AMD in 2005: Coming Out of Intel’s Shadow? (Page 2)

Abstract

Hector Ruiz, Chief Executive Officer of Advanced Micro Devices (AMD) has strong reason to believe that AMD will give Intel a run for its money in the 64-bit microprocessor market. Itanium I, Intel's first 64-bit microprocessor has failed. Itanium II has also elicited a lukewarm response from the market. But Opteron, AMD's 64-bit microprocessor, released in mid-2003 is receiving strong performance reviews. Many companies that shied away from AMD's products in the past such as Hewlett Packard, Sun, IBM have started using Opteron. AMD has grabbed 7% of the low-end server market, up from almost nothing a few years back. Is AMD finally ready to catch up with Intel? The case covers the leadership of Ruiz, market response and features of Opteron and the battle between AMD and Intel.

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Opteron contd...

Though Opteron was designed for high-end servers it could also run like 32-bit (Pentium and Athlon) processors in most PCs. A PC version of Opteron was also expected to be available unlike Intel's Itanium 2. Opteron prices ranged from $283 to $794, compared to Itanium 2's $1,338 to $4,226.

Opteron's design made it fully backward compatible with existing 32-bit applications. That differentiated it from Itanium 2, which used a different architecture. By offering both 64-bit and 32-bit operation with the same chip, AMD believed that Opteron systems would be the perfect upgrades for aging servers that used Intel's Pentium and Xeon processors. AMD also had plans to introduce a 64-bit processor for home computers in 2003. The Athlon 64, due for release in September 2003, would be the first such chip aimed at the consumer market.

In early 2003, there were no 64-bit applications for consumers, but AMD believed that once Athlon 64 machines were available, multimedia and game software companies would write programs to take advantage of their power.

David vs Goliath

For more than 30 years, AMD had been challenging Intel in the semiconductor industry. Intel had been able to control x86 microprocessor and PC system standards and dictate the type of products the market required of competitors. Intel's financial muscle allowed it to market its products aggressively, offer special incentives and to wean away customers who did business with AMD. Intel had longstanding partnerships with both software developers and hardware manufacturers. Intel exerted substantial influence over PC manufacturers and their distribution channels through the "Intel Inside" brand and other marketing programs .

Intel spent substantially greater amounts on R&D than AMD did. For instance, Intel was expected to generate revenues of $34 billion in 2004 with projected profits of $7.35 billion. This meant Intel earned in 11 days what AMD made in a year. In January 2005, Intel had a $14 billion cash reserve compared to AMD's reserves of about $1.1 billion.

The microprocessor market was characterized by short product life cycles and migration to ever-higher performance microprocessors. To compete successfully against Intel, AMD realized the need to make the transition to new process technologies at a rapid pace and offer higher-performance microprocessors in significantly greater volumes.
Things had started looking up for AMD since the late 1990s. The Internet boom had increased the appetite of consumers and businesses' for microprocessors. But this time, Intel had finalized plans to make a paradigm shift in its architecture by tying-up with HP to make the Itanium series of microprocessors....


More...


New Optimism

A New Leader

Looking Forward

Exhibit: 1 AMD's Stock (January 2000 - January 2005)

Exhibit: 2 AMD Product Roadmap

Exhibit: 3 Opteron Features

Exhibit: 4 AMD - Timeline of Important Events

Exhibit: 5 AMD - Key Financials

Bibliography

        Case Code   BSTA001
   Case Length    17 Pages
              Period    1990s to 2005
 Organization     AMD (Advanced Micro Devices); Intel
        Pub Date     2005
Teaching Note    Not Available
     Countries    Global
      Industry    Semiconductors

Issues

Leadership of Ruiz, market response and features of Opteron and the battle between AMD and Intel

AMD (Advanced Micro Devices); Intel; Itanium; Opteron; 64-bit computing; Strategy; Strategy in information technology (IT) business