<font color=green>Another great AMD article posted on the mod thread by Don Green.
I don't care what anyone says, Jerry Sanders is the da man!!
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AMD bounces back
BY THERESE POLETTI
Mercury News
It is the stuff of Silicon Valley legend that Jerry Sanders, the feisty chairman and chief executive of Advanced Micro Devices Inc. was severely beaten up when he was 18, after he jumped into a fight to defend one of his buddies at a summer party on Chicago's rough South Side.
Sanders, now 64, woke up in a hospital bed after major surgery to repair his face. And to this day, he does not like to be photographed from certain angles.
Like Sanders, who had literally been left for dead at the end of that street scuffle, the computer chip maker Sanders co-founded in 1969 has been left for dead many times in its history. A perennial also-ran against the much larger Intel Corp., AMD has been the victim of its own product missteps and manufacturing snafus.
But now, for the first time in 10 years, Sunnyvale-based AMD has caught up with its Santa Clara arch-rival and is aggressively challenging it to supply the chips that are the ``brains''' of the personal computer.
AMD's Athlon chips, a new family of microprocessors that AMD engineers designed from scratch, is on par with the best and the fastest members of Intel's Pentium family, which run more than 80 percent of the world's PCs. And AMD claims it can keep up as Intel rolls out even faster chips, such as its upcoming Pentium 4 line.
But AMD could still stumble. Some analysts are now predicting a major slowdown in world demand for PCs and the components that go into them, including chips, as rising oil prices affect the world economy. On Thursday, Intel warned that its third-quarter revenues would be lower than expected, because of sluggish demand in Europe apparently caused by a declining European currency and record-high oil prices.
``These companies will be battling it out for a declining market share in the first half of next year,'' said Drew Peck, an analyst at SG Cowen & Co.
Still, in the past year, AMD has gained ground against Intel in the $35 billion PC processor market, as the Athlon took hold and other small competitors folded.
And AMD and its outspoken chairman have started to get renewed respect in Silicon Valley and on Wall Street.
Earlier this year, AMD shares rose to a high of $48.50, up from a 52-week low of $8.18, after a recent two-for-one stock split. In recent weeks, however, its shares have fallen amid a general downturn among semiconductor stocks. AMD shares closed at $26.50 Friday, up $2.56, despite a sharp drop in Intel's stock following its revenue warning.
``Everyone in the valley has been buzzing about them for the last six months,'' said Rick Whittington, an analyst at Banc of America Securities. ``AMD is just executing beautifully right now. They didn't in the 1980s and late 1990s, so most of us took them off the radar screen as a processor innovator. It turns out they have come out with a processor family that is superior to Intel's. Everybody in the valley is happy to see this.''
Indeed, the increased competition has put more pressure on Intel. ``If it wasn't for AMD, Intel would be taking its time in rolling out these clock speeds. They are under pressure,'' said Linley Gwennap, principal analyst at the Linley Group in Mountain View.
Now the big question is whether AMD -- which is known as much for its mistakes as for the Beverly Hills lifestyle of its CEO -- can maintain its momentum.
AMD beat Intel to the punch in March with the news that it was shipping the first Athlon running at a clock speed of one gigahertz (1,000 megahertz).
Missteps by rival
But some of AMD's recent success came at the same time as some major missteps this year by Intel, the world's largest semiconductor maker. Among the problems: Intel delayed its low-cost Timna processor and had to recall two products, a motherboard featuring its 820 chip set and a 1.13 gigahertz processor, which was Intel's fastest chip at the time.
Intel hopes to regain the performance crown later this year, when it launches the new Pentium 4 chip line.
AMD also faces challenges as it seeks to move into the higher-profit area of corporate PCs and network servers, where it will have a tougher job convincing commercial customers to try an alternative to Intel.
``AMD has been a great supplier for us, particularly on the consumer side,'' said Mike Winkler, who heads up the commercial PC business at Compaq Computer Corp. ``We continue to look at and evaluate AMD, but on the commercial side, we have seen a customer preference for the Intel devices.''
A long rivalry
For two decades, scrappy AMD has struggled to be some kind of threat to the behemoth Intel.
But AMD, which first started out in the PC processor market in 1982 as a second source of Intel-compatible chips for the emerging PC industry, had design and manufacturing problems that hampered its progress every time it made steps forward.
``We have been through five or six go-rounds with AMD,'' said Intel CEO Craig Barrett. ``Sometimes they do better and sometimes they do worse.''
The two companies were founded within a year of each other during the Wild West days of Silicon Valley. Sanders co-founded AMD with seven other chip executives after he got pushed out of his job at Fairchild Semiconductor, where he was a sales superstar but too brash and contentious to get along with management. Sanders had previously worked with Bob Noyce and Gordon Moore, who left Fairchild in 1968 to found Intel.
The intense rivalry between the two firms started when AMD's second-source agreement began falling apart. This agreement, which gave AMD rights to copy the microcode -- the core instruction software -- used in Intel's processors allowed AMD to develop clones of Intel chips.
In 1987, Intel abruptly stopped providing AMD with information as it had been doing in its original agreement. After efforts at arbitration failed, AMD eventually sued Intel, leading to the longest, most contentious legal battle in Silicon Valley history.
