Paul, you'll hate this:
penstarsys.com
But, I'm pretty sure you'll love this IBD story:
investors.com
Sanders' Reign At AMD: Tales Of Merriment, Woe
Date: 6/30/99
Author: Russ Britt and James DeTar
The late 1970s and early 1980s marked a golden era in Silicon Valley. The computer industry was young and full of promise, and everyone seemed a potential winner.
First of two parts
The horizon was bright for Walter Jeremiah ''Jerry'' Sanders III, the mercurial chairman and chief executive of chipmaker Advanced Micro Devices Inc. AMD had built a reputation as an alternate source for PC microprocessors to chip king Intel Corp.
AMD prospered, and Sanders became a shining star in Silicon Valley. He was rich, powerful and charismatic, and employees warmly referred to him as ''King Jerry.'' His persona grew so large at one point, it was suggested that he represent Silicon Valley in a 1980 run for the U.S. presidency.
''I could never pander to a constituency. But if the country wants a king . . . ,'' Sanders quipped at one public gathering. He then flashed the ''V'' sign, a la Richard Nixon.
Sanders was joking, but some say his brand of humor speaks volumes about the man who's been AMD's only leader since its 1969 founding.
The 62-year-old CEO often is criticized for having a large ego, a generous compensation package, a lavish lifestyle and autocratic management techniques. While Sanders is a driven and gifted salesman, industry insiders say he also has a taste for the good life -expensive cars and stately homes.
''He does all the things the rest of us want to do,'' said a former associate.
AMD shook up its management recently, but Sanders clearly retains tight control, company officials say. Atiq Raza, president and chief operating officer, now is the heir apparent. Analysts and insiders, though, say Sanders is unlikely to give up control for many years.
That's what has Wall Street concerned. ''A lot of people think a change might be good,'' said Erika Klauer, an analyst at Deutsche Bank Alex. Brown. Analysts say long-term AMD shareholders have seen few gains, even below the comparison returns investors would have received from, say, U.S. Treasury bonds, says executive compensation consultant Graef ''Bud'' Crystal.
Sanders declined to comment for this article. But nine former AMD executives had similar descriptions of the CEO: tough competitor, good motivator, overly optimistic, lacks focus.
AMD And Intel
When AMD and Intel started fighting over chip patents in the mid- 1980s, eventually forcing AMD out of the Intel-clone business, Sanders became obsessed with beating his much larger rival, analysts say.
''He's had this fixation on competing with Intel,'' said Larry Borgman, an analyst with Josephthal & Co. ''I'm not sure it's really done well for the company.''
In the last year, AMD has made strong inroads against Intel. AMD held 40.5% of the U.S. retail PC market in April, compared with 25.4% a year earlier, says PC Data Inc. Intel's share in that time fell to 53.2% from 71.9%. Overall, though, Intel chips still power more than 70% of PCs worldwide.
But the market-share gains have come at the cost of price cuts. Last week, AMD warned it would lose $200 million for the second quarter, much worse than analysts expected. The company is expected to wind up in the red for its fourth straight year.
AMD had to discount its chips more than expected as Intel undercut the company on some prices, says spokesman Scott Allen.
''Even Intel runs into these stumbling blocks,'' Allen said.
The big second-quarter loss, which even Sanders called deeply disappointing, has analysts asking questions they've mulled for years: Should Sanders remain at AMD's helm? Does his style work today?
Intel Chairman Andy Grove works from a cubicle and at times must hunt for a parking space. Sanders' work habits are viewed as more old school, even regal. He works either from spacious digs in Sunnyvale or offices in Beverly Hills, Calif., near his Bel-Air home. That's an hour away from AMD headquarters by plane.
Usually, Sanders is in Sunnyvale Tuesday through Thursday. He used to ride to work in chauffeured Rolls-Royces. Now he is driven to work in a Mercedes-Benz from his San Francisco townhome.
Office size and transportation aren't the only differences between AMD and Intel. Former AMD executives say the company doesn't have Intel's hard-charging attitude.
