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AMD aims to fatten corporate piggy banks

CEO Hector Ruiz says there are several reasons for large companies to buy computers with AMD chips--including potentially billions of dollars in industry savings.

LAS VEGAS--Advanced Micro Devices CEO Hector Ruiz says there are several reasons for large companies to buy computers with AMD chips--including potentially billions of dollars in industry savings.

Sunnyvale, Calif.-based AMD has launched a campaign to get its Athlon and upcoming Hammer chips into the corporate market. While the processor maker continues to promote its benchmark results, it is also appealing to companies' financial bottom lines and the comparatively lower price of its chips.

"If everyone in the PC industry today switched over to AMD, the industry would save something like $10 billion dollars," he said in an interview at the Comdex Fall 2002 trade show. "There is a lot you can do with $10 billion dollars."

The $10 billion figure is purely hypothetical, he added. AMD doesn't have the factory capacity to meet such a shift anyway. Nonetheless, Ruiz says that the cost savings of using AMD chips instead of Intel's are real. More important, corporate buyers are listening more intently to the company's pitch.

"Some of these larger companies are putting pressure on these larger PC companies" to adopt AMD chips, he said. "They are saying, 'I am spending millions of dollars on this stuff.'"

Penetrating the corporate market will be the one of the dominant issues for AMD in 2003. To date, most of the company's chips have been incorporated into consumer PCs or machines for the small- to medium-sized business market. Still, the general business market remains larger, and the major PC and server makers have almost exclusively relied on Intel chips to serve it.

The barriers, though, have been steadily dropping, Ruiz said. The company has shed much of its reputation for recurring shortages and manufacturing problems. The performance of Athlon, and the expected performance of Hammer, has also raised the profile of the company. In the last few years, awareness of AMD?s products among corporate IT buyers has risen from 20 percent to 80 percent in surveys, Ruiz pointed out.

On the other hand, the company must battle inertia. "The profile of our customer base (PC manufacturers, not buyers) is not one I like a hell of a lot," Ruiz said. "When you look at the who's who in the PC industry, they were not embracing AMD as strongly as they could" in the past few years.

Additionally, competition remains stiff. "We only have one competitor (Intel), and that one is pretty awesome. It is huge, and they have a lot of smart people," he said.

AMD also needs to put itself on sound financial footing. The company has lost millions over the last several quarters and is in the midst of laying off 15 percent of its staff. Recently, the company has had to delay some products.

"The server space is particularly challenging for us because it demands the most discipline and rigor," he said. "The consumer space is a little bit more forgiving."

Intel did not respond immediately for comment.

Ruiz said AMD will increasingly team up with other semiconductor companies on manufacturing and research. AMD, for instance, is working with Cambridge, Mass.-based AmberWave to examine the possibilities of bringing so-called strained silicon to future chips. Using strained silicon, silicon atoms are forced apart, which allows electrons to move faster.

Manufacturing coalitions will also become mandatory with the rising price tag of semiconductor manufacturing tools, Ruiz said. The next generation of facilities to make chips will cost around $3 billion.

"There has to be a coalition," he said. "Outside of Intel, I don't know who could do it."