All Things Digital

For a while there, it looked like Advanced Micro Devices (AMD) was really going to take Intel (INTC) to the mat, didn’t it? But not lately. After seven consecutive quarterly losses, AMD shares fell to a six-year low last month, down 50 percent in the past year. Good thing, then, that the company has chosen to sell off its digital television business, which these days is more of a distraction than anything else. This morning, the struggling chipmaker said Broadcom (BRCM) has agreed to buy its TV unit for $192.8 million.

For AMD, the sale frees it of a business that’s been a drain on capital expenses and, in the words of CEO Dirk Meyer, will make the company “leaner and more focused” while it seeks to “create a business model to deliver sustainable profitability.” For Broadcom it’s an easy way to immediately scale its DTV business from low-end to mid-range to high-end interactive platforms and panel processors.

Advanced Micro Devices has tapped Chief Operating Officer Dirk Meyer as its new CEO, replacing Hector Ruiz. Ruiz will become executive chairman of AMD (AMD) and executive chairman of the board of directors. The changes are effective immediately.

Ruiz announced the leadership change during AMD’s second-quarter financial earnings conference call. “The time is right to turn the company over to a new leader,” he said. And, given the company’s ugly $1.19 billion second-quarter loss, he would appear to be right. “We have not been living up to our potential,” Meyer said during a conference call. “Looking forward, we will. We will demand a pattern of sustained profitability…We will execute, execute and execute.”

Presumably, Meyer is refering to the company’s mission here and not AMD employees who’ve suffered enough already, I think.

Apparently, someone forgot to tell Intel (INTC) about the recession. The company reported a sharp rise in profit on Tuesday in the face of a flaccid U.S. economy. Revenue rose 9 percent to $9.5 billion from the year-ago quarter. And net income rose 25 percent to $1.6 billion, or 28 cents a share–well above the expectations of Wall Street analysts, who had projected earnings of 25 cents a share.

Best of all, Intel predicted more strong sales in the months to come. “As we enter the second half, demand remains strong for our microprocessor and chipset products in all segments and all parts of the globe,” Intel CEO Paul Otellini said in a statement. Comments like that, coupled with Intel’s strong Q2 earnings, should go a long way toward reassuring investors that the technology sector isn’t succumbing to the economic downturn. At least until AMD reports second quarter results on Thursday. Analysts expect AMD (AMD) to post a loss of 52 cents per share.

It’s likely a challenge to program and a bitch to debug, but IBM’s (IBM) new Roadrunner supercomputer is the most powerful in the world. With 12,240 cell processors typically found in Sony’s (SNE) PlayStation 3 console and another 6,562 dual-core AMD (AMD) Opteron chips, Roadrunner has been benchmarked at 1.026 petaflops (1.026 quadrillion calculations per second). And that places it atop the latest Top500 supercomputing ranking as the most powerful computer in the world.

The first computer ever to pass the petaflop milestone, Roadrunner is more than twice as fast as the top-ranked computer in the previous Top500 ranking. It’s also one of the most energy efficient systems on the Top500. But you wouldn’t know from looking at it. It’s housed in the Los Alamos National Laboratory and will be used principally for nuclear weapons simulations.

What a lousy week for Intel, yeah? First Korea’s Fair Trade Commission fines the company $25 million for abusing its dominant market position there and offering discounts to PC-makers in an effort to drive rival AMD out of the market. And now the U.S. Federal Trade Commission has opened a formal investigation into its pricing practices.

In recent days the commission has subpoenaed Intel, AMD and a number of their PC-maker customers as part of a probe into Intel’s pricing policies, which some claim are engineered to maintain a near-monopoly on the chip market. Intel, which has long claimed that its business practices are well within U.S. law, did so again today in a statement announcing its cooperation with the FTC investigation. “The evidence that this industry is fiercely competitive and working is compelling,” it said. “For example, prices for microprocessors declined by 42.4% from 2000 to the end of 2007. When competitors perform and execute, the market rewards them. When they falter and under-perform, the market responds accordingly.”

But what if a competitor, say AMD, falters and underperforms because a rival is threatening its customers? What if it falters because a rival is using illegal inducements to dissuade PC-makers from buying AMD processors and “knee-capping” those who do? Which is what AMD accused Intel of in its 2005 antitrust lawsuit. In 2000, for example, Michael Capellas, then chief executive of Compaq Computer, allegedly told AMD that Intel had withheld the delivery of some microprocessors he needed for servers because of Compaq’s relationship with AMD. He told AMD he would stop buying from it, saying he “had a gun to his head.” And in 2004, Gateway officials are alleged to have told AMD that Intel “beat them into guacamole” in retaliation for their limited dealings with its rival. And these are but two incidents in a list that includes similar alleged acts of coercion by Intel involving 38 other computer makers, distributors and retailers.

