AMD Loses $1.18B and Its CEO
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Seven is usually considered a lucky number, but not for Hector Ruiz. After seven quarters of red ink, the AMD CEO has resigned his post, turning it over to President and Chief Operating Officer Dirk Meyer, who had long been acknowledged as Hector's successor-in-waiting.
Ruiz will stay on as executive chairman and chairman of the board, working on the company's mysterious "asset smart" strategy and continuing the battle against Intel by "breaking our industry from the grip of an illegal monopoly," as he put it.
"The time is right," Ruiz told a conference call of financial analysts. "Barcelona is shipping, the conversion to 45 nanometer is on track. We've made progress on asset smart. This is why the time is right to turn the company over to a new leader, one who has earned the trust of AMD partners and customers worldwide."
Meyer, 46, joined AMD in 1995 as part of the design team for the original AMD Athlon processor. He worked his way up to president and COO in 2006. He holds more than 40 patents as an engineer. An AMD spokesman said there was no immediate plans to replace Meyer as COO and would stick with the existing executive team for now.
Right now, patents are not what AMD needs, it needs to make some money. The company just reported a second quarter net loss of $1.19 billion, or $1.96 per share, compared with a net loss of $600 million, or $1.09 per share, in the second quarter of 2007. Revenue rose to $1.35 billion from $1.31 billion a year ago.
The lion's share off the loss was a $876 million loss in write-offs from the ATI, which was two years ago. AMD has taken several depreciation charges for ATI over the past few years. These write-downs are simply a realignment of the balance sheet, saying that the company has less value on paper than it thought it did. No money actually goes out the door.
A challenging economic climate
But in this quarter, the company was cash flow negative. It posted an operating loss of $143 million, even though its gross margin was 52 percent and expenses were in line with prior quarters. The loss could be attributed in part to the seasonally weak quarter and, as Chief Financial Officer Bob Rivet put it, "the challenges of the consumer macro economic climate."
The company will also take charges for the next few quarters as it ramps up to a 45 nanometer manufacturing process, something Intel is several quarters ahead on. Rivet said the company would take charges over the next few quarters as it brings its fabrication plants up to speed.
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