January 3, 2008 4:00 AM PST
Dirk Meyer, the man to watch at AMD
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Barcelona is AMD's first quad-core server processor, based on the original Opteron design. The company decided to build a chip in which four Opteron processor cores were integrated onto a single piece of silicon, which is hard to do but pleased customers who wanted to protect their investments in the chipset and motherboard technology used in AMD's earlier designs, according to executives. AMD representatives repeatedly declined to comment on Meyer's role in Barcelona's development, but he's been the man in charge of the processor division since 2005.
Barcelona was originally supposed to arrive in mid-2007, but a steady stream of problems pushed most of the shipments well into 2008. AMD shipped Barcelona processors to select customers in the fourth quarter of 2007 after introducing the chip in September. However, after the first customers started getting their chips, a serious bug was uncovered that required the chip to be reworked before it could be sold to the general public. Performance is expected to suffer as a result.
Because of all this, lots of customers who were looking for all-out server performance in 2007 went with the competition. Intel's decision to build a quad-core processor by assembling two dual-core chips into a package--derided by AMD executives as an inelegant hack far beneath their "true quad-core" design--meant that Intel has enjoyed much more than a year with the quad-core server processor market to itself.
Intel has gone on to release the second-generation of its quad-core chips, and has a third iteration planned for later in 2008 called Nehalem that borrows many of the design techniques that made the original AMD Opteron such a hit, namely the integrated memory controller and the point-to-point interconnects that directly link cores to their neighbors. Those features allowed AMD's processor cores to enjoy fast connections to memory and to their fellow cores on a multicore chip, improving the overall performance of a chip.
However, AMD's combination of problems doomed its financial performance, especially after it was forced to severely discount its aging dual-core chips to compete against Intel's products. AMD promised financial analysts in December that it will break even by the second quarter, but they seem skeptical: Bank of America's Sumit Dhanda cut his rating on AMD to "sell" on Wednesday, citing an expected slowdown in the economy in the first half of the year and AMD's own internal troubles.
CEOs at other prominent technology companies, such as Motorola, Yahoo, and Dell have slinked off stage for performances that don't even come close to AMD's troubles--which have also included a distribution gaffe that alienated channel partners, the reorganization of its sales organization following the departure of sales chief Henri Richard, and a pending write-off of some portion of the $3 billion in goodwill associated with the October 2006 acquisition of ATI Technologies. But in AMD's case, it's not clear where the blame should be directed.
"It's hard to discern among the executives, since they present a unified front," said Ross Seymore, a financial analyst with Deutsche Bank.
Ruiz told CNBC Europe on the eve of its December financial analyst conference that he had no plans to step down in 2008, and sources familiar with AMD's succession planning say that the company's performance last year has not accelerated the timing for Meyer's ascension to the CEO spot--pinned at late 2008 or early 2009. Still, sources familiar with the board note that just like any other CEO, Ruiz serves at the pleasure of the board.
Often when a company president is named to the board of directors, that executive is named as CEO within six months to 12 months of joining the board--18 months at the latest, said Stephen Miles, managing partner of leadership consulting in the Americas for executive search firm Heidrick & Struggles.
There's a reason for that. The practice of naming a No. 2 executive to the board of directors is fairly uncommon, occurring in roughly less than 1 percent of companies in corporate America, Miles said. Intel and New York Life have used that strategy in recent years, but the No. 2 generally only gets to sit on the board once they become the No. 1.
"When a company is under siege, they know the No. 2 is likely to exit so this is a way to lock them in as a retention maneuver. It signals that a succession plan is in place and the clock is ticking," Miles said.
A Meyer administration
While AMD needs leadership as much as the next organization, it faces a number of unique hurdles.
Modern PC and server processor development is a two-company game, and Intel's staffing and marketing budget dwarfs AMD's resources; AMD must be nearly perfect just to keep pace. Intel can afford to throw away billions of dollars on peripheral products and acquisitions, tear up its technology roadmaps, and still remain profitable.
AMD doesn't have that luxury; when it places a bet, it needs to make the right call.
That also means that it has to take risks, and not all of them will pay off. The original Opteron design was a huge risk in 2002, but it paid off in spades. Paying billions of dollars more for ATI than it was worth? The lasting effects of that decision, in which Meyer played an important role, remain to be seen.
So, what kind of CEO would Meyer make? Despite the problems with Barcelona last year, Meyer's obvious strength is his technical background. But sources who have worked with Meyer have some concerns: the CEO of a chip company is not the lead architect on every design; he or she is a salesperson, a manager, a negotiator, a disciplinarian, and a visionary.
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