ATI veteran Orton out at AMD

The former chief executive of ATI Technologies has resigned from Advanced Micro Devices Inc. (AMD) just nine months after the two companies combined in a US$5.4 billion merger.

AMD said Tuesday that David Orton will resign as executive vice president after working through the end of this month. AMD had convinced Orton to remain with the company by signing him to a $1.7 million contract in October, shortly before completing the merger.

As the president and CEO of ATI, Orton led efforts to compete with rival Nvidia Corp. in the building of high-end graphics boards for PCs, as well as cell phones, smartphones and gaming consoles. By acquiring ATI, AMD hoped to become more competitive with Intel Corp. by creating a single “Fusion” chip that integrates its x86 microprocessor with ATI’s graphics processor on a single piece of silicon.

AMD wanted to retain Orton along with his ATI colleagues because of his ability to push ATI to success in the graphics, chipset and consumer-electronics markets, said Dirk Meyer, AMD’s president and chief operating officer, in a statement released Tuesday.

However, AMD expects it will take until 2009 to complete the engineering necessary to bring the new Fusion chip to market. In the meantime, the chip vendor has been suffering from the effects of a price war that has made just a small dent in the profits of its much larger rival Intel. By contrast, AMD has watched its profits sink into the red, reporting losses of $611 million and $574 million for its past two fiscal quarters. In a search for operating cash, AMD even decided to sell off a stake of the company, raising $2.2 billion through the sale of convertible notes to institutional investors.

That financial pressure may have been one factor contributing to Orton’s departure. In a statement released Tuesday, Orton said he still had faith in the companies’ merger strategy.

“It is with mixed feelings that I am leaving AMD,” Orton said. “I am very optimistic about AMD’s future. I believe strongly in the strategies that brought AMD and ATI together and the talented employees of the ‘new AMD’ who are committed to winning in the market.”

Instead of seeking a replacement for Orton, AMD will promote his top two deputies, fellow ATI veterans Adrian Hartog, senior vice president and general manager for the consumer electronics group, and Rick Bergman, senior vice president and general manager for the graphics products group.

Hartog, who was formerly the chief technology officer of ATI, and Bergman will now report directly to Meyer and AMD CEO Hector Ruiz, said AMD spokesman Mike Haase. That plan indicates that the company will merely change its executive flow chart, not its corporate strategy, in the wake of Orton’s departure, he said.

“[Dave] was a primary driver of the integration of the two companies. And with that process complete, and deemed a success, he thought it was time to take on other challenges” and also to spend more time with his family, Haase said. Orton had been commuting between his home in the San Francisco area and the former ATI offices in Markham, Ontario. Orton’s decision will not affect AMD’s business and technology outlook, one analyst agreed.

“It was a bit of a surprise, but I think it makes sense,” said John Spooner, a senior analyst with Technology Business Research Inc. “It’s a good move because these two were at ATI for a while and are really the experts. It would be really difficult to bring someone else in.”

Also this week, AMD renewed its determination to continue its price war with Intel, announcing Monday that it was cutting prices on its range of desktop PC chips, from the top-end Athlon 64 FX through the Athlon 64 X2 and Sempron families.

In the longer term, AMD hopes to regain profitability with its “Barcelona” quad-core Opteron server chip. AMD plans to launch that processor in August to compete with Intel’s dual-core “Woodcrest” and quad-core “Clovertown” Xeon processors launched last year, and quad-core “Harpertown” server chip due out in the fourth quarter of 2007.

AMD may provide more details on Orton’s departure and its new strategies when the vendor reports second-quarter fiscal 2007 earnings on July 19.

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