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5/20/2005
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Can AMD Keep Its Hot Streak Going?

Despite being outspent by Intel, the chipmaker is winning more business customers

For most of its history, Advanced Micro Devices Inc. was dismissed as little more than an x86 clone chipmaker, producing processors that mimic the features and capabilities of those from industry leader Intel. But in the past two years, AMD at times has shown up its much larger rival by introducing innovative microprocessors that forced Intel into the unfamiliar position of reacting to competition.

"AMD is the most competitive it has ever been," says Dean McCarron, an analyst with Mercury Research. "Today AMD and Intel are competing in every major segment--desktops, notebooks, and servers--and with a broad spectrum of products and performance values within those segments. There hasn't been a time in history when that existed between those two companies."

AMD chairman Ruiz wants to win a third of the microprocessor market in the next two to three years.

AMD chairman Ruiz wants to win a third of the microprocessor market in the next two to three years.
Intel remains the dominant force in the chip business, but AMD's new technology has produced market-share gains. The company has big ambitions that it will accomplish by focusing on nuts-and-bolts execution, Hector Ruiz, chairman, chief executive, and president of AMD, said in an interview with InformationWeek last week. "In two years, we've gone from zero to about 8% of the market," he said. "There's no reason why we shouldn't aspire to be a third of the market in the next two or three years."

It won't be easy. Intel will probably spend more money on capital investments this year than the total revenue that AMD brought in last year. "When you're in that position, there's only one thing to do," Ruiz said. "Stay close to your customers and end users, understand what they need and want, and then just out innovate the hell out of it. Innovation is at the center of our ability to succeed. We cannot win by just aping the competition, which we are not going to do." (For more of the Ruiz interview, see Q&A: AMD's Ruiz Says 'Our Opportunity For Growth Is Phenomenal'.)

AMD led the way in transforming the x86 processor market from chips that handle 32-bit chunks of data to chips that handle 64 bits of data at a time. It broke new ground again in April when it became the first provider of dual-core x86 processors for the server market.

Those two achievements have paid off. AMD increased its share of the overall x86 market from about 14% a year ago to 17% in the first quarter of 2005, and grew its share of the x86 server market from 6% a year ago to 7.4%, according to Mercury Research.

It also won more orders from important customers. A year ago, three of the four top-tier computer makers--Hewlett-Packard, IBM, and Sun Microsystems--only used AMD's Opteron chips in one or two systems. By the time AMD celebrated the second anniversary of its Opteron chip in April, those vendors were offering a range of servers, blade servers, and workstations that use up to four Opteron chips.

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