After more than seven years of suits and countersuits and millions of dollars in legal fees, the two companies entered into a cross-licensing deal in 1995, ending all litigation. The settlement permitted AMD, whom Intel Chairman Andy Grove once referred to as the ``Milli Vanilli of the semiconductor industry,'' to develop microprocessors, using its own microcode, that were compatible with the Intel architecture.
Sanders said that the long-running litigation was particularly debilitating for the company, and it was through his own dogged determination and obsession for justice that AMD kept fighting.
``Competing with Intel is something I wouldn't wish on anyone,'' Sanders said in an interview. ``My life was much better when Bob Noyce was alive and our relationship was more collegial.''
Playing catch-up
The years of distraction left AMD far behind Intel in the PC processor wars. Its first product that was designed from scratch, the K5, was almost a year late.
``AMD didn't have a processor to compete with Pentium. The K5 . . . never could keep up with the Pentium in terms of performance or price,'' said Tony Massimini, chief of technology at Semico Research Corp. in Phoenix.
AMD finally bought NexGen in 1996 to get a design that would work, said Massimini.
With a new K6 family of processors based on NexGen's architecture, AMD managed to make a dent in the PC business again, but it was typically the underdog, getting Intel's table scraps. It made its biggest inroads first by selling to the second- and third-tier PC makers.
The big break for AMD was the rise of the low-cost PC, costing less than $1,000, which Intel essentially ignored. In 1997, International Business Machines Corp. became the first major PC maker to use an AMD K6 as an alternative to ``Intel Inside.'' Other big-name PC makers followed.
Just as AMD started to gain share, Intel fought back, developing its own low-cost chip, dubbed the Celeron.
Intel launched a major price war against AMD in the first half of 1999. At the same time, AMD was beset with problems with the K6-2 processor, a design that stalled out as it tried to hit faster clock speeds. The upshot: AMD reported two of the biggest money-losing quarters in its history.
Meanwhile, turmoil reigned in the executive suite. In July, then-President and Chief Operating Officer Atiq Raza abruptly quit AMD. Sanders persuaded AMD's board to give him until the end of the year to turn things around, while he temporarily took over the day-to-day operations.
``He jumped in and immediately took control,'' said Bob Palmer, former CEO of Digital Equipment Corp., who had just joined AMD's board that April. ``When I joined, the company was still suffering with the investments that were made to take a leadership position in the semiconductor industry . . . The question was . . . whether the company would be able to benefit from the investments.''
Raza says he left AMD because he felt that being in the PC chip business, he wasn't driving in the ``fast lane'' of technology anymore. Raza is now heading up Raza Foundries, an investment and incubator firm based in San Jose that is focused on grooming networking and communications start-ups. ``It makes me very happy to see AMD do well,'' Raza said.
It was only after AMD launched the Athlon in late 1999 that profits ensued. In each of the first two quarters of 2000, AMD surpassed $900 million in revenues and reported better profits than Wall Street expected, fueled by the sales of the Athlon family and on still-strong demand for the older K6 family of chips.
Demand for flash memory, which makes up about one-third of AMD's revenues, has also been surging, with networking companies like Cisco Systems Inc. and cell-phone makers buying up all the flash memory that AMD, Intel, and others can make. Flash memory has become so important to AMD that its stock has gone up and down on rumors about the supply of flash memory chips.
But investors tend to be a jittery bunch when it comes to AMD. The company has had so many internal boom-to-bust cycles that some still-cynical investors are waiting for what they believe is inevitable -- Intel starting another price war or AMD making another manufacturing mistake.
``The company doesn't get any respect on Wall Street because they obviously have a checkered past in terms of disappointing people,'' said Steve Shapiro, president of Intrepid Capital Management, a New York-based fund. ``They have great new products, and if anything, I'd argue that they are executing significantly better than Intel . . . It's absolutely a legitimate turnaround.''
AMD has managed to convince many skeptics on Wall Street that its manufacturing problems are a thing of the past.
But Mark Edelstone, a Morgan Stanley Dean Witter analyst, points out that AMD is now dependent upon motherboards and chipsets from other companies to support its Athlon architecture.
``There are issues beyond AMD's control,'' Edelstone said. ``The key issue is the ingredients that go around their processor, namely motherboards and chipsets,'' which have been in short supply at some contract manufacturing firms.
For its part, among the major weapons in AMD's arsenal are its two state-of-the art plants in Austin and the new fab in Dresden, Germany. The Dresden facility cost $1.9 billion, and Sanders likens investing in new chip plants to playing Russian roulette, except that it takes four years to know what happens when you pull the trigger.
``Dresden is the best thing that has ever happened to AMD,'' said Sanders. ``We made the investment in the technology . . . We are ahead of Intel in copper.''
By using copper technology instead of aluminum as the metal for a chip's interconnects, chip makers can develop faster chips. Through an alliance with Motorola Inc., AMD has rights to Motorola's copper interconnect technology, which it is using in Dresden. So far, the chips that have been coming off of the Dresden plant are hitting speeds of above one gigahertz.
``From the outside looking in, it appears that the Athlon came out of nowhere. But in fact some of the pieces were put in place from the early 1990s, in terms of giving us the experience,'' said Dirk Meyer, a vice president of engineering at AMD and the leader of the Athlon development team in Austin.
And many people also give credit to the tireless fighting spirit of Sanders, who has kept the company going through its darkest times. ``In the years that I have known Jerry, he has always had the ability to rally the team,'' said Palmer. ``He doesn't know anything except to just charge.'' |
