Interview with Jerry Sanders - From Yhoo
July 12, 1999
DER SPIEGEL
SPIEGEL: Your company is Intel's last serious rival? How are you going to survive this technological arms
race?
Sanders: We have to be more efficient. We have the world's best chip designer. Our teams number 80 to
120 heads each. Intel's teams number 600. Intel has lots of teams, we only have three. The development of
each processor generation costs more than $300 mill. Production technology counts extra. Each technology
generation lasts only for 5 years. Our future depends on the new Athlon processor and the Dresden fab.
SPIEGEL: Why did you decide to build the fab in Dresden?
Sanders: Germany is the largest market in all of Europe. In Saxony, we have found well trained and
ambitious employees. Thirdly, and I want to be very open about this, we are receiving money there. I told
Dr. Biedenkopf, we can turn Saxony into Europe's center for microprocessor, but that it requires several
billion dollar and that I only have $200 mill. After some discussion, we found a solution. We are putting
$400 mill in, Federal and State Governments contribute with guarantees, and now Saxony will have a facility
which is worldclass in terms of technology.
SPIEGEL: Weren't you afraid of the often cited German business disadvantages, e.g. high wages?
Sanders: Wages are not so important as long as the productivity is there. Today, everyone can buy
equipment. But what counts are the heads. When we decided on the project in 1996, we were thinking
about a technology which didn't exist then and a product which hadn't been designed then. Only because
we were able to demonstrate that we had a clear roadmap and the people to implement it, we were able to
realize the project.
SPIEGEL: How do you want to gain the confidence of PC manufacturers so that they will begin using your
new chip in their products?
Sanders: Intel's long awaited Merced processor has been delayed for more than a year. How can that be?
Isn't Intel God? Isn't Santa Clara Valhalla? They weren't able to maintain their time schedule, but they are
making money. And profit is a good deodorant. When we were profitable in Q3 of last year, we were
heroes. As we didn't earn as much money in Q4, we were bums. And when we making a loss, we were
scum. - But that is Wallstreet talk, that's not how the industry works.
SPIEGEL: The Athlon processor is seen as your last chance in the market.
Sanders: It is not our last chance to survive, it is our last chance to be part of the top ten of the industry. If
the monopolist is able to squeeze us out of the market, the consumer will suffer in the end. If it hadn't been
for AMD, the PCs would never have become as inexpensive as they are today.
SPIEGEL: For a period of time, you were very successful in the market of inexpensive PCs. But Intel
caught up to you with its cheap Celeron processor.
Sanders: Intel charges usury prices. No doubt about that. No other semiconductor company makes a 45%
profit. That is only possible because of their monopoly in the Windows-PC market. As long as we were
only manufacturing clones of Intel processors, we only got crumbs of the cake. We had to develop a real
alternative. At the same time, we couldn't be completely different in order to be Windows-compatible.
Windows of course is inseparably linked to the Intel architecture. Everything spoke against it, but we were
successful in developing such processors.
Spiegel: That is exactly your problem. The Windows-user doesn't care whether his PC has an AMD or
Intel processor. Why should he buy yours?
Sanders: We are able to make the customer only this offer: A comparable performance at a better price.
SPIEGEL: And now you are engaged in a price war with Intel.
Sanders: We cannot expect that the PC manufacturers pay us more than Intel out of sheer beneficence.
Thus, we have to keep our prices at the Celeron level. At the same time Intel can charge usury prices in the
business market because there is no competition. That's where they make their money so that they can
afford to strangle us in the consumer market.
SPIEGEL: You have not only fallen behind on prices. You couldn't provide enough fast chips.
Sanders: Yes, but this technology is extremely complex. When you are going with record speed in a racing
car, a tire might blow out from time to time. At the same, Intel's amazing marketing made customers think
that the quality of the processor is determined just by the speed grade measured in MHz. That is not the
case, just as the speed of rotation doesn't measure the performance of a car engine. A K6-2 Processor with
300 MHz performs as well as a Pentium II with 400 MHz.
SPIEGEL: Doesn't Intel need AMD in order to prove that they don't have a monopoly.
