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By William Van Winkle |
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AMD ON MOBILE:
RAM: Describe AMD’s presence in the mobile space now. In particular, how do AMD’s mobile CPUs and chipsets offer a differentiating advantage versus their rivals? BM: Back in 2005, we introduced Turion, and since then we’ve seen a real nice trajectory with respect to our market share and revenues. The way we’ve been able to grow business is to demonstrate to our OEMs how they’ve been able to differentiate themselves in the market. When we first introduced Turion, we partnered with some industry leaders to develop an ecosystem of low-power technology and then over time have evolved our platform strategy to where we actually work with the OEMs to develop reference designs and enable them to bring product to market in a more rapid fashion and at a lower cost. We formalized our efforts through a program called Better By Design, where we talked about delivering through these partners and our reference designs really superior technology, particularly in the areas of graphics and wireless. It’s through these that we’ve been able to demonstrate how AMD can enable a superior solution. RAM: Better by design...how? Let’s take wireless as an example. BM: It’s typically vendors like Atheros, Marvell, Broadcom, etc. that are able to bring the latest and greatest in terms of performance and functionality to market most quickly because this is their sole area of focus. We brought to our partners the 802.11n solutions that enable people to range further from their access point and still remain connected or at a particular distance receive higher throughput. That’s really important as people are moving to higher bandwidth content that they’re downloading or streaming from one device to another in their home. RAM: Our readers are pretty savvy on how Draft N and MIMO works. Can you be more specific? BM: These industry leaders are the ones that have their technologies in the access points as well as the notebooks. And when you have the same technology in both places, you can achieve a much higher throughput rate than with different technologies. RAM: The standard doesn’t assure cross-compatibility? BM: There’s the standard, but then these vendors innovate on top of the standard in terms of the number of antennas, what frequency you’re using. There’s HD 20 and 40 that vendors offer—just a number of ways they try to differentiate themselves. RAM: Not to beat this horse to death, but I still haven’t heard why AMD’s wireless approach is superior. BM: With Centrino, you’re required to use Intel’s wireless. With AMD, we partner with these wireless vendors in order to test their technologies on our reference design in order to ensure interoperability. By enabling these wireless vendors, our OEMs can enable their products with technology that provides a better wireless experience. This highlights a fundamental strategy difference between AMD and Intel. A good analogy is the A/V consumer electronics market. Intel is trying to sell you on the all-in-one, big, black box with everything from one vendor. Now, people into audio/video know that you may not want to buy your amplifier from the same company that you buy your CD player or speakers from. You want to buy individual components that are best of breed. That’s what AMD is trying to enable. We’re not making wireless chips and putting them in notebooks because that’s not our expertise. We’re not the best in the world at wireless technologies. Atheros, Broadcom, and those guys are the best in the world. Intel? They’re not the best in the world. RAM: What is Turion today? BM: Turion is a dual-core product that is based on our K8 Direct Connect Architecture. We’re moving to a next-generation architecture with the introduction of our Puma platform here in the second quarter. The processor’s been enhanced to improve performance and battery life. RAM: Is Puma K8 or K10? BM: It’s K8, but we’ve increased the amount of cache, improved the integrated memory controller. We’ve architected it to provide the performance you need when you need it, but when you don’t, it scales back on power. We now operate the memory controller on a separate power plane and can power down both cores to extend battery life if there’s nothing going on. Likewise, we’ve done similar things in the graphics subsystem. RAM: This is the same split plane we saw with Barcelona? BM: Yes. In fact, we have three planes in the Griffon processor. RAM: On the surface, AMD seemed to do the channel a disservice by only selling most of its Turion SKUs to resellers in tray quantities. Obviously, this didn’t do much to help the whitebook cause for small business players. What was AMD’s thinking behind this restriction, and has that thinking changed? BM: We are definitely interested in supporting the channel through the whitebook market. We were seeing what Intel was doing, and they’d made a number of attempts to grow the whitebook market, and likewise, we wanted to position ourselves in that market. We introduced Turion to the channel in single-unit quantities, which we called WOF—without a fan. But truthfully, ODMs and large distributors have said that neither we nor Intel have seen much return on the efforts we’ve made. So we stopped offering WOF, but we continue to work with all of the leading ODMs in order to ensure that we have a large quantity of notebooks for the channel. ASUS, Arima, Compal, FIC—all those guys sell product through distribution, and if you’re large enough, they’ll entertain a direct relationship. In order to support smaller resellers, we partnered with Compal to support a program where they can purchase quantities of tens to thousands of systems through a Compal distributor as opposed to the 5,000 to 10,000-unit quantities that many ODMs require for a direct relationship. Compal will sell smaller quantities of these units with processors through distribution to resellers. RAM: In the last couple of years, we’ve seen a lot of allocation issues in the mobile space. Is AMD working to prevent this going forward? BM: Back in the fourth quarter of ‘06 and the first quarter of ‘07, you’re right. We did run into some supply issues. On the notebook side, we got all of that straightened out during the