PART I: People & Strategy

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PART I: People & Strategy By Ken Luskin [email protected] October 28, 2014 PART I: People & Strategy The Brilliance of Steve Jobs was in building a team of geniuses Virtually everyone in the world knows that Steve Jobs was the driving force behind the success of Apple. Unfortunately, few of them understand that without the team of technical gurus Jobs assembled, his visions would not have become reality. Without a Microprocessor Brain, the iPhone would not exist Inside every “smart” computing device is a microprocessor, considered the brains of the device. When Jobs was creating what is now known as the iPhone, he needed a special microprocessor, which could make it through the day without draining the battery. Jobs first approached Intel, the company that was supplying the microprocessors for the entire MAC line. Intel was not interested in supplying a relatively low cost mobile chip, because the bean counters and FAB guys had no vision. So, Jobs built a team of top mobile microproprocessor engineers, licensed the ARM architecture, and created a chip that became the brains of the iPhone and iPad. Apple buys P.A. Semiconductor in 2008 to keep Apple’s microprocessors on the cutting edge With this acquisition Apple received a group of highly innovative engineers, including ex AMD employee Jim Keller. From a VentureBeat article: “Keller spearheaded the development of Apple’s custom mobile processors — including the A4 in the iPhone 4, the A5 in the iPhone 4S and iPad 2, and the A5X in the new iPad — all of which have managed to keep Apple’s mobile devices on the cutting edge. His departure could be a big loss for Apple, which desperately needs smart chip designers to keep pace with the rapid evolution of mobile processors” Five Tech Gurus that have joined AMD #1: October 19, 2011: Former Apple exec Papermaster joins AMD From Macworld: Advanced Micro Devices has appointed former Apple iPhone development chief Mark Papermaster as chief technology officer, where he will take charge of developing AMD’s future microprocessors and hardware. Papermaster joined Apple in 2009 as senior vice president of devices hardware engineering, leading development of the iPhone and iPod hardware. Apple hired Papermaster from IBM in 2008, but made his appointment official after settling a lawsuit filed by IBM around Papermaster’s alleged violation of a noncompete agreement. #2: August 1, 2012: Apple CPU lead Jim Keller heads back to AMD as chief architect From VentureBeat: “For AMD, Keller’s return is nothing but good news, especially after its recent disappointing quarter. He previously played a key role in the design of AMD’s Athlon 64 and Opteron 64 processors, which were among the last generation of processors where AMD was able to outclass Intel. Keller also co­authored the HyperTransportspecification and x86­64 processor instruction set. .In short, he’s kind of a big deal. By taking a leadership role at AMD, Keller could potentially help the chip maker be more competitive against Intel and give AMD a leg­up when it finally decides to enter the mobile processor arena.” #3: April 19, 2013: Anandtech: “The King is Back: Raja Koduri Leaves Apple, Returns to AMD” by Anand Lal Shrimpi “ I remember back when AMD’s CTO of the Graphics Product Group, Raja Koduri, first quietly left the company for Apple. At the time (2009) I didn’t understand why Apple would want so many smart graphics guys on staff, were they working on their own GPU? Mac OS X was hardly a gaming platform of choice back then so the idea didn’t make much sense to me. Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/27/2021 1 By Ken Luskin [email protected] October 28, 2014 It turns out that Steve Jobs wanted to surround himself with the absolute best in the business. Today, the impact of the work of folks like Bob Drebin, Raja Koduri, Jim Keller and others is quite evident. Apple tends to ship some of the fastest GPU hardware in the mobile industry, and its work in bringing high­DPI displays to virtually all of its products is unparalleled. It turns out, that’s what happens when you hire a bunch of crazy smart GPU folks. Raja’s immediate goal is to ensure that AMD has the best GPU architecture/hardware possible. Unfortunately, it will likely take 2 ­ 3 years to realize this goal ­ putting the serious fruits of Raja’s labor somewhere around 2015 ­ 2016. Interestingly enough, that’s roughly the same time horizon for the fruits of Jim Keller’s CPU work at AMD. Today, AMD is a much smaller and more agile company. Raja believes AMD is in a better position to take advantage of new opportunities vs. being