A Chip on His Shoulder
When Trek Bicycle senior designer Michael Sagan was modeling Lance Armstrong's bike in 2000, he spent more time working from home than at the office. His personal computer, powered by a chip from Advanced Micro Devices, ran his design software applications more efficiently than the Intel-based computers at the office, and he got more done at home. By 2003, AMD had formed a partnership with Armstrong's team, and today more than a dozen Trek designers and engineers use AMD-powered computers to create virtual wind tunnels to test and reduce drag on racing bikes. "With AMD machines, we've seen our design-cycle times come down by about 50 percent," Sagan says. The computers at Trek are being used for graphics, Web and industrial design, and mechanical engineering.
AMD may be the biggest little chip company you've never heard of, and it is desperately trying to change that image. The Sunnyvale, Calif., company has been a distant second behind semiconductor behemoth Intel since the early days of computing. The two companies compete to build the internal brains of computers--the microprocessors that power the math, word processing, and graphics. Intel commands a dominant 82 percent market share in terms of units sold, with AMD as the only other noteworthy competitor. Intel has a $148.6 billion market capitalization, dwarfing AMD's $9.9 billion.
Intel and AMD have a storied past, and their rivalry is only getting uglier. In April 2003, AMD released the Opteron chip for servers, which analysts praised as cheaper and faster than Intel's offerings. Since its launch, AMD has gained share in the server market--during this year alone it jumped from 7.4 percent in the first quarter to 11.2 percent in the second, according to Mercury Research--and Intel has still not released a comparable chip. Then in June, AMD sued Intel for allegedly violating antitrust laws, while launching a media campaign to raise consumer awareness about what it claims are bullying tactics by Intel. Intel denies any wrongdoing.
At AMD's helm is CEO Hector Ruiz. A 59-year-old Mexican immigrant with a Ph.D. in electrical engineering, Ruiz spent 22 years climbing the ranks in Motorola before coming to AMD in 2000 and then ascending to CEO in 2002. "Internally, people say we've turned the company upside down," says the soft-spoken Ruiz.
The 64-bit Opteron processor was unique in its ability to allow systems to run both newer 64-bit software applications and older 32-bit models, which means companies don't have to upgrade their entire systems at one time. In April, AMD launched a version with two processors instead of one. Intel plans to launch a competing dual-core processor for servers later this year.
Moving on. AMD is trying to leverage the market bang it got from Opteron beyond servers--the large boxes that hum inside corporate closets, processing and storing massive amounts of data generated on corporate networks--into the corporate desktop market. Intel dominates this business in partnership with PC giant Dell, which uses the semiconductor giant's chips exclusively. But AMD hopes technology managers who are pleased with the performance of servers powered by its chips will influence purchasing decisions when it comes to desktop deals. "I decided the only way we were going to compete was to go at the belly of the beast--the [corporate] enterprise market," Ruiz says. "There is huge opportunity, considering we are starting at zero."
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