''I was on executive row, and at 5 p.m. there was nobody there,'' said one former staffer. ''You can't run a tough technology company with that kind of attitude. Maybe that's the real problem.''
Former associates say Sanders' lavish lifestyle may be traced to his humble beginnings in Chicago. One of nine children, his parents divorced, and when he was 4 he was left with his grandparents to a life of poverty.
He climbed out of his early hole, but Sanders' difficult life affects him to this day, associates say.
''When you boil it down, he's extremely insecure,'' said a former AMD executive who, like many others who commented for this story, spoke only on condition of anonymity. ''He deals with that by surrounding himself with only the most expensive things.''
Sanders' $1 million salary and his bonus package is widely considered the most extravagant of any Silicon Valley executive, says Joseph Richard, a Half Moon Bay, Calif., compensation consultant.
But such criticism doesn't seem to rattle Sanders. He once boasted publicly of never bringing company parties - which have featured such entertainers as rock-'n'-roller Rod Stewart - in under budget. At a recent analysts conference, he wore a tailored suit with his name stitched into the pinstripes.
Sanders, who once aspired to work in the entertainment industry, likes to mingle with the Hollywood set. His wife, the former Tawny Capriccio, is an actress.
In early 1997, Sanders doubled the size of his home when he bought a 13,694-square-foot Bel-Air mansion, called La Lanterne.
Sanders might have felt a little richer when he bought the home for $13.3 million. AMD's stock had taken off and in midyear hit its all-time high of about 45. Yet AMD lost 51 cents a share in 1996, the start of the annual losing streak.
Sanders also owns a 7,606-square-foot beach home in Malibu, which he bought in 1992 for $3 million.
A Volatile Temper
Sanders' management style also generates controversy. Several former NexGen employees recall how they were awed by Sanders when AMD bought their company in 1995. NexGen brought the K6 to AMD, which helped the company make its recent market-share gains.
''There's a lot of key good things he's done for the company,'' said one NexGen alumnus who recently left AMD.
Others have different views. One AMD worker recalls almost quitting when he witnessed Sanders' volatile temper as he berated a co-worker.
Jack Gifford, founder of Maxim Integrated Circuits, says Sanders' temper has helped catapult him to the top. Gifford helped found AMD, a company he called his brainchild. He says he brought along Sanders because of the executive's standing as a top salesman with the former Fairchild Industries.
Sanders soon caused rifts among the other five co-founders of AMD, who wanted him out, Gifford says. Gifford encouraged the co-founders to keep Sanders - a move he later regretted.
''One Saturday Jerry came to my office and started an argument. I told him that the founders told me if you (Sanders) continue to behave like this, you're going to be out of here,'' Gifford said. ''He went to each founder and told them he would fire them if they supported me. He thought I was doing a mutiny.''
That temper had other side effects. Engineers were so worried when performance flaws in AMD's K5 chip started to appear in 1995 that no one told Sanders.
''Everyone in the company knew the thing was in bad shape but Jerry,'' said one recently departed staffer.
Sanders, says another former employee, simply is overbearing. He ''is the culture at AMD,'' said the ex-AMDer.
''His biggest strength is he's the world's consummate salesman,'' the employee said. ''The problem is so many of the decisions have to go through him. If he's not engaged with the problems, they move slower than they should.''
Several former top AMD executives say Sanders may be undone by his Intel obsession. But National Semiconductor Corp.'s recent decision to get out of microprocessors may strengthen his resolve. AMD will be the only major alternative to Intel in PC chips.
The company has made a $5 billion bet on its Athlon chip, also known as the K7. That money has been spent on research and new chip-making plants in Dresden, Germany, and Austin, Texas.
But many industry insiders feel the future lies in smaller, Internet-oriented communications devices. These chips are on the horizon, and AMD has failed to heed the call.
One former AMD executive says that's why he left.
''You have to really believe in what you're doing,'' the executive said. ''You have to believe the strategy makes sense.''
Next: Sanders' employment contract.
(C) Copyright 1999 Investors Business Daily, Inc. |
