 25 that Read-most recently Lenovo’s president and COO-is taking the helm at AMD. Company executives and analysts praised Read, 49, for his ability to grow revenue and income at Lenovo while keeping control of margins, with some analysts saying that such an ability to execute will be a key asset for AMD.
During a conference call with analysts and journalists, AMD Chairman Bruce Claflin, who oversaw the search for Meyer’s replacement, praised Read’s passion, competitiveness and strategic mind-set.
“As a former [AMD] customer, he will bring the voice of the customer inside the company,” Claflin said.
For his part, Read-who spent 23 years with IBM before moving to Lenovo-spoke enthusiastically about what AMD is doing now and its opportunities down the road. He pointed to the Fusion strategy-offering processors that integrate the graphics and CPU on the same piece of silicon-and the company’s upcoming release of its next-generation “Bulldozer” Opteron server chips, as key strategic advantages going forward.
At the same time, he shrugged off the idea that the PC market is in decline, saying the space for traditional systems will continue to expand for the next five to 10 years. Read also spoke about opportunities in new areas, such as the mobile computing and cloud computing environments.
He was short on details about his plans, but said he is still in the early process of meeting customers and partners.
“AMD is a unique company,” Read said. “There’s outstanding potential here.”
He takes over a company that has been trying to find its footing over the past few years while competing against giant chip maker Intel. The launch of the long-awaited Fusion initiative in January was important, but it also came at the same time Intel released its “Sandy Bridge” architecture, which also offers integrated graphics and CPUs. In addition, a week after the Fusion launch, Meyer was forced to resign after disagreements with the board over the company’s direction.
The board reportedly was upset about AMD’s slow reaction to the mobile computing trend, as well as the market share it was losing in the server chip space.
Analysts generally applauded Read’s experience in the PC space, though some questioned whether finding a PC veteran was the right move.
“We view Mr. Read as a solid hire with strong PC industry experience that should be beneficial to AMD’s core business,” analysts at Deutsche Bank Securities said in a research note. “However, we note that the former CEO was dismissed due to a lack of vision and apparent failure to capitalize on the mobile opportunity. While Mr. Read clearly has strong PC experience, we fail to see how his experience addresses these concerns.”
Others viewed Read’s PC experience more positively.
“Read has done a great job at Lenovo, building market share while holding onto margins,” Dan Olds, an analyst with Gabriel Consulting, said in an email to eWEEK. “And he’ll certainly give them credibility with the PC side of the business, particularly notebooks.”
“We believe his track record with Lenovo Americas will bring the necessary experience needed to improve [operating expenses] and lead AMD’s road map progress,” Vijay Rakesh, an analyst with Sterne Agee, said in a research note. “We believe AMD made a smart move hiring a key customer into their top management position, which should at least help AMD hit the ground running, understand the market and win over some of its customers.”
AMD’s board also found the company salesman AMD needed, Nathan Brookwood, principal analyst at Insight 64, said in an interview with eWEEK. Meyer had a strong technical background, but lacked the skills needed to sell the company to large and small groups of people, he said. The same can’t be said about Read, who effusively talked about AMD’s culture, road maps, strategies and people.
“Listening to him on the [conference] call, that [enthusiasm] really comes across,” Brookwood said, noting that such a personable presence is important as vendors look to sell their products and road maps. “The company is right now … set in terms of products and market position, but with [Read in position], maybe they can sell more of them.”
The analysts also talked about the importance of finally having a permanent CEO in place, saying the lengthy search had a negative impact on the perception of the company, as well as its financial numbers.
“The issue for AMD is that the long search made it look like the firm was rudderless, and that isn’t good for customers or investors,” Enderle said. “They really needed someone in that job, or they were likely to start bleeding revenue and investors badly.”
Sterne Agee’s Rakesh agreed. “Another big drag on AMD shares has been resolved with the announcement of a new CEO,” he wrote. “AMD has been without a permanent CEO since Dirk Meyer left … which has been a significant overhang on the shares with constant speculation. We believe the appointment-a smart move-should help AMD refocus on its markets.”
Short term, that means pushing forward its core Fusion and Opteron strategies. Farther down the road, AMD will need to expand what it does, analysts said.
“Longer term, they need to find a strategy that keeps them relevant over the long haul,” Gabriel’s Olds wrote. “To me, it means embracing the newest trends in computing (like enterprise analytics, or big data, as it’s referred to) and craft products aimed at solving those problems. This doesn’t necessarily mean specialized chips, but it probably does mean initiating and/or supporting activities aimed at exploiting their Fusion processors for use in these types of workloads.”