AMD: This is the ‘prove it’ stage

Advanced Micro Devices is in the second phase of a strategy to turn around its financial situation and prepare it for a battle with Intel in the high-end server market.

The processor firm’s senior vice-president and CFO, Robert

J. Rivet, told the Morgan Stanley Semiconductor & Systems Conference in Dana Point, Calif. Monday that it has already taken steps to reduce inventory in its supply chain for PC customers. The next stage, he said, will see the company launch a chip called Opteron next month to compete with Intel’s 32-bit Xeon server product.

“”This is the ‘prove it’ stage,”” Rivet said at the conference, which was Webcast. “”We’ve spent the last while focused on reducing our costs, but you can’t cut your way to prosperity. Now we’re focusing on top-line growth. Next year I’ll be talking about the payoff.””

AMD cut about 350 jobs in the United States late last month as part of the “”Operation Flexibility”” strategy the company devised last summer to deal with quarterly losses. While renegotiating one of its loans and raising additional money, Rivet said AMD has managed to reduce capital expenditures from about US$850 million to US$705 million. Rivet said AMD expects to break even in the second quarter and return to profitability during the second half of the year.

Rivet admitted that AMD was taken back by the downturn in PC purchasing that began last year, which bloated its channels’ supply chain. It has since moved to “”rebalance”” the channel and is now sitting on about three or four weeks worth of inventory from a high of eight weeks, Rivet said.

Mark Waters, a reseller in Red Deer, Alta., isn’t complaining about product glut. He said the company, Mark’s Mobile, tends to sell triple the number of AMD-based white box PCs than those using Intel’s Pentium chips.

“”The AMD, I think, for what you get is far superior in terms of performance,”” he said. “”That’s in any environment — graphic, audio or video . . . as far as multimedia and then even business applications and stability, I think it’s the best way to go. I think you pay too much money for Intel, I really do.””

Rivet said Opteron, which will launch April 22, will be aimed at the one- and two-way server market where Intel’s Xeon chip is popular. While Intel is pitching its Itanium 2 product for the higher-end of the data centre, Rivet said Opteron will be less disruptive.

“”This will be the only chip to let IT departments migrate at their own speed, when they want to, to 64-bit computing,”” he said, adding that while AMD only enjoys about three to five per cent of the server market now, it foresees reaching double digits by next year.

Waters said AMD’s channel partners will be critical to Opteron’s success.

“”Intel has always had that part of the market,”” he said. “”It could be a little di

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