first half of ‘07 such that now there are no supply issues. We focused on improving our internal supply chain and processes. We spun off a whole team devoted to demand planning and delivery. We’re also working with the large OEMs to help them sell their product through the channel. In our research, we saw a number of channel partners interested in selling an Acer or ASUS—those types of channel-friendly OEMs. Many resellers noted they were interested in the higher margin application sales or services that go along with the branded PC. Have you seen much of resellers carrying tier-one platforms? RAM: Honestly, yes. It’s very difficult to find good news in the whitebook space, Common Building Blocks perhaps excepted. More and more, it seems the sticker is what sells the unit, and I wish that weren’t the case. I don’t want whitebooks to shrivel away. BM: Actually, we’re not seeing it shrivel. It seems to be staying constant in that just-under-10% range. There’s a lot of consolidation at the tier-two level in notebooks while whitebooks are holding their own. But there doesn’t seem to be much growth. Our research shows a couple reasons for that. One is a business model. In the desktop market, it made a lot of sense for configuration to be done at the point of sale because of the standardization in that space, plus it’s very expensive to ship a larger unit like that. You don’t get that standardization in notebooks. In fact, many system builders and smaller OEMs want a unique design. I think that’s where Intel had some trouble with their Common Building Block program. People didn’t want the same design as the next guy. But yeah, we share your frustration. We would like nothing more than to be a part of building a viable, large, rich-margin whitebook business. But it’s just not reality right now, and we don’t see a path to get there. And frankly, we see some parallel between the whitebook and whitebox market right now. For the smaller guys in the channel, the whitebox market has now suffered the same fate. People who want just a basic home machine aren’t walking into their local resellers. You just go grab whatever’s on sale at Best Buy. Notebooks are no different. So on the whitebox side, those guys have had to find a new avenue. They have to specialize in gaming boxes or media boxes or small form factor or go into SMBs with their flexibility and service and support. That’s the only way to survive now on the whitebox side, and it’s the same with whitebooks. You have to specialize in some way or resell a branded system accompanied by service and support. RAM: Well, one sec. It’s easy to point to Intel’s difficulties with VBI and other efforts and say, “See? Not even Intel can do it.” But at least Intel is trying to help resellers succeed with whitebooks. Has AMD taken, or will it take, any steps to help build up whitebooks, or should the channel just let the OEMs inherit the Earth? BM: Yes, Intel is “trying to help.” But by way of analogy, if you have a little old trying to cross a busy street, are you really helping if you walk her out into the traffic and she gets mowed down by a semi? We don't see a clear path to a profitable whitebook business for these guys right now, so we’re choosing to put most of our energy into helping them be successful with the OEMs and ODMs that can provide them with a good AMD choice to resell in the notebook space. AMD ON AMD
RAM: The phrase “so-and-so turned its back on the channel” is excessively dramatic and overused. Still, some people have the sense that AMD shorted the channel when Dell came on board, and now that Dell has backed off, AMD is coming back to its homely ex-girlfriend for another go. GB: In the second half of 2006, we did go very short to the channel on product. It was in the time frame when Dell came onboard, but the reality is that the bigger culprit in that shortage was our gross misforecast, if you will, of our mobile business. We had made commitments to our mobile OEM partners to fulfill a certain amount of business, and that ended up being a lot bigger number than we thought it was going to be. So we had to shift production to fulfill mobile products as opposed to desktop products. As a result, we just didn’t have the die to commit to our channel business. There was never a conscious decision to say, “We didn’t care about the channel anymore. We had these OEMs. But now we’re back.” We felt horrible. We weren’t happy about it, even then. It was a very anguishing time at AMD, because we knew we were letting down some of our best partners, and there was nothing we could do about it. So in the first part of 2007, we said publicly that we’d screwed things up. It wasn’t our intention, and we wouldn’t do it again. Since then, I think we’ve done a good job of demonstrating our commitment to the channel. RAM: Apologies aside, what specific lessons did AMD learn in that process? GB: One of the things we’ve learned is on our supply chain efficiencies and capacity planning, to make sure that we have the right visibility into market demand and that we can balance that with supply. So I’m pretty confident that we’re not going to have to make the same decisions we did in 2006. Even with the challenges we’ve had with Barcelona, I think we can point to enabling channel resellers right alongside the big OEMs as we bring Barcelona back online. Hopefully, that’s good evidence that we’re not in this thinking that whatever’s left over after HP and Dell take all that they want will go to the channel. That’s absolutely not the way we’re doing this. RAM: There’s more to the issue than allocation, right? It’s not just having the product available but knowing what to do with it and how to promote it. GB: What we found in the past is that a lot of resellers were selling AMD a lot in the consumer part of their business, but the commercial part of their business was all built around Intel-branded platforms. Because of the programs that Intel puts around those platforms and the perception of the quality of the product, the motherboards in particular. Honestly, that story is the motivation for CSIP, AVS, and now Business Class. We’re very proud that we can now put a platform next to an Intel motherboard that is in most respects superior to that platform, especially if you account for integrated graphics