Advanced Micro Devices (AMD) was right. It didn’t quietly shed 5% of its work force in mid-March. How could it when it was busy preparing to shed twice that number in April?

This afternoon AMD said it will lay off 10% of its work force, or about 1,600 employees, by the third quarter of 2008 in an effort to cut costs. More ugly news for the company, which said it expects first-quarter revenue of $1.5 billion, about 15% lower than it reported in the fourth quarter.

There’s a reason Intel’s processors are in more than four out of five x86 computers sold in the global market and–like the European Union, Japan and South Korea–New York’s attorney general thinks it might be an anticompetitive one.

Empire State AG Andrew Cuomo today opened a formal antitrust investigation against Intel to determine if it violated state and federal antitrust laws by engaging in a relentless, worldwide campaign to coerce customers to refrain from dealing with its rivals. “After careful preliminary review, we have determined that questions raised about Intel’s potential anticompetitive conduct warrant a full and factual investigation,” Cuomo said in a statement. “Monopolistic practices are a serious concern, particularly for New Yorkers who are navigating an information-intensive economy.”

Harder still for Intel rivals navigating a potentially antitrust-intensive economy. Rivals like Advanced Micro Devices, who in 2005 filed its own antitrust lawsuit against Intel, accusing the company of using illegal inducements to dissuade OEMs from buying AMD processors and “knee-capping” those who did.

Harsh accusations, but ones supported by some disturbing anecdotal evidence. In 2000, for example, Michael Capellas, then chief executive of Compaq Computer, allegedly told AMD that Intel had withheld the delivery of some server chips because of Compaq’s relationship with AMD. He told AMD he would stop buying from it, saying he “had a gun to his head.” And in 2004, Gateway officials told AMD that Intel “beat them into guacamole” after they purchased some AMD microprocessors. These are but two incidents among 38 other alleged acts of coercion claimed by AMD in its suit.

Intel, of course, denies them all. Just as it denies AG Cuomo’s. “We believe our business practices are lawful,” said Intel spokesman Chuck Mulloy. “We also believe that the microprocessor market is a competitive market and is behaving just as one would expect a competitive market to behave.”

The ban on the export of U.S. computer equipment to Iran hasn’t stopped the Middle Eastern nation from building a supercomputer out of Advanced Micro Devices chips. The Iranian High Performance Computing Research Center claims to have assembled a machine with a theoretical peak performance of 860 gigaflops from 216 AMD Opteron processors.

How did the Iranian computing center get its hands on 216 Opterons when the chips are embargoed from export to Iran? Well, it didn’t get them from AMD. “AMD fully complies with all United States export control laws, and all authorized distributors of AMD products have contractually committed to AMD that they will do the same with respect to their sales and shipments of AMD products,” the company said in a hastily released statement. “Any shipment of AMD products to Iran by any authorized distributor of AMD would be a breach of the specific provisions of their contracts with AMD.”

So, again, how did 216 Opterons find their way into Iran? Via the United Arab Emirates, perhaps? AMD did, after all, receive $622 million in funding from Mubadala Development Co., the investment arm of the Abu Dhabi government.

ALEXIS GLICK: “There’s some news coming across the tape right now. We’re seeing from The Wall Street Journal that Apple is buying an 8% stake in AMD.”

PETER BARNES: “The big chip-maker, yup. And AMD and Intel battle back and forth, and so this is a very significant statement by Apple, Charles and Liz, is it not, that it’s going to buy into AMD, pick one of the two?”
[one-year charts of Apple and AMD]

CONTRIBUTOR CHARLES PAYNE: “Well, yeah, and AMD needs, uh–that’s real smart by Apple because AMD is in trouble right now. AMD has always had two problems: either it had a great product that was either sometimes superior to Intel but not the distribution, or it would have a terrible product that obviously they couldn’t compete. And they’re sort of in the middle right now–they haven’t had great product offerings per se recently, the stock has been really just sort of muddling along, so I gotta tell you, Peter, I think it’s a smart play by both companies to get involved with each other.”

GLICK: “That, oh, it’s not Apple. Let me just correct ourselves here. It is not Apple. [cross talk] Alright, I’m sorry, we got a little ahead of ourselves here on that. Um, Apple Dubai?” [sic]

Contrary to earlier reports, it was Abu Dhabi, not Apple (or “Apple Dubai”) that paid $622 million for an 8.1% stake in Advanced Micro Devices today. Orchestrated by the Mubadala Development Company (the investment arm of the Abu Dhabi government), the deal will make the Persian Gulf emirate one of the chip-maker’s biggest shareholders. And it will give AMD, which posted a loss of $396 million for its third quarter, some much-needed financial relief as it faces increased competition from rival Intel.

Said Roger Kay, principal analyst with Endpoint Technology Associates, the deal is a “pretty good one for AMD. What AMD wants is access to short- and intermediate-term financing. Abu Dhabi represents a pretty good partner, since they’re not on the board and it’s not structured as debt.”