Why $100 computers are on the way

It's been just more than two years since CEO Hector Ruiz unveiled Advanced Micro Devices' new Opteron server microprocessor. To the surprise of some, the company was able to sign up IBM right away to use the new chip.

Winning the race to market with a 64-bit processor was not just a vanity play to impress the computer chip cognoscenti. By hitting the streets first with a 64-bit capable x86 processor, AMD one-upped rival Intel.

It also worked to convince other systems vendors to follow Big Blue and lend their support to the Opteron.

Indeed, to the surprise of critics, who could recite a litany of company missteps over the years, this was not a one-off event. As it geared up for stiffer competition with rival Intel, AMD lined up the likes of Hewlett-Packard, Sun Microsystems and many systems vendors to use Opteron in their higher-end systems.

"I think we're the preferred technology on Wall Street."

But to retain the momentum, AMD needs to stay ahead on cutting-edge chip design. Ruiz is pushing hard to promote the use of the dual-core Opteron and is powering forward with a plan to diversify into new market segments.

CNET News.com spoke with Ruiz about technology trends and what he envisions for AMD chips in consumer electronics. We also found out that Ruiz believes the era of the $100 laptop PC may be on the horizon.

Q: When you look back over the last two years, since Opteron's introduction, what's your assessment?
Ruiz: We had a lot of expectations and dreams and hopes and goals...and all that. Considering...that there was a lot of trepidation (by) customers to even just show up--obviously the fear of Godzilla was very strong--when I think what we've done in the last two years, I'm really pleased with the progress.

It's pretty clear the enthusiasm of the OEM (original equipment manufacturer) community of what this technology is doing for them is pretty high. And also our expectations of being able to penetrate an almost impenetrable segment of the market back in those days--I'm real happy with where we are.

What was the company's original goal?
Ruiz: Our hope was that by the end of 2004 we'd be at 10 percent of the market on the server side. We were just slightly short of that, according to IDC. But in the grand scheme of things, we feel pretty good.

Looking ahead, what are AMD's other goals?
Ruiz: When we set out two years ago...the decision we made was to sort of flip the company upside down in terms of priorities. We felt that the server/enterprise segment was incredibly important for us. It's a very lucrative segment of the market for us to participate in...and it's aimed right at the belly of the giant. We felt that we needed to demonstrate to the outside--particularly to the enterprise--that we were very capable of doing that, which was the hardest thing to do.

I don't think a $100 computer is out of the question in a three-year time frame.

We set out to have a long-term strategy to become very relevant in that space, so that over a period of time, the enterprise would see two very strong players, as opposed to two years ago, when there was only one.

What did that involve?
Ruiz: Part of that revolves around having a very strong technology road map and a very strong product road map--which we believe we have. I think the introduction of dual core is one of the steps that continue to demonstrate to (business customers) that this is a long-term commitment we're making to the segment and that this is a very high priority.

Look at the benchmarks and the data coming out of our customers. The dual-core product indicates we have actually widened the gap in terms of leadership. I feel this will continue. Our plans are to continue to out-innovate, in a customer-centric way, the technology and products in the server segment. That, combined with our strong partnering with customers, which I believe is getting stronger and stronger, will lead us to (become) a very relevant player in the enterprise (market).

When do you think AMD chips will make it into the mainstream servers, desktops and notebooks that huge corporations buy? Ruiz: The server part of it is happening as we speak. We're already in a fairly significant part of Sun's, HP's and IBM's business, as well as Fujitsu-Siemens, Lenovo and others outside of the United States.

We expect to start seeing, for example, dual-core desktops before the end of the year being fairly active in the marketplace. There, though, I have to tell you that we have to make sure that the consumer understands the value. For a number of consumers, it'll take some time before the software and all the things that will make dual core really great will actually play out.

