Edgelings

AMD; Creatively Thinking Its Way To Success

by Rob Enderle

www.technologypundits.com

Part of the problem with massive economic problems is they can lead to political grid lock. Whether we are talking a country or a company you put a lot of people in fear for their jobs and homes and that is all they can see their creativity tends to go out the window. The end result is a lot of complaining and finding people to blame and comparatively little creativity and effort focused on actually fixing the problem. The end result, for a company anyway, is failure. AMD just took the unusual and laudable path of creatively thinking up a way to partner with others and eliminate the problem perhaps so well that it may have given them a competitive advantage.

In addition the investment group from Abu Dhabi which is funding the deal has been anticipating the end of oil revenues for some time and aggressively investing in the US. Not only are they showing more faith at the moment in our own capabilities than many of our own people seem to be doing but they are, and have been, anticipating the end of oil revenues better than we have and also thinking strategically. It would seem that theirs is an example that we should appreciate as well.

The AMD Plan: Getting and Eating their Cake

There is a saying, having your cake and eating it too, that seems impossible but is a case in point in this instance. What AMD is doing is selling their FAB capability (they retain half ownership) to this Abu Dhabi consortium creating a new company that isn’t privately traded. This allows the new entity to operate without the massive costs associated with a private company instantly improving its efficiency and allowing it to bid for other business like NVIDIA’s (NVIDIA is also fabless) and IBM’s (IBM has been cutting back on plant and equipment investments to contain capital spending as well).
AMD will be the primary customer of this new company which is the “have their cake part” but walks away with $2B in extra cash and the new company has the funds to build out the new FAB (factory) in New York adding a potential 5,000 jobs to the local economy and this is the “eat it too” part. In effect they get the financial benefits of selling and the operational benefits of keeping and building out. Abu Dhabi gets one of the leading FAB operations in the world, a dedicated and much healthier customer, and a strong potential hedge against the eventual collapse of the oil market.

Some Risk

There is always risk when you give up some control but, in this instance, the new company will be run and operated by ex-AMD employees so that risk is largely mitigated and AMD was on a path that would have put them out of business in 2 years had they not done something. So while there are some minor risks the benefits seem to have massively outweighed them putting AMD in a stronger competitive position against Intel.

The US Lesson

The US lesson is that, by working with others who have an interest in the US’s success, and given how the US is interwoven in world financial health those folks shouldn’t be that hard to find, that perhaps there is a creative way to address our own trade deficit and dramatically offset the massive financial problems we are currently facing.

This won’t happen unless people, as AMD has clearly demonstrated, get off their collective Butts and think creatively to both find answers to the tactical problems and strategically think of a way to assure this never happens again. For AMD they have taken an issue that was sure to put them out of business and turned the result into an arraignment that makes them more competitive than they ever have been.

That’s creativity, that’s leadership, that’s the way it should have always been.