AMD reflects on progress, charts course for 2005

Executives at Advanced Micro Devices (AMD) painted a much different picture of the chip maker than in recent years during a briefing for analysts and reporters Friday at the company's headquarters in Sunnyvale, California.

Two years ago, AMD Chairman, President, and Chief Executive Officer Hector Ruiz told analysts at the annual meeting about AMD's plans to slash its workforce amid a sharp downturn in the PC market. But on Friday, flush with the success of the company's 64-bit x86 processors, Ruiz spoke of an AMD that "is in the midst of a major transformation."

Once a secondary supplier to the consumer desktop market, AMD now has Fortune 500 customers for its server processors and a growing stable of mobile technologies, Ruiz said. The company has recorded four straight profitable quarters, mostly on demand for its Opteron server processor, after racking up nine consecutive quarterly losses from 2001 through 2003.

This turnaround has attracted the attention of all the major server vendors, with one notable exception. In an interview after the main analyst event, Ruiz addressed the latest round of comments by Dell President and Chief Executive Officer Kevin Rollins about the potential for a Dell Opteron server.

"My guess is we're going to want to add that (AMD) product line in the future," Rollins said earlier this week in an interview with InfoWorld.

"We'd love to get the number one computer maker left," Ruiz said. However, the competitive price advantage that Dell enjoys as an exclusive user of Intel chips is hard for AMD to match, he said. AMD can't provide the same financial incentives to use Opteron that Intel can dangle in front of Chairman Michael Dell and Rollins, he said.

AMD expects to grow faster in 2005 than the market for both processors and flash memory chips, Ruiz said. It hopes to improve its balance sheet as well to attract investors, said Robert Rivet, chief financial officer.

The company can accomplish those goals because it can take market share from Intel in the server world, a market that AMD has historically watched from the outside, Ruiz said. The average selling prices of its chips are also increasing as its Opteron and Athlon 64 processors gain traction in the market. Furthermore, the company can increase shipments to emerging markets such as China, India, and Latin America that have yet to establish a dominant supplier of microprocessors, he said.

Finally, AMD can take advantage of the vast amounts of software developed for the x86 architecture with x86 chips for handhelds, high-end servers and consumer electronics devices, Ruiz said. Intel uses different architectures in its chips for high-end servers and its handheld processors, while AMD pursues a strategy called "x86 everywhere."

"We are the x86 company. No other company has the resources that we have on x86. We don't have three other architectures to worry about," Ruiz said.

Software developers and IT managers are familiar and comfortable with x86 programs, and chip companies can do those customers a service by maintaining application compatibility across their products, said Dirk Meyer, executive vice president and head of AMD's Computation Products Group, which makes its microprocessors.

AMD did not disclose any new details about its plans for dual-core chips, which the company expects to release in the middle of 2005. As many analysts expected, the company said it eventually will increase the number of cores on its processors to four and eight, but it did not attach a time frame to that plan.

The company plans to increase the capacity of its flash memory operation with the expansion of an existing facility in Japan, said Bertrand Cambou president of Spansion, AMD's flash memory joint venture with Fujitsu.

By 2007, Spansion's main fabrication facility will be in Aizu-Wakamatsu, Japan. Right now, Spansion makes the majority of its flash memory chips in Austin, Texas.

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