Maverick - " As Dan Scovel, semiconductor analyst with Fahnestock and Co. in New York, puts it: 'AMD knows how to spend money, and Intel knows how to make it.'' "
You can read the whole article here - pay attention to Sanders' natty pin-stripes, weaving his initials into the threads.
Paul
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sfgate.com
AMD Chips Away at Intel
Critics argue company continues to
spend and lose money
Dan Fost, Chronicle Staff Writer
Friday, September 4, 1998
This should be the finest hour for Advanced
Micro Devices and its flamboyant founder,
Jerry Sanders.
At long last, AMD is giving its hated rival,
industry leader Intel, a run for the money. Its
inexpensive K6 chip took Intel by surprise
and is stealing some market share. But
instead, AMD has not made a profit for four
successive quarters and doesn't foresee one
until the fourth quarter of this year. It's lost
$120 million so far this year. The stock is
hovering near its 12-month low.
Sanders, 61, the chairman and chief
executive, has come under fire for his lavish
compensation, and he faces increasing
pressure to turn the company around.
Manufacturing woes stalled production of its
flagship computer chip, and when those
problems were solved, the other elements of
AMD's business faltered in the face of the
worst chip recession in memory.
As Dan Scovel, semiconductor analyst with
Fahnestock and Co. in New York, puts it:
''AMD knows how to spend money, and Intel
knows how to make it.''
While Scovel was referring to AMD's 1995
purchase of chip firm NexGen for $860
million, his statement also appears true in
other areas. Unlike Intel's spartan Santa
Clara offices, AMD occupies a dazzling new
building in Sunnyvale.
In an interview at AMD's headquarters this
week, where a bust of Sanders graces the
spacious lobby, Sanders wore his trademark
gold bracelet and sported a trim white beard
grown during a two-week vacation at his
Malibu beach house.
His natty pinstripe suit was made by his
Beverly Hills tailor, Jack Taylor, who also
made the CEO a suit that raised eyebrows at
the Robertson Stephens Semiconductor
Conference in San Francisco this summer. A
close examination of that suit revealed that
the pinstripes were actually his name in tiny
block type running the length of the suit.
Intel is Sanders' obsession. In the interview,
he alternately referred to the company as
''corrupt'' and ''unethical'' and charged that it
lies about its achievements, strong-arms
customers and produces a ''piece of s--
Celeron chip'' designed to compete with
AMD's K6.
Although AMD won a long legal battle with
Intel in the 1980s, Sanders still says that fight
distracted AMD and kept it from becoming a
chip superpower.
''Intel is the Bill Clinton of microchips,''
Sanders said. ''Everybody loves their
performance, but there's a character flaw.''
An Intel spokesman declined to respond to
any of the charges.
''Sanders has his strengths, but he has his
weaknesses,'' said analyst Scovel, who
started in semiconductors 15 years ago at
AMD, as one of ''Jerry's kids.'' ''You put him
on a level playing field and he'll outsell
anybody. He's plain good at it.''
And with the K6 taking hold, Scovel said,
AMD is ''back in the game full force with a
viable competitive offering.'' AMD is also
able to stay close to Intel in manufacturing, he
said, using the latest processes to build
chips effectively.
A deal with Motorola will give AMD even
more manufacturing strength, Sanders said.
And AMD is proceeding with equipping a $2
billion fabrication plant in Dresden, Germany,
and is putting $1.8 billion this year into its fab
in Austin, Texas.
''To be a meaningful long-term player, our
goal is to have a 30 percent unit share,'' said
Sanders. He said AMD has about 12
percent market share now, making it No. 2
after Intel.
Sanders pointed out that AMD is virtually the
only major chip company not to announce
any layoffs or workforce reductions this year.
His sights are now set on the future. He
wants to more than quadruple output to 50
million chips per year, but some analysts see
that as a problem.
''What does he think he's doing with all that
fab capacity?'' asks Linley Gwennap, editor
of the Microprocessor Report, an industry
newsletter. ''There's only so much market
there. Intel is not willing to give up that much
of the PC market to AMD.''
But Dataquest analyst Nathan Brookwood
thinks that the low-end segment will grow so
dramatically that AMD and National
Semiconductor's Cyrix unit can gain more
market share even if Intel makes inroads.
Gwennap sees the criticisms of Sanders as
justified. ''All you've got to do is look at the
bottom line,'' he said. ''For the past couple of
years, it hasn't looked very good. And he's
the boss.''
As the boss, Sanders has reaped a sweet
compensation package. Even with a
$30,000 pay cut last year, he still had a $1
million salary. That salary when combined
with other benefits took him up to $1.7
million.
''My favorite CEO,'' scoffed Graef ''Bud''
Crystal, a noted critic of lucrative executive
compensation packages. ''W.J. Sanders III --
I hope there's never a fourth.''
A large institutional shareholder, the
California Public Employment Retirement
System, or CalPERS, has been after
Sanders to relinquish his chairmanship for
several years. CalPERS releases note that
$100 invested in AMD in 1992 would have
been worth $98 in 1997, while $100 invested
in its peer group of 500 technology stocks
rose to an average $369.
Sanders said a high-tech company needs to
have one person serve as chairman and
CEO, both setting and implementing policy in
a fast-changing environment. ''This is just a
wooden rule'' CalPERS has, to oppose joint
titles, he said. ''They don't understand how
technology works.''
If he has detractors, Sanders also has
admirers. He is the chairman of the
Semiconductor Industry Association and will
lead an SIA group to China next week. He
will receive the prestigious Noyce Award --
named for Intel founder Robert Noyce --
along with LSI Logic founder, chairman and
CEO Wilf Corrigan, this fall.
But even people who see Sanders leading
AMD back to the black note the long-term
challenges are enormous.
Mark Edelstone, an analyst at Morgan
Stanley Dean Witter in San Francisco, said
AMD's slips on K6 production cost the
company dearly last year.
Now, with the semiconductor industry in a
slump, AMD must deliver its next chip, the
K7. ''Here the risk factor goes up
considerably,'' Edelstone said.
But Sanders maintains an optimistic outlook
on virtually every challenge before him. He
knows that AMD hasn't always done what it's
promised in the past, but he said the
company is meeting its publicly stated goals
this year, and will continue to do so next year.
Not only is AMD finally making money in
microprocessors, but Sanders sees a
comeback in flash memory and in
programmable logic devices -- two of the
divisions getting hammered in the current
slump.
''Rather than be a Roman candle, and have
one brief flurry where the stock rockets up,
we have elected to build for the longer term,''
Sanders said. ''We have built a bridge to
cross the moat on Intel. . . . The single word I
would use to define AMD is momentum.''
AMD AT A GLANCE
HEADQUARTERS: Sunnyvale
CHAIRMAN, CEO: W.J. "Jerry" Sanders III
EMPLOYEES: 13,300 worldwide; 2,900 in
Sunnyvale 1997 REVENUES: $2.36 billion
1997 NET LOSS: $21 million (15 cents per
share) STOCK 52-WEEK HIGH-LOW: $40
(Sept. 1997), $12.75 (Aug. 1998)
YESTERDAY'S CLOSE: $14, down 69 cents
c1998 San Francisco Chronicle Page B4 |
