08 July 2014
Three steps to survival: Interview with AMD president and CEO Rory Read
When Rory Read joined AMD in 2011 it was a company in trouble, but he has led the company back into profitability. Tim Fryer asked him how he achieved it.
Advanced Micro Devices (AMD) has made some important contributions to the world of computing in its 45 years of existence. It was the first company to break the 1GHz barrier, pioneered multicore processing and, through the acquisition of ATI in 2006, made breakthroughs in graphics processing.
In the last decade, according to Read, there have been a couple of highs lead by 'great steps in technology' – notably the introduction of the Opteron and the introduction of low power APUs in 2010 – but, in this time, the company was only profitable for a couple of years. The problem was AMD's dependency on the PC market – a sector that accounted for around 95% of its revenues. The introduction of the tablet therefore was a revolution which affected AMD badly.
The company needed to do something different and, in 2011, appointed Rory Read as president and CEO. "They knew things were changing and they needed a good strategic direction," said Read. "They knew there was good IP, they knew there were talented people, but they weren't 100% sure of how to take advantage of it."
This was not new territory for Read. "I lived through the Gerstner transformation [at IBM] and the move to services," he claimed. He took the lessons learned at IBM to Lenovo, which he led through difficult times back to growth and profitability. "I have generally worked on things that needed refocusing and re- energising. At Lenovo, everyone thought it was going to fail within three years – look at the company now. And, two years ago, AMD was done, baked, over. That is now further from the truth today than it has ever been; it is a different AMD."
The task has been accomplished in three steps. Firstly, streamlining; cutting costs by 30%. Secondly, introducing new products based on existing IP. According to Read, these were 'low power, more commercially competitive products that would allow us to execute a return to growth and profitability'. "We laid down the 'turn' – we said by Q3 2013, we would return to profitability and that is what we did." The final step was to move away from the traditional PC market and into new high growth areas.
There are five of these high growth segments – new client solutions, professional graphics, dense server, semi custom and embedded. Read said: "Embedded has long sticky relationships where our IP and graphics and compute – both ARM and x86 in an ambidextrous architecture – can make a difference for our customers.
"When I came, everyone said you've got to go into smartphones immediately, but the smartphone wave happened seven years before and, if I chased that, I would be chasing into the back end of the trend. It is crowded and people are starting to move away."
Instead, the company looked at what it thought would be happening in 10 years; areas where its IP could be used to best effect. "We won't catch every one," Read conceded. "We won't predict every one exactly right, but if we pick three out of those five waves, we are in a great trajectory for the future. And we catch them as they are happening – not chasing the past."
The PC market will still represent 50% of AMD's business. "It is foundational," said Read, "it is where our DNA comes from, where the IP was created." But part of company's transformation comes from its ability to deliver new technology. "One of the biggest problems was that AMD didn't always deliver on its commitment and its execution," admitted Read.
"We had to change that and drive true ownership and accountability into the organisation. If you ask any of our customers today, they will say that, over the past three years, we have improved our ability to execute dramatically. Embedded wins in Playstation 4 and XBox 1; those are two really tough customers and we executed those ramps nearly flawlessly."
Such improvements in execution make claims for implementation of new technology more credible with AMD's new customer base. One such technology that Read predicts will have a big impact on the embedded and 'client space' is HSA – Heterogeneous System Architecture. This is basically an open system architecture that allows improved processor design. AMD is a founder member of the HSA Foundation along with companies such as ARM and Qualcomm.
"HSA is going to be huge," said Read, particularly for applications like AMD's APU (Accelerated Processing Unit) SoC, which contains both processing and graphics centres. "HSA creates an architecture that will allow programmers to write code that takes workloads to the proper part of the engine. If you put the right workload on the right solution on that single chip, you can see dramatic improvements in performance – five, maybe 10, times. That kind of workload is the future of this cloud era, which is why HSA, along with our APU and graphics capability, positions us for a unique opportunity. This really is a big deal – it is just the beginning of a trend that is going to dominate the industry over the next 5 to 10 years."
HSA is just one of the technologies coming on stream as AMD starts to progress into new markets, some of which are making million dollar contributions to turnover from a standing start in 2012. Meanwhile, the five high growth segments are on track to represent 50% off the company's revenues by the end of 2015 as the third step in AMD's transformation takes shape.
Having seen the company turn into a profitable organisation again in Q3 2013, and therefore completing step two successfully, Read is confident of progress with step three "I love the roadmap. I love the cultural change in the organisation. I love the clarity of the strategy and the way that the organisation is embracing it," he concluded.
Rory Read is president and chief executive officer of AMD and a member of its board of directors.
Prior to joining AMD in August 2011, Read was president and chief operating officer of Lenovo Group,
During his five years at Lenovo, Read led the company through a substantial business turnaround and led its entry into the tablet and smartphone markets.
Before Lenovo, Read spent 23 years at IBM in various global roles. As Managing Partner for IBM's Business Consulting Services Industrial Sector, Read led the division through a turnaround that improved gross margins significantly, drove new customer acquisitions and generated double digit revenue growth and operating profitability.