Gateway & Ted Waitt accused by AMD of taking bribes.
eWEEK: What does it mean to you personally, though, when a Gateway or an IBM not just stop, but announce that they'll no longer be offering AMD as an option?
Ruiz: I think it's terrible, obviously. It's terrible. I think if you were to talk with Ted Waitt at Gateway, and ask him, "Why'd you do that?" and if he would really tell you why, it's a question of he's being bribed to do it. Now, he's got to look out for his own hide and the company that's probably in great difficulty has got to listen to the huge amounts of money that can help him do that.
eweek.com
December 2, 2002
AMD Places Chips on 64
Like just about every other company in IT, Advanced Micro Devices Inc. is burdened with the challenges of an economic slowdown and drop in IT spending. But unlike anyone else, to turn itself around, the Sunnyvale, Calif., semiconductor manufacturer must win over end users and computer makers thoroughly aligned with chief rival Intel Corp. But AMD has a plan. And as it licks the wounds from its third consecutive quarterly loss for the third quarter, the tenacious chip maker is focusing on the future--the first half of 2003, to be exact. That's when the company releases its first 64-bit processors based on the Hammer architecture. The chips, which will be priced comparable to 32-bit chips and backward compatible with 32-bit apps, are the keys to AMD's turnaround and future, according to President and CEO Hector de Ruiz. eWEEK Executive Editor/News Michael R. Zimmerman and Editor in Chief Eric Lundquist caught up with Ruiz at Comdex in Las Vegas recently for a candid conversation about AMD's challenges, its future and Intel's influence in the market.
eWEEK: What is AMD's most pressing issue today given all the things you're faced with?
Ruiz: Well, how do you measure that? You measure that when you lie awake at night thinking about what it is that occupies your mind the most. And frankly, it's just assuring our people are focused and motivated. There's hope that, in this time of a tremendous difficult environment, that we have a strategy that they feel is within their [reach and are] motivated to follow through. And I'd say, just the hope of our employees is the biggest thing I'd like to see is for them to not lose focus, not lose track.
eWEEK: If we were to narrow it down to in-house business challenges vs. external challenges, which garners more of your attention?
Ruiz: There are two sides to that. Internally, we try to focus on things we can control, intensify our effort from every angle we can on those things. We would like to tell employees there are some things that we cannot control. We really can't control whether we'll go to war with Iraq, and all that sort of thing. So we place focus on things we can control, and one of them has some external elements to it, and that is our customers. To a large degree we have to work hard and win our customers, in addition to … making sure we meet our milestones and targets. But there is an element of control on the outside. It has to be customers--we have to convince them we have a winning plan, our products are not only good and competitive today, but they're going to be good and competitive in the future.
So there's two pieces. There's an outside element that we don't control and we don't worry about it. There's an outside element that really is a function of how well we do internally. And so we tend to not to lose sight of that.
eWEEK: Would you agree that there's a somewhat less positive perception of AMD by enterprise customers and certain OEMs when compared to the perception they have of Intel?
Ruiz: No, I don't agree with that. Let me explain what I mean by that. We have for about three years now been doing surveys almost every six months of the perception of the enterprise customers of AMD to understand what are we doing that we should be doing and what are we doing that we shouldn't be doing, etc. And the rate of change has been so large in the three years that I would say the momentum is strongly in our favor right now. We went from 20 to 30 percent of the enterprise customers having a positive image of AMD to today, [where] the last survey we just did said that 80 percent of the enterprise customers have a very positive image of AMD. That's not much different than our competitor's numbers. So, OK, we've gotten out to the point where that issue doesn't seem to be as strong as it was three years ago. The next step, of course, is turning that into real business.
eWEEK: The reason I ask is because there are a number of OEMs out there that won't consider AMD.
Ruiz: You [bring] up an entirely important point. We have these people in the middle that are responsible for delivering to the enterprise the boxes. And these people in the middle frankly are, and I'll just be totally blunt with you, they're scared to death to respond to the enterprise positively of AMD for fear of retaliation by Intel. It's just as simple as that. I could give you numerous examples of enterprise people who say they would love to see boxes with AMD products in them. But they expect the PC maker to provide that option to them, and they don't. Although, it's changing, HP [Hewlett-Packard Co.] is now providing commercial units in this space. … It's changing. But there's no doubt that these PC makers are frankly being held hostage by the tremendous market power of our competitor.
eWEEK: So what can you do proactively to try to change that?
Ruiz: At some point in time, I think it is getting very close to that, the compelling price/performance difference is so huge. … We're not talking about a 5 percent difference, we're talking about a gigantic difference that just fiduciary responsibility to shareholders demands that some of these PC makers have to pay some attention to it.
eWEEK: I'm hearing from PC makers that customers are just not asking for AMD. So where does the education process begin, with customers or PC makers?
