Almost overnight, chipmaker Advanced Micro Devices (AMD) has become a serious threat to its far-larger rival, Intel (INTC). With a strong technology lineup -- including its Opteron server chip, AMD Athlon64 PC chip, and MirrorBit flash memory chip -- the Sunnyvale (Calif.) company is in the best position in its 35-year history to prosper (see BW Online, 09/20/04, "Suddenly, It's AMD Inside").
BusinessWeek's Cliff Edwards recently sat down with AMD Chief Executive Hector Ruiz to discuss the company's successes as well as his strategy for staying a step ahead of powerful Intel. Here are edited excerpts from their conversation:
Q: Suddenly, AMD is a contender. AMD's 64-bit server technology appears to be getting a lot of interest in the enterprise. Was that priority No. 1?
A: For us to meet the growth and objectives we set, we had to have participation in the commercial enterprise segment. Opteron certainly opened up a tremendous window of opportunity for us to build that credibility up really fast.
Q: The next level, of course, would be clients -- desktops and notebooks. You're still not a big player in Corporate America, are you?
A: Certainly, it's not an area where we have a healthy level of participation today. To get to 25%-plus market share, that will take three to five years to accomplish. We believe we can take our success with 64-bit technology and see it trickle down to the client.
Q: AMD used to underprice Intel to even get in the door, selling your chips for tens of dollars. Now, I see your top chips sell for $900. Is that something you can sustain?
A: I use this analogy: If everyone's making Volkswagens, it's hard to compare costs. But what happens if one player switches and then is making a BMW? Are people willing to pay for the ultimate driving experience? People who are buying our products now are buying for the value they provide and the things they do. That's hard to beat.
Q: AMD has had some successes before, only to stumble again and again. How do you convince customers those days are over?
A: Certainly, they're committing to a roadmap that is dependent on how we execute, how we deliver. We're creating our own ecosystem with our architecture. If you're nervous, that's a little dangerous because it means you can lose it all. But we have high confidence that we can execute.
Q: When do you declare ultimate victory?
A: We will earn the return on capital in this company. We have plans to be able to fund our own growth. We think we can get there in the in next three to five years.
Q: Intel is a powerful, some say ruthless, competitor. Do you think they're going to let you get there?
A: It's the question everybody wants [answered]. Truthfully, our customers care how we're doing relative to what they want and need and whether we're delivering that. We have become such a natural extension of each of our customer's businesses that we're almost in sync in what they think, want, and need. I'm not as concerned what the competitor does since they don't seem to be concerned with what the customer wants.
Q: But Intel already is realigning itself to address the threat of AMD. Surely that must keep you thinking?
A: No question, if we don't execute that gives them an opening. But I think it's time for us to start telling the world we're here to stay. We're not going away. We have great people in the market who are delivering products that the customers need. We're not basking in the glory of Opteron. We're not standing still. You ain't seen nothing yet.