We're surprised we haven't heard more about big companies, such as banks, adopting Opteron. Do they just not talk about it?
Ruiz: There's a little bit...of cautiousness on the part of banks. If a bank were to talk about the fact that they committed to use AMD technology, that could be interpreted--especially if it's an investment banker--that they were actually endorsing AMD stock, which can be confusing.

I think we're the preferred technology on Wall Street. Frankly, if you talk to any of the Wall Street firms, they'll tell you that they like what we do,

and seven out of 10 of the top are using it. But you're right. They don't talk about it.

What about the communications space?
Ruiz: If by communications you mean the traditional communications things...the answer is no in the near future. We will have communications technology in our chipsets, especially around wireless and broadband capability. But we're not doing anything that would put us in the same competitive space as people like Qualcomm or TI.

So the effort is more in consumer electronics?
Ruiz: The way I would describe it is, because of our commitment to the x86 architecture, we have an opportunity to be the premier company--if we're not there already--in that architecture. Therefore, we can take it to places that no others can, because they don't have the intellectual property and the experience to do it.

So our intent is to continue to go down in power and cost so that we could see x86 used in places like automobile entertainment and consumer electronics devices, such as a portable media player, and perhaps potentially down the road a digital convergence device that has mobile and computing capability that's far superior to what a smart phone has today.

So by staying focused on one architecture, we believe we can go all the way from a very low-cost consumer device all the way to a supercomputer.

People are dying to know what the deal is with Dell.
Ruiz: We'd love to have Dell as a customer, obviously, and we'll continue to always work hard at it. But you know, frankly, if you take the extreme that if Dell were to publicly say they really no longer have an interest in AMD and they're not going to do it, they lose all the leverage with the other supplier. So I think by definition, they'll never say that.

Then the question is will we ever be able to get to the point where we provide a good solution to their business. I believe we will, but it's not clear when and how that's going to happen.

What's the next step for AMD in emerging markets? Are you going to continue with the Personal Internet Communicator or are you working on the mythical $100 PC?
Ruiz: The PIC was our first attempt to do something different. I think that will continue to morph into a new generation of products. We have a PIC 2 and a PIC 3 on the road map. All those products will improve the (computing) power and value, while at the same time lowering the cost.

Related story
AMD offering blueprint for $185 PC

Low-price computer design is meant to help provide Internet access to people in emerging markets.

I don't think a $100 computer is out of the question in a three-year time frame. A lot of people forget that the first cell phones came out at $3,000 to $4,000 dollars and today are free. I think there's going to be some of that same kind of movement with computing and communications devices.

It's important for us to not lose sight of the segment that today doesn't have any products built for it. The trickle-down effect of desktops and laptops into that segment just doesn't work. I believe that we have an opportunity to use our x86 know-how and capability to really build products for that segment. That will be the PIC at the beginning, and there will be more. I think, within three years, it's not at all unreasonable to think of a $100 laptop for that segment.

A $100 laptop?
Ruiz: Yes.

When it comes to the competition, was the Japan FTC ruling against Intel a victory for AMD?
Ruiz: I think the important thing in Japan is it's a victory for the customer and the consumer. More than anything else it tried to eliminate any impediment to free and open competition.

We would hope that we can see the elimination of those impediments throughout the world, not just in Japan.

So Intel is doing the same thing in other markets?
Ruiz: We believe that the practices that they have been accused of doing in Japan and the evidence that was found by the FTC (Federal Trade Commission) in Japan is probably indicative and a proxy of the way they operate around the world.

Do you think they use the Intel Inside campaign to keep OEMs on the hook?
Ruiz: There are some things that are not allowed when you're a monopoly, and they're pretty clearly spelled out. Although there are slight variances from one place to another, they're all pretty clear in terms of holding someone hostage to a monopoly. I think those things need to change.

Then AMD isn't planning to do something like Intel Inside?
Ruiz: No. We prefer to be on our customers' side rather than on the inside.

Are acquisitions something you're looking at?
I do think there's an opportunity for us to complement our x86 architecture. The possibility of either acquiring or doing things like that with some companies is something we'll consider.