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AMD defectors flock to chip start-up

Former Advanced Micro Devices president Atiq Raza and a number of Silicon Valley veterans form an incubator to nurture start-ups in the hot market for networking and communications chips.

Former Advanced Micro Devices president Atiq Raza and a number of Silicon Valley veterans have formed an incubator to nurture start-ups in the hot market for networking and communications chips.

Called Raza Foundries, the new company will focus on finding, funding and polishing start-ups looking to produce technology to unclog increasingly congested Internet networks. Maple Networks, one of the companies working with Raza, plans to develop processors that will smooth the data handoff between long-distance optical lines and metropolitan networks.

Communications has become the new frontier for the semiconductor industry. The increased power of desktops and servers--combined with the mind-numbing demand from consumers that Web sites be elaborate and fault-free--has put huge demands on the world's computing infrastructure.

"In the semiconductor field, the economic value has moved from the desktop to the infrastructure," Raza said. "There has been a huge emigration from the microprocessor world into the broadband and communications world."

Many of the company's 22 employees, in fact, have come from the processing world. Dana Krelle, former vice president of marketing at AMD, and Lance Smith, a principal figure on the Athlon processor, have joined Raza Foundries.

Other Foundries executives include Andrew Fine, a former principal at Bessemer Ventures; Waqar Shah, another former AMD executive; and Sunny Siu, a professor at MIT. Benchmark Capital is an investor.

The firm will seek to groom start-ups during the early stages of development, when product strategies are still being formulated. If successful, the company will then go on to find further funding, seek an IPO or get acquired.

Although Raza Foundries will function as an incubator, company executives avoid the word as much as possible. In a very brief time, incubators have gone from being a cutting-edge concept to a "me-too" sort of venture.

Recently, for example, distributor CHS Electronics announced that it was reforming as an Internet incubator the same day it filed for Chapter 11 bankruptcy protection.

"Those who can't do, teach, and those who can't teach, consult," said Martin Wolf, chief executive of Martin Wolf Associates, an investment bank focused on small to medium-sized mergers.

Many merely give "high-level commonsense advice, like 'Go build a pet-food portal,'" Raza said.

Raza Foundries will differ largely by the type of companies and projects it will handle. Developing a line networking processors, after all, takes a significant amount of sophisticated technical expertise.

Just as important, the marketing and business plan for any line of chips has to be precisely drawn. Ideally, the firm will help a start-up get their products to a point where future investors can be shown a software prototype fairly rapidly.

Connections will also play a significant role. Several executives involved in the company have been around for years and can call on wide networks of associates in the business. The firm will also work with IBM, which will produce silicon prototypes of products.

Assistance from the firm, however, is not cheap. On average, Raza Foundries has obtained 40 percent of the equity in start-ups that become part of its development program.

Still, the firm can point to results. Kenneth Yun, a professor at the University of California at San Diego, and his investment banker sister Kay formed Yuni Networks last October. The company teamed up with Raza in December. In April, the company was sold to Applied Micro Circuits for approximately $240 million.