AMD is hurting, badly.

I hate to say it, because I have friends working at AMD—good friends that go way back—as well as many who have left the company for one reason or another. The current economic situation isn’t helping, of course, but I have seen quite a few good people there get laid off due to factors that many of us could have predicted months ago, with or without the recession.

The company is hemorrhaging cash; last quarter alone it lost more than $600 million, and no matter what AMD’s management does, it can’t seem to right the ship. Some would say that part of the problem is AMD’s insistence on sailing in the same waters and that perhaps it’s time for a totally different mode of travel.

Does AMD need a new leader? I’m not suggesting that Dirk Meyer is an incapable CEO, but do you agree that it’s reasonable to conclude that AMD needs to find an entirely new direction? If you do, then follow my thinking; I believe the only way a company can go on a completely new path is if it hires someone from the outside. AMD requires a leader who can bring in some fresh thinking and, more importantly, who can bring the factions of ATI and AMD together with a believable long-term vision.

Is it wrong of me to assume that things are broken inside of AMD based on its recent execution? The company has lost some incredible people along the way and continues to trim, and morale is low. Believe it or not, hope still exists, but it’s time for some profound, lasting change.

Jen-Hsun Huang is a strong leader, by every measure. Sure, Nvidia has screwed up a couple of times along the way, but somehow the company always scraps its way back to the top. Up until the beginning of 2008, Nvidia was a darling of Wall Street, and history should certainly repeat itself. Usually time heals all wounds, and on Wall Street good numbers can heal anything.

Jen-Hsun is aggressive, incredibly intelligent, and he wears his passion for Nvidia on his sleeve. Like Steve Jobs, he takes his brand very personally. Jen-Hsun’s totalitarian-style leadership works because he has long-standing credibility and can inspire the masses when he’s excited about something—his passion is definitely contagious.

Both AMD and Nvidia face huge challenges in the coming months and years. Intel is only getting stronger, leaner, and angrier. Mark my words: Intel’s push into graphics will be anything but mediocre. The company is going all in, and has no plans to launch a crappy video card. Intel wants to control its ecosystem and increase its margins. Nvidia is doing a great job of pushing Visual Computing to the forefront, but it’s really a technology that any graphics supplier will be able to support at some time.

If you’re wondering where I’m going with all of this, here it is: Nvidia and the fab-free side of AMD need to merge. I don’t think there will be any antitrust issues here because Intel still owns the lion’s share of the graphics market, thanks to its integrated graphics chipsets. Jen-Hsun needs to run the show, to tear through the entire company and lean it out, promoting all of the top engineers and producers and optimizing middle management.

The new company should consolidate everything under the Nvidia brand and start to build out the most insane, most aggressive, most comprehensive strategy. It needs to control its entire ecosystem, and if the new company executes, it will be more than competitive with Intel. In this case, one plus one should equal five.

This, my friends, is likely the best way for AMD and Nvidia to survive and prosper in the long run. It will also create competition with Intel and push innovation to new levels. This is the Art of War.

Yeah, I might be asking for trouble, but I’m really tired of watching companies constantly beat their heads against the same wall over and over again, hoping something will break.

Let’s just hope the higher-ups are listening; if you have any comments for them, please feel free to share them on my blog.

Send your opinions to this opinionated guy at rahul@cpumag.com