Can AMD's heir apparent turn its fortunes around?

Imagine you're a director for a company, which has endured a year that began with a distribution snafu and then unravelled in a series of engineering glitches, forcing the delay of your most important product in years. Worst of all, its stock price has dropped 63 percent.

It might be time to start thinking about going in a different direction, right? Well, not at AMD. Chief executive Hector Ruiz said last month that he plans to stay in the job throughout 2008, and it doesn't seem AMD's board of directors is inclined to send him packing.

Perhaps that's because they are still auditioning Ruiz's replacement. AMD confirmed last month what had been evident for more than a year: company president and chief operating officer Dirk Meyer (pictured) is the heir apparent to Ruiz. That strategy became clear years ago through a series of promotions, and Meyer is credited by some as having played a key role in the company's day-to-day operations for about a year.

Meyer is considered an engineer's engineer and was heavily involved in the design of two of the most noteworthy server processors to emerge during the past 20 years: Digital Equipment's Alpha in the 1990s, and AMD's Opteron, released in 2003. But some current and former colleagues of Meyer's say they aren't sure he's the right fit for the top spot.

While Meyer has considerable technical credibility, he's said to lack the softer sales-and-marketing touch that's crucial in the corner office. And, given the debacle that was the Barcelona processor launch, some wonder whether Meyer — who ran the company on a day-to-day basis while AMD struggled to ship a quad-core chip — may not have the engineering clout he once did. This year will tell whether he's also the tough competitor and ace salesman the chip outfit will need.

"This company is difficult to manage. It requires a chief executive with a lot of energy to go up against [Intel]. The chief executive needs to be a dragon slayer, given the way we compete," said one source familiar with Meyer's management style. AMD declined to make Meyer or Ruiz available for an interview for this story.

The next six months are a crucial period for AMD, Ruiz and Meyer. Ruiz promised in December the company would be profitable in the second half of 2008. That won't be easy. AMD lost more than $1.5bn (£759m) during the first three quarters of 2007, and analysts surveyed by Thomson One expect the company to lose 35 cents a share in the fourth quarter. At least that's headed in the right direction, compared with last year's fourth-quarter loss of $1.05 per share.

AMD is accustomed to boom and bust cycles and it has some work to do getting itself out of this latest mess next year. But choosing the right successor to Ruiz, 62, might actually be the company's most important task in 2008.

The man in waiting
Meyer, 46, has worked for AMD since 1995. He has risen steadily through the ranks of AMD's processor group, taking over the division in 2001 and becoming the de facto second in command at AMD in 2005, when the company decided to spin off its flash memory business, making the processor group its only business line. AMD formalised Meyer's status in January 2006, promoting him to president and chief operating officer and naming him to the board of directors in November 2007.

Placing Meyer on the board not only signals to customers and Wall Street that he is an anointed successor, but also changes the way he's viewed by fellow directors, said Jon Holman, who heads up the executive recruiting firm The Holman Group. It's very different sitting among your fellow directors as a peer and laying out your strategy, as opposed to making the big presentation as an executive, he said.

Current and former colleagues, who did not wish to be identified, almost universally praise Meyer as a man with "integrity and honesty" who commands respect because of his accomplishments during his career. He's not an executive prone to surrounding himself with yes-men and isn't afraid of being challenged.

But they also acknowledge that much of AMD's troubles during the past year can be placed at Meyer's feet. One source familiar with AMD's internal operations said that during the past 12 months, Meyer has taken on much more of the day-to-day management of AMD, while Ruiz has focused on key customer relationships and globetrotting to promote AMD's interests, such as its 50x15 project to promote technology adoption in developing countries and its antitrust campaign against Intel. Unfortunately, that also means Meyer has been at the wheel during the Barcelona ordeal.

Barcelona is AMD's first quad-core server processor, based on the original Opteron design. The company decided to build a chip in which four Opteron processor cores were integrated onto a single piece of silicon, which is hard to do but pleased customers who wanted to…