Ruiz: There is a big difference between saying, "Our customers are not asking for it," vs. "Our customers are not willing to accept it." I think people are playing with this issue. There is not an enterprise customer I've talked to, and I've talked to many, who wouldn't say, "Things are now pretty even, we'll be willing to consider AMD as a solution, but we need the PC maker to offer us that solution."
eWEEK: It's a chicken and egg situation.
Ruiz: Absolutely. But I feel we've made a lot of progress on that side. We now have to figure out how to work with the PC makers, and say, "Look we're going to give you …" I mean, I'll give you an example. If I could just say some numbers off the top of my head. If Intel makes 100 million units, which is about roughly right, and the average price is about $200, we're talking about $20 billion in revenue. If everybody that bought Intel parts would switch over to AMD, just that alone would save the industry $10 billion. I think there's a lot that PC makers could do with an additional $10 billion. Maybe make the boxes better, more attractive …
The reason that wasn't an issue before was because the total cost of ownership of the enterprise, the CPU part used to be almost negligible. And so the cost of ownership was a lot bigger. I saw some data from McKinsey several years ago where the CPU portion of total cost of ownership was less than 5 percent. But that has changed. Now, with the IT industry and the CIOs becoming much more savvy about what's going on, that's becoming an important part. And I think they're asking the right questions. So, we're in the throes of this thing changing.
eWEEK: What would you say to an end user or an OEM that said AMD is a risky proposition?
Ruiz: Well, when we hear that what we do we is present all the data. We hired an individual a couple of years ago. His total focus was, Let's get these enterprise people familiar with AMD and start to show them … they really would not object to an AMD solution. We're now collecting enough data. We're holding CIO summits regularly to do this. Now when a customer expresses some of that concern, by the time they do that at a high level, we've already worked with lower-level people. …
eWEEK: How often do you have the CIO summits?
Ruiz: Every six months. Between Austin and Sunnyvale.
eWEEK: What does it mean to you personally, though, when a Gateway or an IBM not just stop, but announce that they'll no longer be offering AMD as an option?
Ruiz: I think it's terrible, obviously. It's terrible. I think if you were to talk with Ted Waitt at Gateway, and ask him, "Why'd you do that?" and if he would really tell you why, it's a question of he's being bribed to do it. Now, he's got to look out for his own hide and the company that's probably in great difficulty has got to listen to the huge amounts of money that can help him do that.
But you know what I find amazing, think about the power, is that despite all that, which obviously we really get emotional about the fact that somebody like Gateway gets bribed into doing that, is that despite that, according to Dataquest last week, we're still holding a 19 percent share of the market. That to me tells me we're in the throes of breaking this open.
eWEEK: Why does AMD seem to have more software support for Hammer than hardware support? For example, with IBM, they back out on the hardware, then turn around and support it in software with DB2.
Ruiz: I don't know if this is a surprise to you, or if you even believe it or not but the fear of Intel is pretty incredible. I mean when somebody's … livelihood is dependent on making sure Intel supports as well, now that's because they're so dominant with that supplier. At some point in time that's going to change. I keep telling people the best antidote for that is to get to 50-50, then you don't have to worry about it. I'm beginning to see significant buy-in on the part of PC makers to say, "Hmmm." Because here's their fear. Prior to Hammer it wasn't as big a fear. But now with Hammer the difference in the enterprise from Hammer relative to price/performance is so compelling that the fear is that one of them is going to jump ship. And whoever does is going to garner the biggest piece of it because we're relatively small at the moment. If one of those big guys were to jump ship, we'd have to support that one guy pretty heavily until we had enough capability to support others. And I think one of these guys is beginning to think, "Ha, I wonder," and you can sort of sense it, "who's going to be the first one in." And frankly they're going to benefit tremendously because there really is a compelling proposition.
eWEEK: Can you characterize the price/performance advantage?
Ruiz: Sure. … I'm going to talk about the volume server market, not the real high end. The volume server market is in the throes of considering where do they go from here. They made a huge investment back in the late '90's as the Y2K thing was coming around. And now they're looking at the fact that in spite of what you hear, broadband is slowly getting accepted, databases are growing, they're not getting smaller. All of a sudden they say, "OK, how do we address this?" Here comes Hammer, which prices at a 32-bit system--that means you get 64-bit for free. And on top of that, here's a factor of two in performance with our competition. So that's really beginning to get their attention. If you look at the benchmarks on Hammer, [they] are so overwhelming, they're not even close.
eWEEK: What is the deal with Oracle?
Ruiz: Their enterprise software is something they're interested in porting to Opteron.
eWEEK: What other software is on the horizon?
Ruiz: Of course, Linux is already way ahead and on top of Opteron. Their far ahead of anybody at the moment because these people have no religion of their own. And it's great for us. But they love it. They love Hammer. It's a great product for them.
eWEEK: And your relationship with Microsoft Corp.?
