Ruiz: Barcelona will help AMD rebound from Intel hits

AMD's product innovation will make up for lagging manufacturing efficiencies versus Intel, says AMD CEO

Advanced Micro Devices (AMD) may have fallen behind rival Intel in manufacturing efficiencies but product innovations will help the chip maker rebound, said Hector Ruiz, AMD's chairman and CEO, at the company's annual shareholder meeting Thursday.

Ruiz, in remarks to shareholders at an event in San Jose, California, near its headquarters in Sunnyvale, acknowledged that AMD is sometimes two or three quarters behind the larger Intel in improving manufacturing capabilities. For instance, Intel is already manufacturing 45-nanometer chips, while AMD only recently moved to 65nm and won't get to 45nm production until mid-2008. The smaller the chips, the greater the yield from each silicon wafer from which the chips are cut.

AMD is working to close the manufacturing efficiency gap with Intel, he said, but what it may lack in efficiency it makes up for in product innovation. The new quad-core Barcelona chip is due in the second half of this year and new mobile computing processors are in development from AMD's 2006 acquisition of graphics processor company ATI Technologies.

"We don't want to spend an inordinate amount of energy focusing on [manufacturing] alone when we know that the innovation that we bring to the market. ... far outweighs any two- or three-quarter disadvantage we could have in manufacturing," Ruiz said, in response to a shareholder's question.

AMD made a serious run at Intel when it introduced the Opteron dual-core processor in 2003 and won new business from server and desktop computer manufacturers. But Intel responded with its own dual-core processors and by cutting the price of its products to force AMD to lower theirs.

The price competition was among the factors leading to an AMD net loss of US$547 million in the fourth quarter of 2006, followed by a net loss of US$611 million in the first quarter of 2007. AMD's stock price fell by two-thirds in the last 12 months to US$13.66 a share today from US$35.

Ruiz responded: "There is no way to sugar-coat our performance. ... it was a disaster and unacceptable."

Ruiz outlined initiatives for AMD going forward aimed at returning the company to profitability: An increased emphasis on graphics processors given the new graphics capabilities in Microsoft's Vista operating system; more focus on energy efficiency, such as quad-core processors that deliver better performance-per-watt than dual- or single-core models; and global market opportunities in developing nations.

On that, Ruiz touted AMD's 50-15 initiative to help deliver computing capabilities and Internet access to 50 percent of the world's population by 2015. The government of the African nation of Uganda, he noted, recently revised its rules to allow AMD to bid on government IT contracts.

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