AMD CEO Ruiz Sizes Up The Competition

Advanced Micro Devices this week rolled out its dual-core Opteron processor as part of its drive to usurp market share from Intel by developing a distinct product advantage. Hector Ruiz, AMD's CEO, discussed how Opteron will shape the Sunnyvale, Calif., chip maker's battle with Intel to win the hearts of minds of systems builders in an interview with Editor In Chief Michael Vizard and Senior Editor Ed Moltzen.

CRN: When do you think dual-core Opteron systems will make an impact in the market?

RUIZ: I divide it into two parts. It will be rather dramatic in that it will force people to rethink their designs, but it will take some time to get things started. So the volume impact for us will probably be next year.

CRN: Given that, how much of an advantage do you think AMD now has over Intel, which is expected to roll out its dual-core offerings next year?

RUIZ: Intel is strong company and very capable. We just think this requires a lot more than a desire to do it. I don't know if you can retain their existing bus architecture and change it enough to get the level of performance and value that we have. If they change the architecture, that is not a trivial thing, so it will take them longer. And customers are already making an investment in the enterprise and are not just tip-toeing in the water.

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CRN: Do you think software vendors are on board when it comes to pricing their applications based on a dual-core rather than a single-processor approach?

RUIZ: This is just starting, but the pressure is insurmountable in terms of going in this direction. Microsoft has taken the first step, and everybody will follow. Sun Solaris is the same way. We have major players signed up. At the dual-core level, I don't think this will be an issue. When we get to quad core, that could create a disruption.

CRN: When will that happen?

RUIZ: I'm perfectly confident that we will see engineering samples in 2007.

CRN: Over the last year, Intel has taken more of a platform approach to the market, which seems to be much different than AMD's approach. How much of a difference is there in the two companies' go-to-market strategies?

RUIZ: The good news is that you have a differentiated approach to the market, so channel partners now have a choice. How Intel and AMD are approaching the market is clearly different. We believe Intel's platform strategy is designed to continue their domination and control the market. But you can pick any three-year period [over] the last three years, and it shows that Intel generates all the profit and everybody else loses money. We believe that's crazy.

Systems makers want people to buy their brand because it has good value in it, not because it has Intel inside it. I think this is giving us an opportunity to go to customers that are becoming more interested in getting state-of-the-art CPUs from AMD and state-of-the-art motherboards from Foxconn to create a best-in-class system with their name on it. Our strategy is to continue to offer customers the option of not being marginalized. Any system builder that thinks warming up to the Intel platform brand is anything other than giving their soul away is nuts. They're naive.

CRN: Would you ever consider building your own chipsets?

RUIZ: I have not closed the door on that. If we do that, it would not be to create a platform. It would be to create a reliable source of supply rather than trying to marginalize the customer brand.

CRN: Most recently, AMD has experienced some profitability issues, especially as it relates to the flash memory business that the company is now preparing to spin off. When do you think AMD will return to profitability?

RUIZ: I didn't give any guidance to that. Profitability is important, but our No. 1 goal was to get the businesses positioned so they could develop a life of their own. The fact that the flash memory market went to hell is a temporary disruption. I'm not worried about how we're going to be profitable there. I was worried about microprocessors because in 2000 we had a phenomenal year, and we didn't make money then. It took a lot of changes and modifications over the years to get the microprocessor business to be consistently profitable over the last few quarters. We are on solid footing.

As the flash unit gets ready to spin off, it's pretty well-positioned. Last quarter, Intel had about $100 million more in flash sales than we did, but they lost $225 million on it. Our flash unit lost $39 million. We have better structure in the flash unit than any competitor. As the market recovers, we have a solidly positioned organization. I am pleased that we have been able to get the microprocessor business profitable and the flash business on solid footing.

CRN: Do you think Intel exacerbated the situation in the flash memory market to cut off a source of revenue for AMD's microprocessor business?

RUIZ: Funny how 999 people out of 1,000 actually think that.

CRN: Are you worried that Intel will try to use pricing on its single-core offerings as a tool to keep AMD at bay?

RUIZ: There are spots where they could choke us, but we think customers are warming up to the idea of having a viable, strong alternative. We're building the strength and momentum where pricing is not as effective as it once would have been.

CRN: How vital of a role does the channel play in your strategy?

RUIZ: The channel has always been a great partner for us when it comes to any product that we introduce. What is going to be different is that there are quite a few people in the channel playing a much bigger role in servers. Channel partners are starting to play a much bigger role in the enterprise. The help that we will get from the channel quickly will be pretty evident there. The people that we worked with that have been successful are people who really value creating a differentiated solution. We think single-core and dual-core Opterons strengthen that ability.

CRN: Are you going to spend a lot more money helping those partners market that differentiation?

RUIZ: We're going to have to change that, so this year we need to do something quite different. We obviously can't spend $2.1 billion on marketing. But we are going to work on that with partners. But what we spend will be an order of magnitude less than what our competitor spends.