Hector Ruiz, president of AMD Devices Inc (AMD), gets a reminder of the chipmaker's rivalry with Intel Corp from his Austin, Texas, office.
8km away, Intel's half-built skyscraper mars the skyline. The chip giant stopped building in February to cut costs as profits fell and its share price slumped. On Ruiz's campus, their PC fabrication plant, or "fab," is running at full speed.
AMD's stock, which has fallen in 12 of the past 18 years, is the sixth-best performer in the Standard & Poor's 500 Index this year after rising 79 percent since Jan. 1.
The turn of events isn't lost on Ruiz, 55, who was tapped by Chief Executive Jerry Sanders in January 2000 to mend AMD's manufacturing. Before he arrived, the company had grappled with delays in introducing new chips, which led to US$282.9 million in losses from 1996 to 1999.
"We're still so shell-shocked from having such a difficult time for so many years," Ruiz says. "You have to really look in the rearview mirror and make sure you didn't forget anything."
Ruiz's scrutiny of AMD's plants and procedures is yielding results. A factory in Dresden, Germany started running without a hitch in June 2000. It now produces the company's most sophisticated chips -- ones that use copper wiring instead of aluminum ones to create faster connections.
Ruiz championed the use of copper as head of Motorola Inc's chip business from May 1997 to December 1999. He got to know Sanders through the companies' collaboration on copper technology.
Gaining Ground on the leader
AMD held the speed record for PC processors for most of last year. In February 2000, it introduced an 850MHz chip and followed with a 1GHz model a month later -- both of them before Intel unveiled comparable products, though Intel jumped ahead in November 2000 with its Pentium 4.
During the first quarter of 2001, AMD took four points of market share from Intel, bringing its share of processor sales to 21 percent versus Intel's 78 percent. Ruiz wants to boost that to 30 percent by year-end.
Unlike Intel and bellwether computer makers Sun Microsystems Inc and Dell Computer Corp, AMD hasn't cut profit forecasts this year. Ruiz says the company is on track to earn US$1.50 a share in 2001, which would top the US$1.38 average analyst forecast by First Call/Thomson Financial.
As AMD's shares have soared, Intel's have dropped 8.5 percent this year, and important institutional investors have taken note.
For example, Fidelity Investments added 4.7 million shares in the first quarter, according to its May filing with the US Securities and Exchange Commission. Janus Capital Corp added 9.8 million shares during the same period, bringing its stake to 23.8 million, according to SEC documents.
"They've got good products in place. They've been first with higher megahertz," says Scott Vergin, a fund manager at Lutheran Brotherhood Inc, which owns 400,000 AMD shares, "and relative to Intel, the stock is cheap."
Even with its surge, AMD trades at 18 times forecast earnings compared with 51 times for Intel.
Not everyone is sold. The personal computer market, which accounts for about half of AMD's US$4.64 billion in annual sales, is heading for its worst slump in 15 years, according to Dataquest Inc analyst Charles Smulders. PC sales will rise 6.5 percent this year -- the slowest pace since the 2 percent growth in 1986 and less than half the 16.7 percent average annual increase, he says.
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