Analysis: AMD's Comeback Plan Needs More Than ARM

Ten years ago, AMD made history with the introduction of its 64-bit Opteron processors, which put the underdog chip maker back on the map and looked to usher in a new era for the CPU industry. But, unfortunately, a lot has changed in 10 years.

Over the last decade, AMD has watched the capital it earned with its 64-bit innovation erode along with its market share and revenue. The company fell behind Intel once again, suffering notable setbacks including the devastating bug in AMD's "Barcelona" quad-core Opteron server chip in 2007. As a result, AMD's stock price plummeted and its market cap shrunk.

While both Intel and AMD have struggled to adapt to the decline of the traditional PC and the rise of mobile devices, AMD has lagged further behind its larger rival, despite the introduction of its accelerated processing unit (APU) architecture. Meanwhile, AMD has struggled to reduce its losses and maintain profitability.

[Related: AMD Launches Low-Power Opteron Server Chips To Take On Intel's Atom ]

But all is not lost for AMD. After a long, steady decline, the company's stock price is starting to trend upward (currently sitting at just over $4 a share, almost double the company's low point this year). While much of that boost initially came from AMD's lucrative deals to supply GPUs in the next-generation video game consoles, the chip maker has sustained that momentum with some notable new products.

And none are more notable than AMD's first ARM server chip, code-named "Seattle."

Last October, AMD joined forces with ARM Holdings to build new energy-efficient server chips for the data center based on ARM's low-power architecture. For AMD, it was a risky but ultimately inevitable move; while AMD competes against ARM in the tablet market, ARM represents a much bigger competitive threat to Intel -- as well as AMD's best chance to get back into the data center.

"It's not about altruism. It's good business," Andrew Feldman, vice president and general manager of AMD's Server Business Unit, told CRN. "ARM processors save you space and power costs to go with high-density clusters that are more energy-efficient."

NEXT: An Uphill Battle

AMD officially introduced Seattle Tuesday, as well as the rest of its server processor road map for 2014. In short, AMD believes it can win share in the data center with better performance-per-watt technology.

But AMD is going to need more than just ARM to return to glory. It will need a revitalized channel push. While AMD's graphics business is still relatively strong and its Radeon GPUs popular with system builders, the company's CPUs are another story.

AMD processor business has been losing mind share with solution providers over the last 10 years. To be fair, the chip maker has made efforts to reverse the decline, most recently revamping its Fusion Partner Program ahead of AMD's APU technology launch. Plus, AMD is now run by Rory Read, who earned a reputation as a strong channel advocate as president of Lenovo.

But those efforts haven't produced the kind of results AMD needs to remain a force in the industry. And that won't cut it for 2014, especially with the training and education needed to ramp partners up around the new ARM technology. AMD needs to take a page from Intel's playbook and get out in front of partners with relentless support, training sessions and road shows.

To its credit, AMD isn't exactly waiting for its new server chips to sell themselves. The company is getting out in front of partners -- but in the software and hardware OEM markets. Feldman said AMD has been working heavily with the ARM software community and building relationships in the open source community as well (the latter represents a huge potential market for AMD's data center push).

"Open source software is big in the data center," Feldman said. "The Linux guys see [Seattle] as a disruptive opportunity, and they're excited about the opportunity around ARM technology."

It's all well and good that AMD is focusing on software developers -- but the chip maker will need a stronger channel presence with system builders and solution providers if it hopes to regain what it has lost over the last 10 years. AMD obviously can't compete with Intel's enormous brand and marketing budget advantages, so it will need more partners on the ground to help sell customers on its new technology.

And AMD can't afford to wait, either. ARM is hot property, and just because Intel won't be playing in the market doesn't mean AMD will be alone (for example, Nvidia's "Project Denver" is focusing on ARM-based CPUs for both desktops and servers).

"We're not naïve," Feldman said. "There will be a lot of companies that come out of the woodwork in the next six to eight months embracing ARM. It's going to be a competitive space."

A stronger channel could be the difference between a repeat of history or a brave new world for AMD.

PUBLISHED ON JUNE 19, 2013