Hello and welcome to Protocol Enterprise! Today: why AMD’s plan to offer a custom silicon service could help it achieve big revenue goals, how VMware sold the Broadcom deal internally, and why Upstart could face possible regulation after years with a get-out-of-D.C.-free card.
A memorable day
AMD’s first financial analyst day in two years was a flex. Executives forecast that the company would double its annual revenue by 2025 — a number that Wall Street will remember.
The largely paint-by-numbers affair (“These things were a lot more fun when AMD was in big trouble,” one of the attendees quipped) involved four hours of presentations by most of the chipmaker’s executive bench. AMD is now aiming to snatch a $40 billion piece of what it sees as $300 billion worth of opportunity within three years.
Beyond AMD’s grand strategy — the not-so-novel approach of going after the data center market, because there’s lots of money there! — is something intriguing: AMD’s custom chip design business.
- At the moment, what AMD calls “semi-custom” is shorthand for video game console chips that it designed for the two recent Xbox consoles, and Sony’s PlayStation 5.
- But AMD has some strong ideas about how to grow it into something much more in the coming years.
- “We've been in the custom silicon business for the last 10 years, right?” AMD CEO Lisa Su said Thursday. “If you look at what we are doing in the game console market, it has been custom silicon, bringing our silicon to our customers' vision of the market and system and software applications. And my belief is that trend towards custom silicon will only continue to grow.”
It makes a ton of sense.
- Google, AWS and Microsoft all have their own efforts around custom data center chips. The idea behind the efforts is that with a little bit of work, and perhaps some marketing, the cloud companies can make a way to set themselves apart from the competition.
- Su said Thursday that a number of the company’s customers have come to it with the request to help them differentiate.
- AMD’s strategy for its custom chips hinges, in part, on its ability to connect several smaller, specialized chips (chiplets) together in a single package. It already makes dozens of its products this way and plans to help customers add chiplets based on their own technology.
- But easily swapping in customer chiplets won’t be ready until 2025, AMD executives estimated.
— Max A. Cherney (email | twitter)
A MESSAGE FROM VERSAPAY
Fewer than half of executives (44%) see better communication with customers as a benefit of digitizing AR. Meanwhile, 72% state that their AR department isn't customer-oriented enough, implying that executives understand the need for customer-oriented AR departments, but aren't aware that they can close that gap as part of their AR digitization project.
How VMware parried employee questions about Broadcom
A new regulatory filing revealed that VMware perhaps expected some employee backlash about chipmaker Broadcom’s proposed $61 billion acquisition of the virtualization and cloud computing software provider.
In an additional proxy filing yesterday with the SEC, VMware outlined answers to anticipated questions about the deal, which came just seven months after it spun off from Dell Technologies. Two of the entries sought to defend why VMware backtracked on the value of being an independent company: “You sold me on the advantages of being an independent public company. Why aren’t we staying the course?” and “You said being an independent company was the best path forward for VMware. How do you square that with this announcement?”
In short, VMware said that Broadcom’s unsolicited offer included a significant premium for shareholders, that Broadcom sees broad value in the VMware portfolio and multicloud work and that Broadcom’s focus on “solving complex IT infrastructure problems” complemented VMware’s role as “the trusted foundation to accelerate innovation.”
“[T]ogether with Broadcom, VMware will be even better positioned to deliver valuable solutions to even more of the world’s largest enterprises, with a continued focus on technology innovation,” the filing stated. “Broadcom will invest in VMware to help us continue to grow a robust ecosystem across all cloud and on-premises infrastructure vendors, as well as new partnership opportunities. This is a landmark moment for VMware.”
VMware also saw the need to outline why it characterizes Broadcom as innovative.
“Their broad portfolio addresses customer problems in a way to help increase efficiency and reallocate resources to move fast and scale their business to new opportunities,” the filing states. “And their R&D investments reflect this, with R&D investments totaling $4.9 billion in their latest fiscal year, 24x their FY2009 spend. Broadcom’s solid vision, coupled with their strong R&D investment and capabilities, continues to move the industry forward, at scale.”
You can’t fire me, I quit
The Consumer Financial Protection Bureau wants to protect people from opaque lending decisions that block them from fair access to credit. Its latest move: The CFPB told fintech AI company Upstart it now has to give the agency details on changes it plans to make to its machine-learning model or face enforcement action under the Equal Credit Opportunity Act.
“Companies are not absolved of their legal responsibilities when they let a black-box model make lending decisions,” said CFPB Director Rohit Chopra in May.
Upstart embeds its “AI-powered Credit Decision API” into loan partner apps. Under pressure from the agency, the company agreed in 2017 to be part of a compliance program shielding it from possible enforcement.
The program required Upstart to obtain an independent assessment of its ML underwriting and pricing model. Upstart had to show how its automated ML model matched up against a traditional credit model — the non-AI kind. The CFPB wanted to know whether it provided better access to credit and fairer lending.
Under that system, Upstart would have to get its would-be model change evaluated if it wanted to remain shielded through the program. But Upstart didn’t want to wait, so it asked to exit the program. The CFPB obliged, which exposes it to possible enforcement.
So what’s the upshot on Upstart? Financial services companies have to keep track of AI/ML model data, outputs and how the models made decisions — something companies like Capital One sweat over. Expect financial services companies to continue investing in data governance, AI/ML model monitoring tech and data storage to keep track of model outputs in case regulators come knocking.
— Kate Kaye (email | twitter)
Around the enterprise
Larry Ellison said that Oracle will seek to offer a national health records database in the wake of its acquisition of Cerner, keeping alive the dream of many a mid-2000s enterprise tech company unaware this is way harder than it sounds.
AT&T said it has successfully tested a 20Gbps fiber network, which could have interesting ramifications for edge computing strategies.
A MESSAGE FROM VERSAPAY
A resounding 96% of respondents claimed that there is work to do in digitizing their AR departments, yet 60% agreed that their AR departments haven’t been prioritized as much as other departments for digitization. At a time when the importance of securing cash flow is higher than ever, many businesses are not putting enough focus on it.
Thanks for reading — see you Monday!