2. The Cold War gave us a lesson or two on
strategy
Prologue
THE FUTURE IS FUSION
3. The Soviet Union had the upper hand in the
Cold War in the 1950s and 1960s
Ideology
Military Power
Launched the first-ever
artificial satellite,
Sputnik in 1957
Growing influence in
the third world
Beat the US to send the
first man into space in
1961
Economy
Rapid growth under the
Soviet Five-Year Plans
Economic growth rate
was ahead of the US in
the 1950s
LOOK SET TO TOPPLE US GLOBAL DOMINANCE
Prologue
Source: Publicly Available Information
THE FUTURE IS FUSION
4. The Soviet Union surrendered their lead and
lost the Cold War in 1991
Ideology
The Soviet citizens are
disillusioned with
Marxist-Leninism by the
late 1980s
Military Power
The Soviet military
could not match the
superior American
military technology
Economy
The Soviet economy
stagnated since the
1970s and was on the
verge of collapse in 1991
EXISTENCE UNDER SEVERE THREAT
Prologue
Source: Publicly Available Information
THE FUTURE IS FUSION
5. The Soviet Union stagnated and gradually
went downhill in the 1970s
Uncompetitive
Misadventures
Technology Lag
Over-reliant on the
production of natural
resources
Extremely expensive
both financially and in
terms of resources
Missed out entirely on
the computer
revolution in the West
Uncompetitive
industrial products
Huge burden on the
Soviet economy
Increasing relative
disadvantage to the US
Source: Publicly Available Information
Prologue
THE FUTURE IS FUSION
6. We can draw parallels between AMD and the
Soviet Union in the 1970s
Prologue
THE FUTURE IS FUSION
7. AMD faces three critical problems
1
Sluggish financial performance for the past decade
2
Increasing relative disadvantage in core operations (CPUs) vis-à-vis Intel
3
Virtual non-existence in key growth segment – mobile handsets
Source: Team Analysis
Situation
THE FUTURE IS FUSION
8. AMD has been experiencing declining financial
performance and increasing relative
disadvantage
Lackluster Financial Performance
Eroding Market Share
8
6
4
2
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
• Intel creates better CPUs than AMD
based on
performance, overclocking, and
value
• Overall revenues are insufficiently
compete with Intel’s
-2
-4
Sales
Net Income
EXISTENCE UNDER SEVERE THREAT
Source: Passmark Software, AMD Financial Report
Situation
THE FUTURE IS FUSION
9. Acquisition of ATI
Acquisition in 2006 was an
expensive misadventure
$1.6 billion of goodwill
was written off in Q4 2007
Huge financial burden and
diverted resources away
from R&D
Weakened the competitive
advantage of AMD’s new
products vis-à-vis Intel
Source: PCPRO
10. AMD is virtually non-existent in the mobile
handsets segment of the industry
Source: Various Sources
Situation
THE FUTURE IS FUSION
11.
12. Expansion into the Semi-Custom Business is
the best alternative for AMD
Catch up with Intel in
the CPU Market
Expansion into Mobile
Handsets
Expansion into SemiCustom Business
Cost
Scalability
Time Period
Risks
Overall
LEGEND:
Source: Team Analysis
More desirable
Situation
THE FUTURE IS FUSION
13. AMD has acquired new capabilities and
resources with the acquisition of SeaMicro
Acquisition of SeaMicro
AMD bought SeaMicro in February 2012 for
$334 million in total: $281 million in cash and
the remainder in stock
Gained ability to directly negotiate with the
buyer instead of having to go through other
server manufacturers such as Dell and HP
Gained a path in the low-power server space by
providing a role in cloud datacenter business
Source: Forbes
Strategy
THE FUTURE IS FUSION
14. AMD has not fully utilized the capabilities and
resources from the acquisition of SeaMicro
High-Density Servers for Cloud Computing
AMD
Optero
n
25%
Intel
Xeon
E3
75%
SeaMicro still produces its microservers
with both Intel and AMD processors
AMD has, rather ironically, become an
Intel OEM
Source: Forbes
Strategy
THE FUTURE IS FUSION
16. AMD must effectively and strategically invest in
the CPU & GPU segment to compete with Intel
Product Differentiation
CPU & GPU accounts for more
than 60% of AMD’s revenue
stream
CPU/GPU
Two distinctive segments will be
targeted:
High Price
Targeting high-end
gamers and overclockers
text1
Low Price
Optimal performance
for daily PC users
Strategy
THE FUTURE IS FUSION
17. AMD can leverage on SeaMicro to develop
Semi-Custom business units for the server
market
Vertical Integration
SeaMicro’s extended x86
platform product line can be
used to exclusively target the
server market
AMD can develop a platform
where it can deliver products
based on the platform, thus
making it semi-custom
With minimal development cost,
AMD and SeaMicro can target all
the industry that require micro
processors
Cloud
Proxy
ERP
Servers
Communication
Mail
Telnet
Web
Source: Team Analysis
Strategy
THE FUTURE IS FUSION
18. SeaMicro can boost the sales of AMD's
Opteron processor product line to increase
revenues
Global Server Market
2007
2008
2009
2010
2011
2012
Total Server Shipments (Mil)
8.8
9.1
7.6
8.9
9.5
9.7
X86 Server Shipments (%)
84.7%
84.9%
87.8%
87.1%
84.3%
82.8%
Total Server Revenue ($Bil)
54.8
52.6
43.1
48.9
52.8
52.5
53.6%
52.9%
57.6%
65.3%
65.2%
68.2%
2007
2008
2009
2010
2011
2012
7.5
7.7
7.6
8.9
9.5
9.7
X86 Server Revenue (%)
(In USD Million)
X86 Server Shipment
AMD’s Share in x86 Servers
15.0%
13.4%
10.1%
7.0%
5.5%
4.4%
Implications
According to I.H.S Research, in
2012, 88K units of microservers
are sold and it is expected to
grow to 1.3 million units in 2016
SeaMicro can effectively market
AMD’s Opteron processor
through Semi-Custom business
units, which will increase current
market share of 4.4% up to 8 to
10% with the increasing demand
on microservers
Revenue increase:
52.5 x 68.2% x 8% = 3.6B USD
Source: Gartner & IDC Press Release
Strategy
THE FUTURE IS FUSION
19. Financial analysts also predict increased
revenues for AMD from the processor segment
Approx. 1.8B USD
4.4% of server market share
Source: Trefis
Strategy
THE FUTURE IS FUSION
20. Alliance with different small server software
companies to supply them the SeaMicro
hardware
Strategic Alliances
Fast growing ERP companies like
OnDemand, WorkForce , Venty and
Netsuite has the potential to grab
extra market share.
