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Tackling Intel: Mission impossible?

Not according to Mort Topfer, who helped revive Dell's fortunes a decade ago and recently became a board member at Advanced Micro Devices.

A decade ago, Mort Topfer helped pull Dell out of a funk that threatened its growth and set the company on the path toward becoming a PC powerhouse.

But at 68, Topfer, a managing director of Castletop Capital, an Austin, Texas, investment firm, is in no mood to rest on his laurels. In fact, his next big challenge could be his crowning legacy--if he's able to pull it off.

After being hired by Dell on the strength of his reputation as an operations ace, Topfer helped create a strategy for growth. Along the way, he also helped school Dell founder Michael Dell in the nuances of big business. Topfer, who recently joined Advanced Micro Devices' board, walks into a situation there that is more complicated than he might have faced at Dell, if not more challenging. In the last year, AMD has achieved technological

It's a challenge to face such a dominant competitor like Intel. But anything I can do to help, I'd be glad to do.
leadership in the PC chip market, winning plaudits for its 64-bit Opteron and Athlon processors. But it still faces mammoth competition in the form of Intel, which, after a brief stumble last year, appears to be back on track.

Topfer recently spoke with CNET News.com about AMD's prospects and his role in the months ahead.

Q: You're close with Michael Dell and Dell CEO Kevin Rollins. People believe you can help AMD win Dell as a customer. Can you?
Topfer: I am a very close friend of Michael and Kevin. I recruited Kevin so I could retire (from Dell). I let Michael and Kevin know that I was considering (going to AMD) before I joined the board, and they wished me good luck. We'll see where it goes.

AMD has made a lot of progress. The issue is that Dell is still Intel's only 100 percent-Intel customer. Intel has a lot of market power to keep it attractive to them to stay that way. I think that ultimately, Dell tends to go with leadership technology and very cost-effective solutions, and AMD has got to be able to do that for them to consider it.

Is it only a matter of time before Dell includes AMD in its offerings?
Topfer: They know AMD very, very well. AMD has got a big fab (its Fab 36 chip factory in Dresden, Germany) to bring up to speed. Dell's buying requirement for microprocessors is in the 25 million to 30 million level--or whatever that number is. That takes a lot of capacity. Dell is a very low inventory-oriented company. AMD, if they are ever going to be a supplier, has got to meet all of its needs without compromising Dell's ability to serve the market.

If it were to go into the notebook or desktop space, it would take a lot of (AMD) capacity.

It may happen some day?
Topfer: I hope so.

How did you get involved with AMD?
Topfer: (AMD CEO Hector Ruiz) is an old associate of mine. I've known him for 25 years. We worked together (at Motorola) for 15

Obviously, Carly was not hitting the numbers and not meeting her commitments and that impacted somewhat the confidence of the board in her.
years. I knew him when he was in the semiconductor business--I ran the paging business--and then he subsequently ran the paging business. So our relationship goes back a long time.

He called me at the beginning of the year. He wanted to wait a reasonable amount of time after me leaving the Dell board, which I didn't stand for re-election on last year. I said, "Yeah, I'd be interested."

It's a challenge to face such a dominant competitor like Intel. But anything I can do to help, I'd be glad to do.

What are your thoughts about AMD and its position right now?
Topfer: It's changed direction, I think, under Hector's leadership. When Jerry Sanders ran the company, he tended to drive the strategy toward fighting Intel in the consumer space and the desktop space. Hector has--through the (AMD64) 64-bit technology--driven the company more toward the technology leadership position, which I think they've achieved. It doesn't mean they're not competitive in all those other spaces, but it's not the sole driving force of the company.

I think that today, they do have a much stronger position on which to grow the company and continue to penetrate the market.

Do you think that Sun Microsystems, IBM and Hewlett-Packard releasing new servers based on AMD chips is another step forward?
Topfer: I think it is. AMD's reputation is really moving forward under Hector's leadership, and a lot of corporate customers are interested in 64-bit technology and using the AMD technology. That is an industry where the customers have a great deal of influence on the suppliers (like HP), as far as what products they want to see in their (computer) products.

What will your responsibilities be as a board member? These days, corporate boards seem to be much more active in company business.
Topfer: Clearly so. I've always been a very engaged board member. I think that Hector is looking to the board for help in the strategy of the company. The board's responsibilities are to represent the shareholders and make sure a company is doing all things appropriately.

But I think where a good board can help a CEO is in the area of strategy and financial performance; decisions as to partnering and acquisitions, divestitures and things like that. There is a whole slew of things that corporate boards today are going to be involved in the decision making...as representatives of the shareholders.

So it seems that AMD wants you to roll up your sleeves and get involved?
Topfer: One of the first things I said to Hector is that I'm not a passive board member. He said, "I've known you for 25 years. You didn't have to tell me that."

Are there any big strategic moves you think AMD might be eyeing?
Topfer: I think Hector is in the process of looking at the portfolio of the company and making some decisions on where he wants to drive the company over the next five or more years. Those things are evolving.

There's been talk in the press about the flash memory area. Clearly, (AMD's) two main businesses are the microprocessor business and the flash memory business. The flash memory business is a somewhat more cyclical business than the microprocessor business.
Topfer: Those are the issues I think Hector and the management team need to work through and bring recommendations to the board.

That's the way the process works. The board's role, I think, is more in a review process and to make sure that those directions are appreciated from a shareholder perspective.

Do you think you can help AMD win any new customers?
Topfer: I will help in any way I can.

Have you been watching developments in the PC market of late? Do you have any advice for Dell?
Topfer: I think they're doing everything right. I really do. As long as they keep executing, they'll keep gaining market share. I think the IBM uncertainty (created by its plan to sell its PC unit to Lenovo Group) is going to help them. I think the HP uncertainty can't hurt them. So I think they've got a lot of cards falling in their direction right now.

What do you think happened to cause HP to oust CEO Carly Fiorina?
Topfer: I have read as much as you have. Obviously, Carly was not hitting the numbers and not meeting her commitments, and that impacted somewhat the confidence of the board in her. From what I've read, she was reluctant to give up any authority and clashed with the board.

These days, the board is there to represent the shareholders--I think the (HP) stock is down 50 percent since she took over the company--I think it was time...for her to move because they couldn't reach agreement.

If HP offered, would you take over?
Topfer: I'm much too old for that. One of the challenges I think HP will have is to find someone that can run that company. From all the people I've seen on the list so far, none of them blow me away as being someone who's going to step in and fix that company. The CEO of an $80 billion company with a broad product portfolio is a very tough job to find somebody to fit.

What do you think about the situation with IBM and Lenovo? What does it say about the PC market?
Topfer: It's tough to compete against Dell. The PC part of IBM hasn't been important to IBM's vision for a long, long, long time. I think they've found a way to serve their customers and exit.

I frankly have some questions in my mind about how loyal those customers will be to a Chinese PC company. I think that represents another opportunity for Dell.