Tuesday, December 04, 2007


This article is dedicated to Henri Richard, and to a lesser extent, to Dave Orton, because they have been the top rats that got a fortune from AMD and have abandoned the ATItanic(1) ship before facing the consequences of their decisions.

Dave OrtonMr. Orton was the CEO of ATI who managed to sell to AMD at 20% market premiums that nest of lice. Mr. Orton didn't allow much time for the evidently catastrophic situation AMD was in to hurt him, he resigned in July of this year.

The inertia that Mr. Orton's ATI carried over to AMD was the disappointing and power hungry 2900 series. It is also interesting to note that although AMD acquired ATI primarily to guarantee support for its processor initiatives, once inside AMD, ATI hasn't done even trivial things like supporting Quad FX. Now that the company has announced that it is killing the Quad FX, we can be sure that there will never be any ATI chipsets for it, the existing nVidia will be the only one...

Henri Richard holding a pair of Quad FX processorsSpeaking about Quad FX, that foolish platform (2) must have been the invention of someone at AMD, very probably Mr. Henri Richard, Senior Vicepresident of Marketing. Since only now that Mr. Richard is not in AMD the company terminates this initiative, it makes you think whether it was his project.

There are other decisions. Most managers at the upper echelons must have pushed for the disastrous "triple challenge" (3). Someone, very probably from marketing, thought that it was a good idea, one year ago, the last quarter AMD had strong demand, to give preference to OEMs and probably specifically Dell, rather than the historic businesses in the Channel, beginning the string of net losses of about $4 per share. Someone must have thought that ATI, a company with few tangible assets beyond its technical and marketing skill, was fairly valued. I don't think that production-minded people like Mr. Meyer or Dr. Ruiz would have taken the decision to acquire ATI without assessments of people from marketing. And finally, someone must have decided that the lesser evil was to launch defective products than to postpone the launching of any K10 altogether.

Henri RichardMr. Richard departed AMD within two weeks of the very late (paper) launching of Barcelona, the first K10 based processor. Exactly what happened with K10?:

  1. The company is not able to produce them even in small quantities, not even enough for IBM to certify its benchmark.
  2. Not able to produce processors of even mediocre speeds, nothing close to what it desperately need, even slower than the already reduced estimates.
  3. The company launched defective Server and Desktop K10 knowingly.
  4. Promises of quantities or debugged products for late Q1
But all of the above is not really important, I heard/read Dr. Ruiz at least in two occasions saying that Barcelona wasn't going to materially affect the financial numbers of the company this year, that the production this year was for "design wins"; but the most important thing we now know about K10 is that it sucks, big time.

I find the chosen timing of Mr. Richard's departure as very good, he left just before the shit hit the fan.

Guys, I have to thank you. Even though you fooled me several times, in the end your departure allowed me to read through your bullshit and thus you indirectly helped me to hold on to my very bearish portfolio bias on AMD with conviction. That has paid off handsomely.

(1) A fellow "cass"posted a comment here where he refers to AMD/ATI as ATItanic
(2) Quad FX is a very foolish platform without coprocessors: A regular "desktop" computer finds very few uses for more than two cores; the economy/speed of unbuffered DDR2 at 800 MHz memory instead of registered DDR2 667 MHz of Opterons does not compensate for the platform premium cost nor the lack of options; the Quad FX, without consumer-oriented coprocessors, always was an expensive platform for cheap memory, an oxymoron.
(3) Triple challenge refers to develop a new architecture, K10, in an immature process and with the complexity, yields and bin split problems of single die quadcores; all at the same time, and unnecessarily.


gfor said...

You negative comments regarding Orton are misplaced. As the CEO of ATI, his first and foremost responsibility was to ATI shareholders, and he took excellent care of them.

1) He managed to get $5.4 billion dollars for a company that, had it not been sold, was hading for ~$2B market cap by April 07 based on dismal profits and R600 fiasco.

2) He knew full-well what a disaster AMD-ATI would be and did his shareholders enormous favor by demanding cold hard cash. The fact that the outside people most familiar with AMD's finances (ATI management team) did not want to touch their stock with a 10-pole should have set off red flags all over. "We will create a dominant company... yeah, and we don't want to be paid in it's stock".

Orton's ability to get AMD to overpay by the factor of two for his company, and pay the bulk of the sum in cash (which they could sure have used now) is nothing short of a genius. The man was looking out for ATI shareholders and he took great care of them.

Eddie said...

I really thank you for your comment, your description of what Dave Orton did is being promoted to full article.

My black humor post refers to my gratefulness for these two guys who greatly helped sunk AMD at times I was maintaining very bearish positions on AMD, they destroyed AMD and I profited.

Mike said...

I agree with gfor's comments.

Fiduciary responsibility to shareholders should be amongst the top of priorities in a publicly traded company.

And, while Orton (and any other company that sells itself to a bigger suitor) maximized the return to its shareholders, I am afraid that the same cannot be said of Hector of late.

Yes, there was a brief period of time where Intel goofed and AMD managed to make a tidy profit with its original Opteron but all of that gain seems to have vanished now.

Moreover, it appears as if had Intel not been distracted with Itanium and Pentium 4 that AMD's good old stock appreciation days between 2001-2005 would not have materialized.

Given that the majority of AMD shareholders are institutional, I wonder how much they are willing to forego.

Where are the shareholder initiated actions?

Eddie said...

Mike, I don't know why gfor or you think I disagree with you guys that Orton had to squeeze every benefit out of AMD for the benefit of ATI shareholders; I just said in very black humor that Orton really helped to destroy AMD and that his early departure of "a dominant company" allowed me to read through the bullshit, the same thing Henri Richard did a little bit later.