performance, which has become so important. We’ve got platforms and motherboards far better than what they’ve got on the market today. And we’ve put our brand behind it and put the same level of advanced warranty replacement, overnight shipment, cross-ship, 800 number to call—all those things Intel offers in its branded program now they can get with an AMD platform. So it gives them choice where they didn’t have choice before. It gives them a superior platform in terms of price-performance and graphics performance. And it gives them parity on marketing, sales programs, and support. RAM: We’ve heard from some resellers that they’re more interested in having an alternative to Intel than they are about having AMD per se. Do you perceive a loyalty issue there? GB: These guys are businesspeople. They’re pragmatists. They have a business to run and families to feed. We know for a fact that they value choice. Frankly, we see it as our responsibility to give them a choice that’s good enough for them to feel comfortable in making it with AMD. Now, two years ago, 18 months ago, our product lineup was such that the choice was dead obvious. We had clear superiority across server and desktop, and it was easy for them to choose AMD. Since then, we have not delivered on our road map the way we needed to on desktop and server. So it’s made it more difficult for them to choose AMD, and we’re the first to admit that. The good news is that we feel we’re absolutely through that. With Phenom and the Barcelona-based Opteron lines, we now are a viable choice across a very broad range thanks to things like price-performance advantages and a leading position on performance-per-watt. RAM: I like cross-product platforms more than components because platforms carry more reseller opportunities for margin and value-adds. But I sense from both AMD and Intel that platforms are what you discuss when there’s no better news coming from the component groups, and it seems a shame that platforms get so easily pushed aside. GB: I can’t remember in my time here that we ever pushed platforms aside and then fell back to components. RAM: I haven’t heard much about Spider recently, but probably the top example that springs to mind is LIVE! GB: Well, LIVE! is still one of the platforms we’re pushing today, but maybe it’s a different perspective. I think we’ve been pretty clear over the last 18 months or so in saying that what we think the market needs is someone to champion a couple things. One is visual computing. Computing is moving to very much a visual-centric experience, and that involves the total platform being able to deliver that experience. Another platform we feel is important, primarily in commercial but increasingly on the consumer side, is energy efficiency. With our graphics, chipset, and processor technology, we’re able to combine and optimize those things to deliver the experiences we think end-users are looking for. We’ll still promote those things at the component level when we need to, because we have customers who are looking to make purchasing decisions at the component level. Take graphics. We need to do messaging specifically on graphics because we have a large audience in the enthusiast space that upgrades their graphics cards a couple times a year, and they want to understand the best graphics card to buy, not necessarily the whole platform. I think we’ve been very committed to trying to deliver a balanced platform that delivers on the promise we’re trying to make at the experience level. Right now, we’ve got the top of the stack on the graphics side. That doesn’t mean we’re walking away from AMD GAME or AMD LIVE!. We’re just going back to push on ATI Radeon and CrossFire. Bottom line is we’re committed to the platform marketing initiatives. RAM: Just to take one last stab at LIVE!, I admit that I haven’t thought much of the platform because it didn’t bring any new technology to the party. It was existing components plus some freeware, period. Viiv may have tanked, but at least Intel built a few new pieces to advance the PC media center space. Where’s that extra effort from AMD? GB: Let’s separate platforms, which I would describe as the collection of hardware that makes up a solution, from a platform marketing initiative, which would be things like Viiv, LIVE!, and AMD Game. The story I’m trying to tell is that the combination of AMD 780 chipset, triple- and quad-core Phenom, Radeon graphics, hybrid Crossfire, etc., that collection of stuff delivers the best hardware platform you can buy at a given price point today. Is any individual component the best in its class? Some of them are, some aren’t. But if you put them together, I challenge you to build, for instance, a $1,000 PC better than an AMD 7-Series chipset, a Phenom processor, and Radeon graphics out of anything else. That’s what we’re trying to deliver. At the points in the market that we care about where our partners make money, we want to deliver the best platform solution. Now, we do want to help our partners with marketing campaigns and initiatives to help message the value of those platforms in specific end-user usage models. One of those is digital media, and that’s where we’re aiming with AMD LIVE!. Another is gaming with AMD Game. Another is commercial business uses with AMD Business Class. RAM: No one disputes that AMD has a tremendous history and many excellent attributes. My own impression, though, has been that humility has not been high on that attribute list. Given the last year, would you say that the company has become more humble? GB: I’ve been here 15 years, and I hope we’ve always had that, honestly. We embarked on a pretty aggressive outreach around September. Once the news hit about Barcelona having an issue and us having to move to another rev and the impact that would have on our customers in the channel, we made our executives available in as many places as we could find. We did the best job we could do in saying, “We absolutely screwed up.” Since then and at that time, we said what we were going to do to fix things, and we’ve met all those milestones—actually, we’ve beat all of them. We’re back in the market. You know, our intent is always to be up front and candid. If we’re not doing that, then shame on us. |
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