Lee Little, AMD's director of field marketing, recently sat with CRN's Jeff O'Heir to discuss how the company will increase share among white-box integrators.
CRN: You presented some interesting numbers that Dataquest recently released regarding AMD's third quarter. Market share in small business grew from 22 percent last year to 40 percent this year. What do you attribute that growth to?
Little: Our overall market share has gone from 17 percent to 27 percent. It's the acceptance rate for the product. There was a period of time when we were picking up a point a month in market share for Athlon. The acceptance rate is based on the performance of the product and the fact that we're winning awards.
CRN: What are the market factors that drove that growth?
Little: One of the real big things is the acceptance rate by the channel. We have been with the system builder and VARs for three or four years. We went on a 30-city technology tour this year, and we'll do another 30 next year. We're talking to VARs and system builders about our technology, and they're integrating it into the marketplace. There are folks looking for alternatives who want to test AMD technology. Once they get it, they're more than happy to reorder and buy. Now there's a true alternative in the marketplace: the Athlon, the Athlon XP, and its little brother, the Duron. And they're now available for the workstation, high-performance desktops, value-based desktops and servers. We span the whole product line.
CRN: IT sales across the board are down. How's the market right now for white-box builders?
Little: I see two key trends out there. Our tier-one folks are in turmoil. It's unclear whether the Compaq/HP merger will go through. IT is questioning whether you'll go with those folks. So you see the market share of those two companies way off. You see Dell growing dramatically. You see Gateway and IBM with some issues. In the middle, you see the tier twos, and they're virtually gone. Then you have the whole system builder market, and that business is growing. Within that market you had some companies that were thinly capitalized, didn't provide service and reliability, and are starting to be weeded out. But the stronger guys are getting stronger and they're able to command more growth. AMD is positioned very well with those system builders, and we think our market share is going to continue to grow.
CRN: AMD has the incredible challenge of going up against probably the best-known brand in the IT industry, Intel. What's AMD doing to increase its marketing and branding efforts?
Little: The question is, they got brand awareness, but does all that branding really equate to increasing end-user value? What does a consumer get from that?
CRN: Peace of mind?
Little: Now wait a second. How's that the case (if you look at the awards AMD has won)? Folks are willing to take notice that all processors are not created equal and that AMD offers performance and value propositions that are better than Intel's. AMD wins in offering high-value processors in the marketplace. We believe the marketplace today has three sectors and one-third of the sectors, 27 percent, are willing to buy AMD technology and are requesting AMD technology. And I would tell you that most of those folks, if you look at the demographics, are younger males, 24 to 35, who spend a lot of time on PCs. They recommend and tell their friends about us. Those are the future IT managers in the next five to 10 years, and it plays very well for our growth strategy. The next third are folks who really don't want to be bothered with whether it's Intel or AMD. The other one-third, or 40 percent, say I have to buy what is heavily branded or heavily influenced, and that is my competitor Intel.
But, to answer your question: What are we doing? We still recognize that as we grow, our market share awareness and branding is important. Therefore you'll see multimillion dollars being spent on print advertising in all the different business magazines. I also work very closely with over 200 different system builders across America to provide marketing funds to help promote their AMD message. We've embarked on national radio ads. We have a variety of different things to get the word out. There are still plenty of market opportunities for AMD and Intel to grow our businesses.
CRN: Any particular areas within the government market that are hot right now?
Little: State and local. That's where the action is. Federal government is pushing funding down to state and local. If you look at the initiatives to automate in state and local, whether its corrections or social services, the list goes on and on for Web-based initiatives throughout the states. I've had lots of conversations with state officials and there are huge bids out there for state contracts. And, by the way, the AMD value proposition plays very nicely. Most of them have statutes for open and fair competition. In the education marketplace, we've doubled our business, from 9 percent market share to 18 percent. Most of that is at the college level, where they want the performance.
CRN: There's one stagnant area for AMD and that's the enterprise. Can you describe AMD's strategy and what the company is doing to bring white-box solution providers with you into the enterprise?