Sanders: Totalitarian states have their puppet governments. But we are not a puppet, we are the challenger
and our ambition has no limits. We are not satisfied to be in the market of cheap products. We have been
fighting for 24 years, and we are still around. When we began, Intel licensed its technology to 15 companies
to assure the universal acceptance of the x86 standard. Of those companies, we are the only one that
survived.
SPIEGEL: Nevertheless, you live in the shadow: AMD processors are not the first choice. Everybody
knows Intel, it is synonymous with quality.
Sanders: “Intel inside” is bullshit, translate that as you like. It is nothing but a tricky rebate scheme. An
example: Intel's largest customers, Compaq and Dell, spend $ 2.5 billion per year on their processors. $
200 mill is returned to each of them because they advertise with the “Intel inside” logo - $ 200 mill! I only
have one customer who buys that much from us. Whoever uses the “Intel inside” logo in his advertising gets
money back - and if there is only one system with an AMD processor in the advertisement, he doesn't get a
cent. Several years back I offered hundreds of thousands of processors for free to IBM so that they could
try them out. They didn't take them because it would have threatened their “Intel inside” program.
SPIEGEL: Why don't you start a similar marketing campaign?
Sanders: We rely on the intelligence of the customer. We'll demonstrate with performance tests that the
Athlon offers more for the money. By the way, business customers take a different approach anyway. They
don't care about Intel's dancing clean room apes.
SPIEGEL: AMD's stockholders may run out of patience. At the last annual meeting there were calls for
your resignation.
Sanders: Come on, that wasn't the case at all. The annual meeting was practically a love-in. Honestly. The
stockholders were very friendly. I explained why we lost money. I was surprised: Our stock went down
from $33 to $14, and there were practically no votes against the board. One investor was upset because he
didn't receive a dividend. Reuters turned that into a story which had nothing to do with the meeting.
SPIEGEL: There are also attacks against you personally. Some don't like your luxurious life style, the
designer suits, the limousine with a driver, your salary.
Sanders: Designer suits. They are tailored suits, but it is my money, so what. Why shouldn't I take a
limousine? That means I can work an extra two hours on the way to and from work. I don't understand this.
I'm the worst paid man in the semiconductor industry. I haven't received a bonus for the past three years.
For the past five years, my annual salary was $1 mill. From 1993 to 1995, we made so much profit that I
received the maximum bonus of $2 mill. No stockholder complained about that. No profit, no bonus. And
since 1990, I haven't made a penny in stock options. That has to be explained to the media.
SPIEGEL: Why do they like to pick on you?
Sanders: Because I have a multi-million dollar home in Bel Air, because I have a luxurious beach house,
because I'm the way I am. I am proud of what I achieved. Of course it is easier to pick on me instead on
those that have to carry their own luggage to the airplane.
SPIEGEL: Did you ever consider quitting during these tough times?
Sanders: AMD is a team. We built a company which is number 2 in the microprocessor business. The only
competitor to which we are compared is Intel. And Intel generates more revenue than IBM, Motorola,
Lucent, TI and AMD combined. They always they: “Intel does this, and what do you do?” They should say:
“My God, it is amazing what you have achieved.”
SPIEGEL: Why is it so difficult to present this as a success story?
Sanders: The market thinks in terms of sprints. And we are running a marathon. We have our own
technology, we have our own fabs. We are a real company and not an Internet-booth.
SPIEGEL: Are you frustrated by the success of those Internet companies?
Sanders: The frustration is immense, it almost hurts. There are companies out there that don't make money
and the stock exchange values them at $10 billion. That is pretty nasty. I spend 30 years of my life to build a
great company. What do you think I feel when I see people whose business is worth just as much after just
one year. But it doesn't change my value system.
SPIEGEL: Mr. Sanders, thank you for this interview. |