Ruiz: The relationship is very strong, and I think one of the things Microsoft would like to ensure is the tremendous opportunity Hammer presents for them to continue the evolution of the X86 investment is awesome. If you can imagine, put yourself in Microsoft's shoes, you see instead of having to do a right turn, 90 degrees, with the Itanium stuff, now they can see a way of evolving all this investment and technology and continue to be in that dominant position they've had and probably even make it stronger. So Microsoft is obviously selfishly, incredibly interested in making sure Hammer is a success.
eWEEK: What does Intel's Banias chip mean to you with respect to the faster clock speed equals better performance debate?
Ruiz: It basically says, it's not really the speed that counts; it's performance. Because they've lowered the speed and tried to improve it from a solution perspective, it's more of a complete solution for mobile as opposed to just the CPU. But it's a significantly lower frequency, but the performance is considered reasonable for mobile. So it does say there is something to this performance thing.
eWEEK: Doesn't it validate what AMD's been saying for a long time?
Ruiz: I think it does. They'll never admit it. But I think it does.
eWEEK: What would the addition of Apple [Computer Inc.] to the 64-bit industry mean to AMD, to the industry?
Ruiz: First of all, I have no indication that Apple is even considering what we make. I've heard rumors going around. But you know it would be interesting because at some point in time if Apple is going to do a 64-bit version, they're going to face the decision, what do they do for it? I cannot picture Apple putting an Itanium in their stuff. So I think if they're going to do that they're going to figure out some way to get a PowerPC version of that. Or they're going to have to consider one of the alternatives we offer and see there's many more than that.
eWEEK: So they're not in talks with you, they're not evaluating the chip as far as you know?
Ruiz: You know, if they were I couldn't tell you, and if they're not I shouldn't tell you. But I think it would be an interesting relationship if that ever really happened.
eWEEK: Intel has officially announced that it is going to abdicate the desktop 64-bit market, leaving it essentially IBM, with its PC970, and AMD's Clawhammer and Opteron products. What is that two-horse horse race going to mean to AMD in 2003?
Ruiz: First of all, I don't believe that Intel's abdicating anything. They would like to influence the market. See it go in a certain direction. But the market, which is actually made up of customers are going to do what makes sense for them. And I think 64-bit at the desktop is going to happen. I really think it's going to provide consumers a value that they'll appreciate. And it's not going to happen overnight, and it's not going to happen next quarter. But I think it will start really avalanching in the beginning sometime late next year, early 2004. And it could start with the early adopters, people like the gaming folks. Those people are really dumping tons of data into broadband and then from there it will go.
eWEEK: So you think there'll be faster adoption on the server end?
Ruiz: I think the immediate desires is the server computer. The enterprise really wants to move into that direction fast because they can really exploit this bandwidth capability. So that's definitely true. Personally I think it's going to happen faster than people think. But it's not going to be next year. I think it's going to start at the end of next year. … The reason I think is not because it's 64-bit, that's not it. The reason is because it's compatible with 32-bit. … I think people are going to say, "Wow, I'm buying a 64-bit system capable of running 32-bit products."
eWEEK: What was the reason for the delay in the release of Clawhammer?
Ruiz: Nothing more than these product road maps are just so complicated, the technology evolution is gigantic. … The product is pretty solid. Never in my career, and I've been in the industry 29 years, have I seen a project of the complexity of Hammer work the first time. When silicon came out the first time, it worked. It worked fully … and that's pretty amazing.
eWEEK: What prompted the customer-centric philosophy?
Ruiz: It's our belief that more and more the difference between where the customer ends and the supplier begins is getting closer and closer. And the more relevant that interaction is and the more enhanced, the more both people benefit. We have this awesome engineering talent that maybe we can put it, in some indirect way, at the use of our customers so that our customers can think of us as their friend and partner. … So we're putting ourselves always to continuously asking questions, "What would the customer think of this? What would they want? What would they say?" Frankly, I think it's generated a lot of enthusiasm in the company to be … hopefully more relevant when it comes to our customers.
eWEEK: But the note that you made that the admission that the industry as a whole is guilty of building technology for technology's sake seemed to strike a cord.
Ruiz: Oh, absolutely. I mean if you look at the PDAs, it's taken 20 years to finally get to where the Palm Pilot finally made an impact. But it was 20 years after trying and trying and trying, because they weren't paying attention to the customer. With all due respect to the awesome power of our competitor, the Itanium is one of the least customer-driven technology developments I've ever seen in my life. I have yet to talk to a customer who's said, "I've been pushing for that for 10 years, can't wait for it to come." And you look around at so many of these things, at consumers and customers in general, and I say, technology is now not an issue. You can do almost anything you want to with technology. Can we now make it more useful? Can we make it more practical? It goes all the way from things like automobiles, televisions, cell phones, etc. One of the reasons Nokia became so successful in the early stages people attributed to the digital effort they did. And although that was very important, the other part was is that their software was friendly. You look at a Nokia phone, you don't need to read the manual to actually figure out how to pick up the phone and follow it.
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