Little: My background is selling into the enterprise marketplace. The enterprise marketplace is a unique beast. Sales cycles are very long, six months to a year. You have the buyer or the IT decision maker very resistant to change. They're risk-adverse. So anything changing inside their network raises concerns. They cannot afford that network to go down.
We recognize we're going to have our work cut out for us. We are going to win in the commercial market place. We are going to get 20, 30 percent market share. It may take 12 to 24 months, but we are gong to be there. We have a couple of ways we're going to do it: notebook platforms, and then desktop platforms. AMD not only offers processors for desktops, we have a great line for notebooks and soon for workstations and servers. AMD has a team of business development executives, seasoned salespeople scattered throughout North America, calling on Fortune 1000 companies and IT decision makers at state and local levels and major educational institutions, talking to them about the AMD story. Most people don't know we've been around for almost 30 years. Most people don't know that we've actually made millions of microprocessors. So once they understand the long-term stability of the company and our overall viability, they'll be happy to buy.
CRN: What are you doing to bring system builders along with you into that market?
Little: A whole host of things. We do trade shows, advertising programs, buddy sales calls with AMD personnel, going out with the system builders and spending a lot of time trying to drive business and reduce any perception of resistance to AMD so they can be successful in the marketplace. Let's face it, with what's going on in the tier ones out there, a good competitive offering could be a system builder's solution using AMD technology. The price and performance gives them a tool they can use to capture more customers.
CRN: And, on top of that, Dell doesn't necessarily have the same-day service that white box solution providers can offer.
Little: Dell's a wonderful company but your regional system builder, your local provider right around the corner, has service and solutions that can't be beat. He can simply walk over and take care of issues.
CRN: What are some of the biggest challenges your system builders face today and what's AMD doing to help them overcome those challenges?
Little: One of the things they're asking for from us is more and more product. We're going to do a series of long-term planning meetings with our major system builders, probably about 100 of them, in the next three months, and we're going to look at the business on an annual 12-month roll-in program. So we're looking to support them and become more entrenched in their long-term viability and support. Despite the recession and 9/11, the market is there. But what we all need to do in the value chain is work smarter . . . to provide as much as we can to increase end-user value. That's the only way this industry is going to continue to grow.
CRN: Are there any particular types of system builders that you're looking for to help crack the enterprise?
Little: The guys that we really want to look at are the folks that have large integration capabilities and for whatever reason have decided not to buy a tier-one vendor and to go in and offer the IT community their own brand. There are some that come to mind. They have huge integration capabilities and do the deployment and ongoing service. In this day and age, looking for alternatives out there and having the flexibility to integrate those into your value proposition are important.
CRN: Does AMD have a formalized partner program?
Little: Yes, we do. It's always in a state of flux and continuing to grow. We build programs starting with a blank piece of paper. One of the areas I don't have is a workstation/server solutions provider program. So what do we do? This is the AMD formula. We bring in 11 guys who focus on workstations and servers and ask them what they want to do. I have this blank piece of paper. [I ask them: What do you need? Tell me. I want to make sure I'm building something that is in tune with what they think is effective. I don't want to waste my money or resources on things that just aren't responsive to their needs. We had one last week in Austin. They told us the good, the bad and the ugly of what our program is now and what we have to do to integrate it.
CRN: What were the good, the bad and the ugly that they talked about?
Little: The good is that we have great products. The good is that we're willing to listen and we're willing to be flexible enough that we don't come up with any preconceived ideas of what has to be. The good is that we're willing to react. I shouldn't say the bad and the ugly, but the thing we have to work on is that we need to implement. Now that we've gotten our marching orders from the folks who are going to use the program, we've got to make sure we implement this program and deliver. I'm confident we will because we have a vested interest in growing our market share and we want to do it with those partners. The final thing is to have a feedback loop of what we're doing right and what we're doing wrong.
CRN: What components do the solution providers want included in the workstation/server programs?