Every 0.01% market share captured by
these company could be translated
into extra revenue of 7.35M USD
(assuming that the profit margin of
the server is 30%)
Estimated number of Alliances: 3
Captured in ERP market share: 2%
Expected Revenue increased:
24.5 x 2% x 30% = 490M USD
Source: Forbes
Strategy
THE FUTURE IS FUSION
22. A huge opportunity lies in the other part of the
server industry – ARM based servers
Global Server Market
2007
2008
2009
2010
2011
2012
Total Server Shipments (Mil)
8.8
9.1
7.6
8.9
9.5
9.7
X86 Server Shipments (%)
84.7%
84.9%
87.8%
87.1%
84.3%
82.8%
Total Server Revenue ($Bil)
54.8
52.6
43.1
48.9
52.8
52.5
53.6%
52.9%
57.6%
65.3%
65.2%
68.2%
X86 Server Revenue (%)
Implications
The revenue of the server
industry is 52.5B USD and
68.2% of it belongs to x86
The remaining belongs to the
next-generation ARM based
servers
Ideal Solution for Servers
ARM based processors delivers
higher efficiency and less power
consumption at the cost of slight
performance
According to IHS, demand and
expectation for ARM based
servers are rapidly increasing
Strategy
Source: Wall Street Journal
THE FUTURE IS FUSION
23. AMD can capture the new trend in the ARM
based servers to create new revenue stream
Product Differentiation
Develop ARM based servers to
capture its increasing demand
due to its higher efficiency than
existing x86 platform
Only three companies are
developing next generated ARM
based processors
Estimated increase in Revenue
assuming 10% of SeaMicro’s
market share in ARM based servers:
52.5 x (1 - 0.682) x 10% = 1.7B USD
ARM
Source: ARM
Strategy
THE FUTURE IS FUSION
24. AMD can acquire the ability to develop ARM
based mobile processors as a positive byproduct
ARM-based Technology
In the long run (2 years), AMD
will automatically gain the
ability to develop ARM based
mobile processors for Android
and iOS devices with
technological knowledge gained
from server processing units
Increased Revenue: Inestimable
since its in a form of intellectual
property in the future
Source: Team Analysis
Strategy
THE FUTURE IS FUSION
25.
26. The revitalization plan of AMD will be carried
out over a period of 24 months
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Semi-Custom
Business Units
Building the
Architecture
Negotiation
Fine-Tuning &
Delivery
ARM based servers
Research &
Development
Building the
Architecture
Negotiation
Fine-Tuning &
Delivery
Source: Team Analysis
Implementation
THE FUTURE IS FUSION
27. The acquisition of SeaMicro puts AMD in an
awkward position
Customers
COMPETE
Customers
Source: Team Analysis
Implementation
THE FUTURE IS FUSION
28. SeaMicro has no intention to compete in the
same arena and thus the threat is non-existent
Customers
No Threat
Customers
Source: Team Analysis
Implementation
THE FUTURE IS FUSION
29. The ever changing technological landscape
gives rise to uncertainties
3 YEARS
BEGINNING
END
IT INDUSTRY
Full of SURPRISES
Source: Team Analysis
Implementation
THE FUTURE IS FUSION
30. There will be precautionary measures
undertaken to pre-empt the uncertainties
ahead
3 YEARS
BEGINNING
END
Mitigations
Emphasis on time schedule
Aim to have zero delays
Adopt best practices
Source: Team Analysis
Implementation
THE FUTURE IS FUSION
31.
32. The USSR might have lost the Cold War, but
all hope is not lost for AMD
THE FUTURE IS FUSION
Editor's Notes
Opening: cold war and sovietunin, given us a lesson or two on strategyIdeology, military, economy, space1950s: on par, if not ahead1990s: lost totally to the US