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Commentary: Ruiz carries on processor fight

Posted: 22 Jul 2008 ?? ?Print Version ?Bookmark and Share

Keywords:OEM? microprocessor? software?

It's going to be a really long goodbye for Hector Ruiz. When industry executives hand over the reins of power to a successor, they might stay on briefly as chairman of the board of directors before relinquishing even that position to enjoy their retirement. Ruiz, until last week as chairman, president and CEO of Advanced Micro Devices Inc. (AMD), is taking a different approach.

In a sign that the battle for domination in the microprocessor (MPU) world has become deeply personal for Ruiz, the long-term industry executive is staying on as executive chairman at AMD with one major goal in mind: dismantling what he described as Intel Corp.'s "illegal monopoly" of the MPU market.

Breaking barriers
Even the most pro-Intel observer of the MPU market must agree that AMD under Ruiz's leadership has already cracked Intel's armor.

Several regulatory authorities globally from Japan to Korea, the European Union and the United States are either investigating or bringing actions against Intel for allegedly violating antitrust laws through its marketing practices and contracts with PC manufacturers.

In the latest action, the European Commission this week informed Intel it had expanded its ongoing investigation of the Santa Clara, California for the company's marketing practices based on new evidence purportedly showing the chipmaker induced an OEM to sell only Intel-based PCs. Other actions have been instituted or concluded in Japan and South Korea.

None of this would have happened without Ruiz's leadership and persistence in filling allegations of antimonopoly practices against Intel at various geographical locations.

"With you at the helm we built AMD's global presence with bold expansion efforts in China, Latin America, India and the Middle East," Dirk Meyer, president and CEO, AMD, told Ruiz during the company's conference call on Thursday (July 17).

"We re-established partnerships with many of the greatest OEM's and software firms in this industry," Meyer added. "You courageously launched a global initiative for fair and open competition. A battle we are winning for the benefit of the industry and consumers everywhere," he noted.

Continuing struggle
AMD might have won a few skirmishes but the war for control of the MPU market is far from over. In fact, despite the antitrust actions being initiated against Intel, the world's no. 1 chipmaker remains the dominant player in the sector.

Perhaps that's why Ruiz is staying on to continue to champion AMD's antitrust cause, leaving Meyer to focus on the management of the company.

Although Ruiz noted that he would also be managing the company's asset-smart manufacturing initiative, indications are that AMD is on the verge of concluding the program and should be announcing details to investors soon. "We have made enormous progress on our asset smart strategy," Ruiz said during the conference call.

Ruiz's main task as executive chairman at AMD would therefore be "to lead our initiative to break our industry free from the grips of an illegal monopoly," he said.

Ruiz may be underestimating the challenge breaking Intel's grip on the MPU market. While antitrust regulatory investigations and sanctions may place limits on Intel's marketing practices, these won't necessarily result in a major shift in market share between the two companies.

AMD under Ruiz was in some ways its own enemy, piling up huge losses, manufacturing missteps and failing to translate its occasional product breakthroughs into major marketing successes. In the June quarter, for instance, AMD's net loss rose to $1.2 billion from $600 million in the Q2 07.

While AMD's new CEO and the board of directors praise Ruiz's leadership of the company, investors might not find it as easy praising his stewardship of the chip vendor.

In fact, shareholders thumbed down AMD's Q2 results as well as Ruiz's continued role as executive chairman and Meyer's appointment in trading recently.

AMD's share price tumbled more than 12 percent in early trading last week, slipping to $4.66 from the previous day's closing price of $5.30. The company's market value slipped to approximately $2.8 billion, a steep drop from the 52-week high price of $16.19 and valuation of $9.8 billion.

Need for repackaging
Analysts said the company must take additional steps to revive its operations and further reduce operating costs.

"While AMD appears to have a product cycle with its new notebook platform (Puma) and desktop MPU Phenom, we think that the company has to rebuild credibility with customers and investors by successfully shipping the products in volume before its multiple can expand again," said Mark Lipacis, analyst, Morgan Stanley & Co. Inc., in a research report.

"We are also concerned that while the company has undertaken cost cutting actions to reduce its cash burn, that it may also be underfunding the development required to be competitive with Intel at the high end," he added.

With that record, Ruiz definitely needs a clear win on another front to burnish his tenure at AMD. That's why the antitrust issue has become personal for the 62-year-old industry veteran.

He might yet get a victory dance on the antitrust issue. Toppling Intel from its perch though, would require a lifetime additional efforts.

- Bolaji Ojo
EE Times

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