What a difference a few years can make. Advanced Micro Devices (AMD), once considered the chip industry also-ran in a race essentially dominated by Intel (INTC), is proving that it can consistently take business away from its bigger rival, and Wall Street analysts are taking note (see BW Online, 3/2/06, "AMD Plays Offense").
Strong business at AMD is at least part of the reason for Intel's current slowdown, they say. AMD Chief Executive Hector Ruiz spoke by phone with BusinessWeek Online's Arik Hesseldahl on Mar. 1 to talk about the state of the chip business, the PC industry, AMD's ongoing antitrust lawsuit against Intel, and AMD's chances of doing business with PC maker Dell (DELL). Edited excerpts follow:
Let's get straight into today's news. AMD has subpoenaed the Internet-calling service Skype over a deal that limits a certain Skype feature to consumers with Intel-based PCs. How does that play into your antitrust litigation? In this matter we're trying to answer one question and one question only. Is this an instance where Intel has abused its monopoly position? If you're a consumer sitting at home, and you just bought a computer that you're real happy with, and now you find you can't use this feature because someone has done a deal that locks you out -- I think that is not fair to the consumer. It's unfair to the market.
Intel has been making a lot of changes to its branding and marketing and positioning lately, which includes changing the names of some of the chips and it sells. What impact if any does any of this have on AMD's business? At the risk of sounding flippant, it means very little for us. We have a plan. We have developed a strategy and roadmap. We have shared that with our customers, who tell us they like it and they like what they hear from us. And we're focused maniacally on executing. Our customers tell us they like what they hear from us, and that if we execute to our plans we're going to be a great player in the industry. We're focused on doing just that.
There are reports -- at least one in BusinessWeek -- that AMD is talking to Dell again. This is a very old question, and you must get tired of answering, because I know I get tired asking it. But are you talking to Dell, and if so, what are you talking about? We don't mind answering the question. The truth is that we have had discussions with Dell for years. The relationship has not changed. They have a pretty damn good idea where we are because they really have access to our products and can play with them.
Our working-level people have a good relationship with [their] people, and so they are pretty much up to speed. We've always based our plans, at least in the near term, that we don't assume that Dell will sign up, and therefore our plans to accomplish what we think we can accomplish this year are not based on having Dell as a customer.
We do have the capacity and the capability to meet their needs should they decide to sign up. Sure, we'd like to have them as a customer.
If you were to get them as a customer tomorrow, if [CEO] Kevin Rollins were to call you up and say, "Hector, it's a go," where in Dell's product line do you think an AMD chip would be most likely to appear? I do know that the place where customers are insisting that manufacturers provide products with AMD chips in them is the server space, more than any space, because the performance and the value proposition there is so overwhelming in our favor that end users are demanding that. I'm sure Dell hears that.
But on the other hand, on the client side, in the more traditional PC market, our value proposition is so strong relative to price performance and power consumption that it's compelling. It's attractive. If you look at the published data from our competitors' results and from ours, you can easily calculate that on the client side, for them to be competitive on price performance, they would have to lower the price a huge amount, not a little, a huge amount -- and that would only get them close.
That's a long answer to the question, but it really comes down to what Dell would be trying to accomplish if they decided to use our chips.
Intel's other marquee customer of the moment is Apple Computer (AAPL). Now that Apple has switched to an x86 processor, would you ever be interested in competing for that business? You know Apple is a small player, but it is a difficult customer to serve. They offer a unique set of hardware platforms, so you have to be very much prepared and have the capability to address their needs.
I think right now we're okay without Apple as a customer. At some point in time, if Apple is successful with its strategy of bringing computing to the home environment, I think they are going to find the same thing all the other PC makers are finding, which is that its there is a compelling reason to consider us. We intend to continue offering the best solution. I wouldn't be surprised if some hacker out there has already demonstrated an Apple box working better with an AMD processor.
Have you talked to anyone from Apple? Before they announced they were going with Intel, did they come and talk with you? No, they did not.
Intel has had a lot of success with its platform-based approached, particularly on the notebook front with the Centrino line of products, which includes the microprocessor, wireless networking and other components all integrated into a single product. Over the last year Intel has been talking a lot about doing the same thing with its other product lines. What does that mean for you? First of all, being able to create platforms to help customers is a good thing. It's what you do and how you do it, and the leverage you have that makes the difference.
Our approach is to open the platform to allow the best in the industry to participate. Then our customers have the choice. If they want the best graphics, they can choose that, if they want average graphics, because the system might be for commercial use and might not require sophisticated graphics, they can do that themselves. By making a strong platform compatible with what is available, we think we are offering a platform strategy that is actually better.
And yet Centrino was and is successful. There is no question that in the PC industry there has been for some -- though I am beginning to see a change as a result of AMD -- a reluctance by those people in the PC value chain to get creative and add value. And that is why Apple's foray into the home is so frightening to so many people. It's because Steve Jobs has never had a fear of creating his own value. And so all these companies have allowed Intel to determine what the computer looks like. I can put a laptop in front of you, take the name off, and I don't think you'd be able to tell me who made it.
And so I think the PC industry has allowed this to happen, although I am beginning to see signs of this changing. But the other part is that there is this belief in the industry that, prior to us becoming a stronger player, when Intel was more dominant, people felt it was okay if they weren't turning out great products, because at the end of the day everyone else has the same lousy product, and so you were competing with people who had no clear advantage over you.
But what's happening now is, people are using [AMD's] Opteron and seeing an advantage over people who don't. People use Turion are beginning to see a major advantage that others don't. We're seeing a desire by some PC makers to get away from the dumbing down of their own brands, and trying to establish themselves as more innovative companies.
Even Dell is wanting to break away from the commodity box. It's promoting its new XPS high-end PC line very heavily. Hewlett-Packard (HPQ) is pushing the Media Center PC. Outside of the corporate environment, is the day of the commodity PC over? I think there is significant interest on the part of good companies to want to differentiate themselves, and Apple is putting pressure on them. Despite Dell's foray into this area with the XPS line -- if you talk to the gaming community, they say the XPS is a nice box, but -- and there's always a big but -- if a box doesn't have an AMD chip in the gaming community, its not going to offer the features that community expects.
This is another place an AMD solution would be attractive for Dell, because they could easily get into that space, and have a great product instead of a mediocre product.
Hesseldahl is a reporter for BusinessWeek Online in New York
Printer-Friendly Version