When Advanced Micro Devices announced last week that both sales and profits for the second quarter would fall far short of earlier projections, the disappointing news sounded familiar to longtime observers of the company. And when AMD's stock tanked the next day, the temptation was to shrug one's shoulders and say, "Same old AMD."
But that would be a mistake. After all, the company still is expecting to report a profit for the second quarter, something a lot of chip makers would be happy to do. Above all, the downbeat news last week obscured the fact that this is not the same company that spent most of the '90s stumbling from one debacle to another.
After its second-source arrangement with Intel unraveled at the start of the last decade, AMD had to re-make itself from a company known more for its marketing prowess than its engineering and manufacturing capability. It wasn't pretty. The first home-grown processor, the K5, was released late and crashed spectacularly. Although the K6 did much better, it was still hurt by manufacturing mishaps.
When the '90s were about to come to an end, AMD seemed on the brink of disaster. Arch-rival Intel had built up a huge PC processor market share, and was spending lavishly to put the coup de grace on its much smaller competitor. AMD had just launched its Athlon chip, but given its long history of manufacturing fiascos, few observers -- including this one -- gave the Athlon much of a chance to eat Intel's lunch.
But the events of the past two years have turned the PC processor world on its head. AMD has emerged as a polished designer and manufacturer, while Intel, that smooth-running juggernaut, has stumbled more than once.
By the first quarter of this year, the shift in the relative fortunes of the two rivals became starkly clear. Intel saw its revenues fall 16% year-over-year, and plunge 23% sequentially. AMD, meanwhile, enjoyed a 9% hike in revenues year-to-year, and even managed to squeak out a small gain from the previous quarter.
A large part of the credit goes to the Athlon, which was designed virtually from the ground up. Intel was content to tinker with the microarchitecture when designing the Pentium III. As a result, Athlon actually gave AMD a performance advantage when competing for the PC market.
AMD also seemed to learn the lessons from its many manufacturing snafus, and launched its new megafab in Dresden, Germany, with nary a hitch.
AMD has emerged as a solid engineering company as well, and in the past few years has become a leader in securing U.S. patents. Who would have guessed?
Intel's reaction to AMD's success --- slashing processor prices to the bone --- has certainly taken a toll on its rival. But AMD's 20% share of the PC processor market is at a 10-year high.
To be sure, the microprocessor race is never over, and AMD still needs to prove itself in the corporate server market. Meanwhile, Intel is certainly capable of regaining its momentum.
But there seems little doubt that when he hands the CEO reins over to Hector Ruiz next year, Jerry Sanders will be giving his successor a far different company to work with than he would have only a few years before.
Robert Ristelhueber is managing editor of EBNOnline. Email comments to firstname.lastname@example.org