I’m a fan of the underdog – always have been. Rocky coming back for the win? You bet. Mystery Men? Guess I’m showing my age now. But what about tech underdogs? We’ve seen a few come and go. Cyrix is one that I recall from the mid 90s that just couldn’t find a way to compete against AMD or Intel, which left the two big players being the only CPU game in town.
In technology we often see this parity with a few exceptions of a third competitor. Microsoft and Apple come to mind as they’ve had quite the storied history together; Linux is certainly a player in the scene but a smaller one at that. In mobile we’ve seen OSes consolidate down to 3 main ones – iOS, Android and Windows Phone – though there are challengers, like Samsung’s Tizen, on the way. Even with game consoles – before it was Sega and Nintendo; now it Nintendo, Sony and Microsoft with the former champion now struggling the worst of the three. I find myself loving Nintendo more all the time, especially since the release of the Wii. I must not be the only one that roots for the underdog either, the outpouring of support for Nintendo upon hearing of CEO Satoru Iwata’s passing has been nothing but incredible.
This leaves me in a bit of a quandary regarding two particular parities in the tech arena: graphics and processors, both from AMD. From a geek perspective I love the fact that I have a choice – Intel or AMD for processors, Nvidia or AMD for discrete graphics. AMD is facing a bit of what I’d describe as a hydra of its own making and the market. On the processor side, its desktop APUs have been long struggling for some time. Part of this appears to be a technical challenge to pose a threat to Intel’s Core series where Intel tends to outperform on raw processing power. There’s no question that AMD still reigns champion in the price arena, but when it cannot arguably do the same job it limits what both consumers and corporations are able to purchase. The solution, according to AMD, will be its new Zen processor that shifts more to the type of hyper-threading that we see with Intel and will hopefully be a lot more competitive versus the Core series. But this new processor is not expected to make it to market until 2016, at which point Intel will be releasing a smaller, more power friendly Skylake lineup. Where AMD is doing well – its embedded segment – arguably is focused too much on thin client PCs and not on a mini-PC segment to challenge Intel’s mini-PC designs for business and now home. The NUC itself has struggled in sales but the form factor has become a popular hit with businesses, especially as it is now cheaper to buy a mini PC with Windows and software than the annual licensing fee for Citrix and other VDI solutions.
On the graphics side, AMD seems to be playing the long game in its investment of High Bandwidth Memory and the new graphics lineup released just last month. While most of the lineup features familiar GPUs that have been tweaked even better than the previous year, the big deal has been the Fury and Fury X. It’s a big deal for AMD because while it arguably failed to beat Nvidia’s 980TI, its scarce availability has meant decreased interest in purchasing and will lead to decreased revenue. There are rumors that this is due to a short production run of HBM and that HBM2 has been increased to help fill that order; but even if that rumor is true, sales of what should be a flagship device will struggle in an environment in which it should normally thrive.
For people who don’t think this is a big deal, it’s important to remember that AMD has shareholders to respond to – and shareholders cannot certainly like or want to see the losses that have mounted even since AMD announced its latest quarterly results last Thursday. If we look at its stock history, AMD has dropped half of its value from a year ago and 75% of what it was 5 years ago – in fact, its per share value is now lower than 40% lower than at AMD’s IPO in 1978! Certainly this is great room for concern; AMD has taken some (arguably strange) actions to help mitigate this, like spin off its foundry business into what is now GlobalFoundries. They’ve also stopped production of the FX lineup, though I think this one may be ripe for a comeback. Management has seen a great shakeup in the past year as well, with Lisa Su being named CEO in October and several changes in executive positions since after CES. 2016 looks like it could be a boon for AMD but they have to survive to get there.
I want to root for the underdog and cheer AMD on and think that’s a necessity in this case. Losing AMD from the marketplace entirely would arguably create two monopolies in discrete graphics and x86 processors; and if Intel and NVIDIA had wanted this, arguably they could have accomplished this goal a long time ago. Much speculation has been made over the past year about overtures to AMD from would-be buyers of their company; but many outside of tech circles have remembered the x86 licensing between Intel and AMD. Given Intel’s response when AMD first spun off GlobalFoundries, the speculation this year on the license specifics was clarified by AMD to state that a change in ownership of either Intel or AMD would null the license. We’ve also seen that the US government is protective of things that are exclusively American property – and so it’s very unlikely that short of a bankruptcy that support for AMD actions which would risk the loss of this license would be met with stiff opposition. Even if they were somehow able to pull off splitting the two operations, it’s extremely likely that whoever the interested party would be would face deep scrutiny with antitrust regulators, along with Intel and NVIDIA since this would likely expand their market share even more than now.
While AMD is working to change internally, its shareholders may not want to wait for that change. Business figures such as Carl Icahn have made quite a living off of turning around companies in struggling or bad shape; AMD is almost ripe for such a picking. While a single shareholder couldn’t do it alone, lest they risk what Intel considers an ownership change, a consortium of minority stakeholders could force change within AMD. It could also offer something that might help AMD out quite a bit – an investment in AMD that hopes it will turn around and thrive in the coming years. Anyone who were willing to jump into that opportunity now could stand to make out quite well – and I suspect there are more than a few already looking at doing so, but cautiously to avoid rocking the boat with respect to the x86 licensing agreement.
AMD isn’t Apple nor did Apple face the struggles that AMD has. Could there be a turnaround in AMD’s future that mimics Apple’s successes though? I still believe there is, though probably not on the same scale – and that’s why I still root for this underdog.