Little: What they definitely want is an AMD processor-server platform, fully tested, fully compatible and very highly reliable. For better or worse, my competitor offers a full line of motherboards that go into their server platforms. We do approval testing of chassis and thermals, but the motherboards we leave to the very healthy Taiwanese manufacturers. Their engineers are remarkable: nimble, quick and flexible. We're working on and will probably announce a program that augments those Taiwanese motherboard manufacturers for a level of assurance on AMD motherboards. It's going to be a solution for those who want a platform with a degree of consistency and a degree of reliability to take to their best customers.
CRN: Can you explain how a program like that will provide more consistency and more reliability?
Little: One of the contractual agreements is that the motherboard vendors we work with have to maintain a consistent platform in terms of chipsets, bias settings, and the host of components on that board for a period of time, because if you sell a machine and three months later the motherboard goes back you can get a replacement motherboard of the exact same model.
CRN: Is AMD doing anything to address its partners' needs for a centralized return system?
Little: Centralized return is if a board breaks you have 24- to 48-hour cross-shipment programs. That came out of the focus group loud and clear. We're already talking to major service vendors asking how we pull that together. What we've learned is that there are other ways to skin the cat. Now we need to figure out how we address RMA and deployment issues. One interesting thing is that when you talk workstations, it's not the same price game as it is selling to consumer. It's reliability, compatibility, stability. We call those 'ability programs' and AMD has the ability to answer all those questions.
CRN: When do you think you'll announce the centralized return program?
Little: I don't know if I have a date. We got to get the platform program out then we'll look at how we can get next or two-biz day delivery of boards. I think six months is definitely doable.
CRN: Since we're talking about solution provider concerns, one is that the Athlon runs hot, requiring integrators to take extra time and money to install additional fans and cooling devices. Is that something you're aware of and is AMD addressing it?
Little: With the Athlon XP our engineers recognized that heat was an issue. When we went from the Athlon to the Athlon XP, we were able to reduce our power by 20 percent, allowing us to get into notebook platforms.
CRN: How much has AMD processor sales for notebooks increased in the last year?
Little: At one point, we had about 50 to 60 percent market share with the K-6 and after that we hadn't really focused on a true notebook part. Recently, however, we have a 30 percent market share in U.S. retail from Compaq, HP and Sony. Now we're going to take that and move it into commercial SKUs and work with vendors to offer white-box notebook platforms, which I think is a huge, untapped source of revenue for system builders and VARs.
CRN Do you see more of your small to midsize white-box integrators getting into white books, or is the process still too complicated and risky?
Little: I think the end-user demand for notebooks is continuing to grow and with that entrepreneurs and businesspeople are going to provide solutions for that in the notebook class, whether it's branded or unbranded product.
CRN: For the white-box builders out there who want to start building notebooks, what are the challenges they face and what is AMD doing to help them?
Little: We've had some conversations with folks who offer platforms out of Taiwan and one of the things they've asked for is training on the insertion of the processors, the hard drive, the memory, because they come out of Taiwan in a kit and most are locally configured in a factory setting.
CRN: How much of its resources is AMD putting behind its white book market and can you compare it to your workstation/server efforts?
Little: Quite honestly, desktop is the horse that got us to the race and the desktop is our flagship with both the Athlon XP and the Duron. But when you look at market-share opportunities workstation and server is clearly there. With notebooks we will capture market share. We have dedicated teams both for notebook push and the workstation push.
CRN: We didn't get to talk much about AMD's server efforts. Can you explain what you're doing to ramp up that effort?
Little: We have been a single-processor server provider for a while, but multiprocessing is the sweet spot of servers where 80 to 90 percent of servers are sold. It's an area in which I think we're going to have solutions.
CRN: One last thing. What types of opportunities does the uncertainty of HP and Compaq's fate present for white-box builders?
Little: My belief is the white-box marketplace is open hunting season. There is plenty of opportunity, if they can get the right salespeople, the right solutions. Most people who bought PCs have already bought their second or third PC. Now do they have to have the name-brand machine or can they buy the local vendor? I think they realize that all PCs are pretty much all the same components. They want to buy from some guy they can talk to. It goes back to the old-fashioned relationships and working with someone you know.