November 7, 2002 2:50 PM PST

AMD to aim for business market in 2003

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Advanced Micro Devices will heavily target the corporate market in 2003 in an effort to pull itself back to profitability, company executives said Thursday.

In addition, the company has confirmed it will begin to lay off employees this quarter and try to reduce expenses by $100 million per quarter by the second quarter of 2003.

"We expect that we will reduce our work force by 10 to 20 percent by the end of 2003," said Drew Prairie, an AMD spokesman. Those job cuts, equal to about 1,300 to 2,600 positions worldwide, will come from a combination of AMD's restructuring and its natural attrition, he said.

When looking at making cuts, AMD will "focus on making sure our product and technology development plans are not affected," Prairie said. As a result, the reductions are most likely to come from administrative areas, such as the human resources and legal departments. AMD is also considering ideas such as merging its marketing and sales operations.

Speaking at AMD's annual analyst meeting, executives said that although AMD will continue to defend its position in the consumer market, the company will put most of its energy into getting its chips into servers, corporate desktops, and "thin and light" notebooks.

A new version of the company's Athlon chip for thin notebooks, the most popular kind shipped to corporations, will be sent out to manufacturers this quarter, said Rob Herb, senior vice president of sales and marketing. Notebooks featuring the chip will appear in the first quarter.

The new chip is architecturally similar to current AMD mobile chips but comes in a thinner package and consumes between 16 watts and 25 watts, less than other AMD mobile chips, he said. Roughly 74 percent of notebooks sold to corporations are thin and lights, Herb added, and half the volume of notebooks from the big three manufacturers--Hewlett-Packard, IBM and Dell Computer--fit into this category.

The push into corporate desktops and servers will also begin in the first half of 2003 with the release of the first Hammer chips. The company did not disclose whether major computer makers have decided to adopt the chip, but said all of them are testing it for servers. Executives from IBM and Dell have made glowing comments about Hammer's potential.

"We have yet to penetrate the tier one computer manufacturers" in the server market, Herb said. "We think we are on the verge of being able to do that."

Aiming for corporate clients
The corporate push will take place both in the United States and overseas. The company has visited more than 800 large corporations in the past year to discuss its technology and to try to erode the historical barriers against it, Herb said. AMD will also make a concerted effort to move into China.

Opteron, a version of Hammer for servers, will debut with about 2GHz and will be marketed with a performance rating in the mid-3,000s, said Dirk Meyer, senior vice president of the computational products group. By the end of the year, the performance rating will go to the 4,000 level. The numbers represent the overall performance the chips exhibit and generally correspond to the megahertz of Intel's chips.

The desktop version of Hammer, meanwhile, will come out in the first quarter.

Like Intel, AMD will begin to try to establish tighter links with computer makers, coining reference designs and contributing more technology to the construction of computers, AMD CEO Hector Ruiz said. Intel, for instance, designed and manufactured many of the first Itanium servers.

Additionally, AMD will continue to try to expand its market share in flash memory. Before this year, the company largely sold its flash memory within the networking market. In 2002, though, it began to shift more emphasis onto the cellular market and since then has been able to take market share away from Intel, according to Herb.

AMD landed a contract this week from an unidentified cell phone maker to supply flash memory to one of its high-end phones, Herb said. The contract earlier belonged to Intel, he added.

Six of the top 10 cell phone makers in China now use AMD flash, said Bertrand Cambou, vice president of the flash group. The flash market is expected to grow by 35 percent next year, and the company says its flash memory output will grow even faster.

Of course, these ambitious plans come at a time when the company has been losing market share, reporting huge financial losses and experiencing product delays. Still, the Hammer chip could help it recover.

"If they can get Opteron out and if they can solidify their balance sheet, they will be with us for a while," said John Joseph, an analyst with Salomon Smith Barney.

 

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