Advanced Micro's Founder Departs
on a Losing Note
By CHRIS GAITHER
SAN FRANCISCO
ESTERDAY, W. J. Sanders
III released his 119th, and last,
earnings report as chief executive
of Advanced Micro Devices, the
chip maker he founded 33 years
ago. He ended his reign as he,
like most entrepreneurs, began:
losing money.
The loss was narrower than Wall
Street analysts had expected.
The flamboyant salesmanship Mr.
Sanders has exhibited since he
started the company in 1969 has
become a trademark of Advanced
Micro, especially in the
longstanding feud with its larger
rival, Intel.
Over the years, Mr. Sanders has
competed with, insulted and
occasionally sued Intel, which
sells the chips at the heart of 8 of
every 10 personal computers.
People in the industry say the
fierce competition has pushed
Intel and wrung better products
and lower prices out of the entire
semiconductor industry.
But at the age of 65, Mr. Sanders
is finally loosening his grip on Advanced Micro. Next
week, he will hand control of daily operations to his
handpicked successor, Hector de J. Ruiz, the president
and chief operating officer.
Mr. Ruiz, who was hired away from Motorola in January
2000 as the heir apparent to Mr. Sanders, will assume the
title of chief executive at a gathering for Wall Street
analysts in New York on April 25. Mr. Sanders will
remain chairman until 2003, when he expects to step
down.
Advanced Micro reported a net loss of $9.2 million, or 3
cents a share, for its first quarter, ended March 31.
Analysts had forecast a loss of 6 cents a share, according
to a survey by Thomson Financial/First Call. During the
period last year, the company had a profit of $124.8
million, or 37 cents.
Sales were $902 million, down sharply from a year
earlier, when Advanced Micro reported revenue of $1.2
billion. Mr. Sanders said the company had maintained its
market share in PC chips; he called that an achievement,
given that Dell Computer, which sells only Intel-based
systems, was the only computer maker to grow last
quarter.
In comments accompanying the earnings report, Advanced
Micro, based in Sunnyvale, Calif., indicated that the
semiconductor industry had continued to return to normal
seasonal patterns after the worst year in its history, though
no major recovery was seen. Intel reported similar
observations but stronger financial results on Tuesday,
when it announced a profit of $936 million.
For the current quarter, Advanced Micro said it expected
to sell 5 percent to 10 percent fewer PC chips and to
report sales of $830 million to $900 million. Mr. Sanders
backed off from earlier promises that the company would
turn a profit again during the quarter, though he said that
might happen.
"If we make the $900 million end of the range, we make
money," he said.
In regular trading, shares in Advanced Micro rose 47
cents, to $14.82. Intel's positive earnings report from the
evening before led technology issues upward. Its shares
gained $1.13, to $30.64.
Advanced Micro was once a back-up supplier for Intel's
contracts with computer makers, but by the late 1980's,
Mr. Sanders had turned it into a ferocious competitor.
"He's been able to stay two or three chess moves ahead of
anybody else in the market," said Joe David Jones, a
former Advanced Micro executive who founded
BridgePoint Technical Manufacturing, which tests chips.
With its Athlon chip for desktop PC's, Advanced Micro
built a following among computer enthusiasts, who like
the Athlon for its speed at playing computer games and
rendering graphics. But the company is still struggling to
win support in the corporate market. It hopes to change
that with a new line of chips, called the Hammer family,
expected late this year. Hammer chips use a technology
that allows them to run both 32-bit and 64-bit computer
programs, a claim Intel has not yet matched.
"The Pentium killer," as Mr. Sanders described Hammer
yesterday, is expected to run desktop, notebook and
powerful data-serving computers.
Many analysts say Advanced Micro's introduction of the
Athlon is a nearly flawless execution of its strategy to
identify and exploit Intel's weaknesses. The analysts said
Hammer holds even greater promise, but said the company
must maintain its focus on execution under Mr. Ruiz as
Hammer arrives in the market.
Outwardly, the two men are different in striking ways. Mr.
Sanders is the consummate salesman, known for his
exquisitely tailored suits, Rolls-Royces and meticulous
grooming. After years of practice, anti-Intel comments roll
easily off his tongue. Mr. Ruiz is praised as more of a
technical and operations expert, the ego to Mr. Sanders's
id.
But a spokesman for Advanced Micro, who said the
transition had been carefully planned, noted that the men
shared a similar vision. He said they would continue for
another year to divide responsibilities in much the same
way as they have.
Though Mr. Sanders's title may change, executives who
know him well said that Mr. Sanders, who is known as
Jerry, was unlikely to fade away quickly.
"His involvement will decline slowly over time as both
A.M.D. and Jerry get used to him not being the C.E.O.,"
said Atiq Raza, a former heir apparent who left Advanced
Micro in July 1999 over differences with Mr. Sanders.
"He won't be completely giving away the reins. They will
slowly slip from his hands over time."
Yet there was a clear note of farewell as Mr. Sanders
concluded a conference call for analysts today by noting
that the previous three decades had been a pleasure.
"Next time I won't be the host, but I'll be listening in," he
said. "God bless."
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