Advanced Micro Devices (NASDAQ:AMD) has long been viewed as a company with a lot of potential. After acquiring ATI back in 2006, a popular view was that AMD would be extremely well positioned to capitalize on the future of computing. At the time, AMD was fielding best-in-class x86 microprocessors, and it had just acquired one of the two top vendors of stand-alone graphics processors.
Unfortunately, while having best-in-class graphics and x86 capabilities under one roof seemed as though it could lead to significant success, the reality of the situation has been far grimmer. Here are three troubling signs for AMD's business.
Computing and graphics isn't doing well
AMD's "computing and graphics" segment consists of microprocessors as well as stand-alone graphics processors. AMD saw its revenue in this segment drop from $3.72 billion in fiscal 2013 to $3.132 billion last year. The good news is that AMD managed to narrow the operating loss from $101 million to $76 million in that time, but the bad news is that the narrowing of the loss was likely due to operating expense cuts (i.e., layoffs).
In a recent investor presentation, AMD talked about how it is driving a richer mix of CPU products, and how its revenue in the relatively high-margin professional graphics market grew by 20% last year. In that same slide, though, AMD says that it has "right sized investments to align with segment's performance."
The questions investors should be asking -- and that fellow Fool Timothy Green recently asked -- is that with the company's research and development spending plunging, how can the company expect to claw back share from Intel (NASDAQ:INTC) in PCs and servers and NVIDIA (NASDAQ:INTC) in graphics?
Overworked employees are unhappy employees
One way AMD might be trying to improve its competitiveness on a declining R&D budget is by trying to get achieve productivity per employee. Efficiency is good, but a common complaint made by former and current AMD employees on Glassdoor is that the company is "short staffed in terms of resources," which "can impact [an AMD employee's] work-life balance."
Further, according to one employee who actually posted a positive review of the company on Glassdoor, bonuses are poor, employees can't go on sabbatical, and restricted stock units "don't mean much due to poor stock performance."
With many of the top semiconductor companies aggressively on the hunt for engineers, it's hard to imagine AMD has an easy time attracting and retaining talent. One engineer who claims to have worked as a graphics software engineer says he/she left to work for a competitor -- and got a "full 44% compensation increase."
Executive shakeups and layoffs
AMD has undergone a number of executive transitions over the last year or so. Firstly, former CEO Rory Read left and was replaced by Lisa Su. Shortly thereafter, AMD announced it would also reduce its workforce by "approximately 7%."
Then, in January 2015, three executives left the company. First was John Byrne, who was formerly the general manager of the Computing and Graphics business. It's not clear whether Byrne left of his own accord or whether he was "asked to leave," but it's a troubling sign nonetheless. AMD's Chief Marketing Officer, Colette LaForce, also left. The final departure was AMD's Chief Strategy Officer, Rajan Naik.
Layoffs and abrupt executive departures generally aren't signs of a company's good health.