What led to AMD’s troubles in 2015?
Two years ago, most investors and analysts expected Advanced Micro Devices (AMD) to go bankrupt as the cash-strapped company struggled to make its interest payments amid deepening losses. During its 2015 Financial Analyst Day, AMD noted that its revenues declined 30% YoY (year-over-year). The company noted that it had a high debt load and heavy losses as it faced strong competition from Intel (INTC) and NVIDIA (NVDA). At that time, AMD’s long-term goal was to stabilize the business, grow revenues and market share, and prioritize investments.
Many analysts noted that AMD’s key problem was poor execution. The company has a history of delayed launches, overcommitment, and underdelivery because the company’s investments were scattered across various product and process technologies. The company exited the high-end server processor, PC processor, and GPU (graphics processing unit) markets.
In September 2014, Lisa Su assumed the position of AMD’s chief executive officer and started optimizing the company’s investments in core technologies of CPUs (central processing units) and GPUs. Her aim was to bring AMD back in the high-end PC, server, and GPU markets.
To improve product execution, Su created Radeon Technologies Group. While AMD focused on CPUs, Radeon focused on GPUs. The company aims to develop basic cores that are competitive with today’s products and then improve them further to beat the competition.
AMD’s product execution on track
In 2016, Radeon launched Polaris GPU, which was competitive with NVIDIA’s Maxwell GPUs but not competitive with the latter’s high-end Pascal GPU. In 2017, AMD plans to launch the Ryzen PC CPU and EPYC server processor, which are competitive with Intel’s Broadwell PC CPU and Skylake server processor. However, they are not competitive with its upcoming processor.
AMD is offering its new products at a lower price than its competitors to deliver a better price-to-performance ratio and regain lost market share. At the 2017 Financial Analyst Day, AMD announced its product roadmap through 2020 to give consumers and investors a look at the company’s upcoming developments and build confidence in its strategy.
At the Bank of America Merrill Lynch Global Technology Conference, AMD’s chief technology officer, Mark Papermaster, stated that the company is leveraging its CPU and GPU technology into the embedded and machine learning space to meet the need for high-level processing and graphics. AMD developed Infinity Fabric, which interconnects CPU and GPU cores efficiently and controls power supply and security.
In this series, we’ll look at AMD’s long-term financial targets and its strategy to achieve those targets.