AMD's CEO prepares chipmaker for a fight

SUNNYVALE, California Thu Feb 2, 2012 2:55pm EST

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SUNNYVALE, California (Reuters) - Advanced Micro Devices' new chief executive delivered an enthusiastic pitch in his debut before Wall Street analysts, saying he was getting the struggling PC chipmaker "fit to fight" in a quick-changing computer industry.

At AMD's first analyst day since 2010, Rory Read said the company would leverage its PC chip technology to attack the fast-growing tablet segment as well as emerging markets but stay away from the smartphone market.

"We're going to double down on client and mobility ... I'm not suggesting we dive into smartphones, a heavily crowded space with low margins ... I'm going to focus on client mobility, thin and light," Read said.

Much of AMD's focus recently has been on selling chips for laptops.

Read took a shot at larger rival Intel's historic dominance of the PC chip market and said the rise of tablets and other mobile gadgets, where Intel so far has been weak, open new opportunities for companies including AMD to innovate.

"You'll see a breakdown of proprietary control points, those control points that have dominated our industry for years and years," Read said. "The status quo will break down."

Read took the chipmaker's helm in August, ending a long search after CEO Dirk Meyer left over differences with AMD's board about the company's lack of progress making chips for increasingly popular mobile devices like smartphones and tablets.

Gesturing with his hands and delivering a presentation with the energy of a motivational speaker, and even jumping down from the two-foot-high stage when he finished, Read said AMD would focus on opportunities in cloud computing and growing demand from developing countries like China for entry level PCs and other devices.

Facing problems manufacturing a newly launched 32 nanometer PC chip, Read in November announced he was slashing 10 percent of AMD's workforce to save about $200 million in annual operating costs.

AMD this year will concentrate on improving its execution rather than pushing the envelope with new technology, he said.

"We don't want to be on the bleeding edge of technology where we're leading in with our chin and we don't execute cleanly and that breaks down trust."

AMD Chief Financial Officer Thomas Siefert told analysts on Thursday he expects gross margins in 2012 between 44 percent and 48 percent. AMD in the fourth quarter had a gross margin of 46 percent.

AMD has long struggled to keep up with much larger Intel in powerful PC processors. It and Intel now face challenges from companies like Qualcomm that are planning to make low-end PC chips using power-sipping technology licensed to them by Britain's ARM Holdings.

With PC sales flagging, AMD and Intel have both failed to find a foothold in smartphones and tablets, where ARM chips are widely used.

AMD's new chip designs are increasingly energy efficient and the company will go after the tablet market "with a vengeance," said recently hired Lisa Su, senior vice president and general manager of global business units.

Raymond James analyst Hans Mosesmann, in a note to clients, pointed to Read's unambiguous commitment to improving AMD's execution.

"We are raising our price target to $8 from $7 following our early impressions of the AMD Analyst Day in Silicon Valley," he said.

Read, who was a top executive at PC maker Lenovo Group Ltd, has also brought on new cadre of senior executives including Su in an apparent bid to reinvigorate AMD.

(Reporting By Noel Randewich; Editing by Steve Orlofsky, Bernard Orr)

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