System Builders Relieved As AMD's Ruiz Steps Down

Advanced Micro Devices stunned the market and the channel with a 1-2 combination on its second quarter earnings call Thursday, announcing a whopping $1.19 billion loss for the quarter and the departure of CEO Hector Ruiz, who will be replaced by Dirk Meyer, president and COO of the Sunnyvale, Calif.-based chip maker.

AMD under Ruiz had a tempestuous relationship with the whitebox channel, and for system builders, the change in leadership at AMD is almost a relief. Several who spoke with ChannelWeb following the news of Ruiz's departure said that the change at the top was a chance for the vendor to reassess its channel and product strategy, especially in terms of how AMD handled its larger OEMs and the ongoing integration of graphics processor and card vendor ATI, acquired by AMD in 2006.

The fact that Ruiz's replacement is Meyer, who has in the past had overall responsibility for AMD's microprocessor business, including development, manufacturing, and marketing, bodes well for AMD, said Joe Toste, vice president of marketing at Equus Computer Systems, a Minneapolis, Minn.-based system builder.

"At least AMD has the product guy involved," Toste said. "But then again, he's probably the same guy that put together the strategy with ATI."

Everyone from the smallest of system builders to the tier-one giants like HP need a strong AMD because its competitiveness with Intel is what makes Intel a great company, Toste said.

"From my perspective, AMD now has a product guy in charge," he said. "There'll probably be less focus on chasing Intel with legal challenges. We just want a good product strategy. The whole Intel thing was getting tiring. Why not go back and focus on better products and better pricing? At the end of the day, people buy for product and pricing and availability, and not on a couple hundred dollars worth of marketing collateral."

Another system builder, who asked to remain anonymous, said Ruiz's departure should help bring a fresh product strategy to AMD.

"Hopefully we'll see more new products coming out to meet customer requirements," the source said, adding that the chip maker needed to focus on leading-edge products.

Glen Coffield, president of Cheap Guys Computers, a Longwood, Fla.-based system builder, is glad to see Ruiz go.

"I've been asking for that for a long time," Coffield said. "It's a pity he stayed so long. He may have been good at selling chips at Motorola, but not at running a channel company."

Ruiz tended to look at the kind of numbers AMD could get from tier-one vendors, or from direct retailers like Newegg, "but not at the guys that sold the AMD brand name," Coffield said. "They screwed us. AMD is done. They've screwed the channel for so long. I gave them opportunities to come back to the true channel."

AMD's move to embrace large OEMs at the expense of smaller system builders, and allow e-tailers to sell products at lower cost than what system builders could buy them for, led to long-term problems for the vendor, Coffield said.

"We were AMD loyalists," he said. "Manufacturers have to be careful when they let one customer become too big a part of their business. AMD went from thousands of little guys to five or six big guys, and the big guys are fickle. I can still make a small profit on Intel, but there's no way I can do that with AMD, either with systems or with processors."

The focus on OEMs, especially an ultimately disastrous deal with Dell at the end of 2006, during Ruiz' reign helped take away AMD's primary differentiation from Intel, said Todd Swank, vice president of marketing at Nor-Tech, a Burnsville, Minn.-based system builder.

For a while, AMD processors were running faster and cooler than Intel processors, and AMD came out with 64-bit processors faster than Intel did, Swank said.

"And everybody used AMD to position themselves against Dell," he said. "Then, boom, AMD signed Dell. The channel got neglected. AMD had to put all their resources behind Dell. They had fewer channel reps to deal with guys like us."

AMD's acquisition of ATI while Ruiz was at the helm became a huge distraction for the company, Swank said.

"Before the acquisition, people there were focused on Intel," he said. "Now they are focused internally. They are thinking, am I going to have a job? Everybody was focused internally at the same time Intel was coming on strong."