in the hopeless position of never being able to catch up in mature markets. What drives Raja is the belief that delivering good quality, high performance and low power graphics will continue to matter going forward. I agree. Raja views AMD’s challenges as being difficult, but not insurmountable. AMD needs a great graphics architecture and it needs a great SoC. Raja’s scope will include making sure that, at least on the graphics hardware/software/dev­rel side, AMD is in the best possible shape. Jim Keller will do the same for AMD’s CPUs.” Surely extremely profitable mega companies such as Apple and Cisco can afford to pay higher salaries to microproprocessor gurus, than can AMD. So why have these 3 well recognized chip industry gurus joined or rejoined a currently struggling AMD? The answer is that stock options/grants potentially provide multi­million dollar returns, significantly greater than the salary component of pay packages for top executives at the largest tech/biotech companies. This same logic applies to solidly profitable Nvidia, the only high end graphics competitor to AMD. #4 October 2013: Jean­Christophe Baratault Nvidia's head of professional graphics, the man behind the success of the Quadro & Tesla line of graphics accelerators joined AMD. The same logic applies to any of the top companies in the server space. #5 Advanced Micro Devices Recruits Dell Veteran Forrest Norrod “Forrest Norrod, 49 years old, was most recently vice president in charge of Dell’s server systems business. Prior to that role, he led an organization that developed custom­tailored servers for companies in the hyperscale market, AMD said. Hyperscale refers to Web services like Google Inc. and Facebook Inc. that serve a profusion of Web pages and consequently buy large numbers of computer servers” “Under Norrod, the server unit grew into a US$10 billion business. He was also responsible for building Dell's successful Data Center Services division” Massive % gains for early investors who clue­in before public wakes up Wall St is a notorious myopic place, that many times only looks a quarter down the road, while technology engineers and executives have a multi­year view. Unlike BioTech companies, that must go through years of Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/27/2021 2 By Ken Luskin [email protected] October 28, 2014 FDA trials, which provides public insight into what they have created, technology companies, such as Apple and AMD, are able to maintain the secrecy of their inventions until launch. Still there can be public info that Wall St. simply refuses to focus on until it smacks them in the face. Back in early 2004, Wall St. viewed Apple as a company that was destined to be stuck with a 10% market share of PCs, with little chance of significant growth. While the stock had been flat lining since late 2000, the sales of iPods and iTunes music had been growing at dramatic rates. But, it was not until Apple broke out the sales and earnings of these growth areas in their Q2 SEC filing, did Wall St finally wake up. While Wall st was asleep during the period from 2000 to 2004, Apple had been hard at work at a strategy that would diversify their sales into devices that did not directly compete with the monopoly held by the Microsoft PC ecosystem. Between early 2004 and early 2008, Apple shares increased by approximately 2,000 percent, or 20 fold. Since early 2008, Apple shares have increased another 3 to 4 fold. Most people did not really appreciate the “new” Apple until the success of the iPhone in 2008. Clearly, the largest percentage gains came well before the general public fully understood the new ecosystems that Apple had created. AMD using a similar diversification model as Apple AMD has been hard at work over the last few years on a similar plan to diversify their sales away from competing head on with Intel in the PC ecosystem. AMD is focused on providing semi­custom or embedded versions of their proprietary APU architecture to companies that want to differentiate their products. Unlike the PC or Tablet space, once a company commits to a semi­custom/embedded chip, it is highly unlikely that AMD’s competitors will be able to replace it for many years. The first such wins were in the game console area, where AMD is now supplying chips or technology to all 3 of the top companies. So, despite the fact that AMD has said they have a pipeline of 1 to 2 additional Semi­custom deals per year going forward, Wall St. still regards AMD the same way they did Apple back in early 2004. Instead of focusing on the huge growth in AMD’s semi­custom/embedded area, Wall St.
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