Analysis: After yesterday, it's time to reset

Shrinkage as a solution

In this more rational equation, we deal with the variables we have in front of us -- we work the problem. No visibility? Not that much of a problem, if we reduce the cost structure. Power down, constrain, conserve. Wasn't conservatism supposed to have been the principle that powered the resurrection of American business throughout the 1990s anyway?

Perhaps most surprising of all yesterday, the biggest company with the greatest exposure to the global economic ails -- AMD -- adopted a sober and emotionless approach, which for it was a refreshing change. In previous quarters, the company's message was led by then-CEO Hector Ruiz, who is easily -- and I say this frankly and honestly -- the nicest chief executive of a company I have ever come across. I would be proud to work alongside Ruiz anytime, anywhere. But the man is so honest, so transparent, and so caring about his business that when it falters, he drips with apology and sorrow...drenching analysts in the process.

Not so with his successor at AMD, Dirk Meyer. Maybe taking a page from the book of his counterpart at Intel, Meyer is straight and to the point. When asked repeatedly by analysts yesterday to explain how it intends to meet its so-called "break-even" target of $1.3 billion in quarterly revenue in six months, while at the same time acknowledging a lack of visibility.

First, CFO Bob Rivet took the response, saying that the company now approaches the problem ahead of it not in terms of how much money can it make and then spend, but how much must it spend to balance its debts. From there, analysts can determine how much AMD must earn to break even. That's the $1.3 billion figure. "Whether we get there or not, when the dust settles, we'll figure that out," Rivet said.

And that might have kicked up some dust right there in itself, so Meyer chimed in. "When we talk about the $1.3 billion break-even model, we're talking about where we're setting the cost structure of the company, with the goal being, given the severely limited visibility that we have in the business, to preserve and generate cash on the one hand while preserving our long-term investments, particularly on the product roadmap. Those two priorities land us at an operating expense level that Bob defined, [which do] not forecast where revenue is going to be over the course of the next two quarters. That's a different conversation."

No apologies, no sappy remarks, and perhaps not the same transparency or niceness as Ruiz. But the more frank, direct approach did leave many with the impression that AMD at least knew how to steer its ship.

"The days of businesses being built on houses of cards are over, as are the days of consumers and businesses alike buying things they have no business buying," Carmi Levy told Betanews today. "Frankly, this is a much more sane way to run an economy, and once we readjust to this new reality, it will be an almost universal good-news story for all of us. Offerings will be more tailored to actual consumer and enterprise needs, and the hype cycle that almost universally seems to cloud buyer judgment will be a little less hyperbolic.

"This is what Mr. Ballmer was getting at, and although a cynic might say he's simply trying to reset expectations for the future performance of Microsoft, a realist would conclude that he's acutely aware of Microsoft's position in the economy as an icon and a bellwether. It's an outlook that companies in all sectors would do well to adopt."

Out of the need for some way of "tagging" the subject of our bad economy stories, I'd chosen to use the phrase "economic storm." I grew up in Oklahoma and I've survived more than one tornado, and even seen them up close. I'm not as fearful of storms as others, and I even think they're beautiful -- I practically subscribe to the annual Weather Calendar of photography. What's more, editorial managers need tagging in order to remind readers what stories they're talking about. Sometimes those tags aren't the best choices -- case in point, CNN's use of the phrase "Tot Mom" in headlines to refer to the mother of the slain little girl Caylee Anthony...as though no other girl is a tot, and no other mother is a mom.

Though storms aren't all bad from my perspective, perhaps my choice of "the economic storm" as a catch-all phrase for the present situation, should be reconsidered in light of what I've learned yesterday from Steve Ballmer and Dirk Meyer. Perhaps I should take my cue from my hero, Gene Kranz, and work the problem. From now on, it's "the economic situation."

There now. Happier?