Saturday, September 15, 2007

AMD Reorganizes Its Sales Unit

Chipmaker Advanced Micro Devices says its first four-core chip, called Barcelona, is more than a match for Intel's (NASDAQ:INTC) quad cores.

AMD unveiled Barcelona on Monday, aiming the state-of-the-art device at server makers.

To get the new product off to a good start, and to boost overall revenue, AMD (NYSE:AMD) this month quietly restructured its sales organization, splitting it into four groups. The heads of each group report directly to AMD CEO Hector Ruiz.

Henri Richard had been chief sales and marketing officer, and was the only sales executive who reported directly to Ruiz. On Aug. 22, AMD announced that Richard was leaving the company amicably, of his own accord. He left as of Sept.8.

Ruiz says Richard helped craft the new structure, which divides the unit into four geographic regions.

AMD modeled the strategy on the way it manages its sales in China. That group is headed by AMD China President Karen Guo, and Ruiz says the unit has grown rapidly by being in touch with local customers.

This week, Ruiz spoke with IBD about the sales reorganization, Barcelona and more.

IBD: You've had a couple of key people leave recently, including Henri Richard and Dave Orton, who was CEO of ATI, the graphics chip maker AMD bought last year. How will their departures affect AMD?

Ruiz: Those are very good people. We tried very hard to find a way to keep them. They're talented individuals. Dave did a lot in creating ATI. But I guess part of the challenge is once you're CEO of a company, it's difficult to find a home in the company that acquired you. In all honesty, I think that Dave just felt it was time for him to look at his life again.

IBD: From the outside, Richard seemed to be really involved with crafting AMD's strategy.

Ruiz: Henri had been with us for five years. And he was critical in getting us into the position we're in, with many customers around the world.

Frankly, Henri was a participant in creating a new vision for the company. So it wasn't like we created it without him. We wanted to have a company with a stronger focus on the regions we serve than we had before.

So if you look at what we just did (with the reorganization), we elevated all the regions we serve to reporting directly to me. So instead of having one salesperson in charge, we have four. That has given us an opportunity to get closer to the customer.

IBD: When did you announce the reorganization?

Ruiz: We didn't issue a public statement. We issued a memo internally. I'm surprised that nobody picked up on it, but it's one of the things that never made it to a public statement.

IBD: Why do you want four sales regions reporting directly to you?

Ruiz: We're about to become a $10billion company in the near future. We have four regions that are going to be roughly $2 billion apiece (the rest doesn't come from any specific region). That $2 billion is the size of AMD five years ago. I think it's critical that we have regional executives empowered to really run the regions on behalf of the customers.

IBD: What are the four regions?

Ruiz: Europe, Middle East, Africa and India is one region (headed by Vice President Alberto Macchi). China by itself is another region, which includes Taiwan and Hong Kong.

Asia-Pacific is another region, which is everything in Asia except China (and is headed by President Dirk Meyer and Ruiz). And the Americas, which is everything from Alaska to Tierra del Fuego (South America), is the fourth region (and led by Vice President Gustavo Arenas).

IBD: As for Barcelona, it has a unified design with four cores on it. What's the advantage of building it that way rather than two designs side by side in a single chip, as Intel does its quad cores?

Ruiz: One thing is investment protection (can swap chips but keep same servers). You can plug in a Barcelona chip where an Opteron was, and you get the advantage of quad core. You can't do that with their quad core.

Another is (better) energy efficiency, or performance per watt. That's becoming one of the most critical points to us.

The last one is the future, which is virtualization (enabling two or more operating systems on a single computer). We put hardware innovations on Barcelona to make it easier for people like (virtualization software maker) VMware VMW and others to optimize a virtualization capability on this product.

IBD: Barcelona was delayed because of design problems. Will that be a problem for AMD?

Ruiz: We've had nine months of challenge because we were late with Barcelona, frankly. And the absence of a quad core in the market did hurt us. No question about that. (Intel's first quad core was released in November.)

But our belief is that not only are we going to regain the position we had, we're going to surpass it, because we have a strong product.


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