November 28, 2005

The man Intel loves to hate

The remarkable story of a Mexican immigrant who wants to change the rules of the global semi-conductor business. By Charles Assisi

It’s tempting to imagine tough men don’t think much of guardian angels. Certainly not men like Hector Ruiz, the soft-spoken CEO of semi-conductor manufacturer AMD. But he does. And there is a good reason why. The impoverished Mexican from Piedras Negras, a town that borders Eagle Pass in Texas, came out of nowhere, challenged the rules in a ruthless business and eventually gave Intel, the industry leader, a bloody nose. After three decades of playing second fiddle, it took Ruiz barely four years to catalyse a war that now promises to be an epic one.
   But getting this far was never easy. The poor critter guarding Ruiz had to work awfully hard to keep the man going. When he first walked into AMD in 2000, the company was in a mess.
   The move met with raised brows in the business. Ruiz had just had a phenomenal run at Motorola for 22 years. When he rose to head the semi-conductor business at the company, he had an unenviable job on hand. Eventually, over three years, Ruiz gave 21,000 people the marching orders. His style generated resentment and the media dubbed him Hector the Dissector. Motorola survived. So did Ruiz. He was well on his way to the top job.
   The Turning Point
   What Ruiz didn’t know of was Jerry Sanders intentions. Mercurial and flamboyant, Sanders, a Silicon Valley legend co-founded AMD in 1969. The company survived Intel, the most dominant player in the business, by delivering chips that offered the same performance at a cheaper price. There was only one problem with this approach. It relied on replicating all that Intel did. AMD, however, couldn’t be faulted for not trying. It tried hard to innovate. But Sanders didn’t have a clue how to take the innovation to market.
   Then there was Sanders himself AMD had to contend with. The man who drove to work in a Rolls Royce kept the reins of the company tightly to himself. It earned AMD the ignominy of being named on Fortune magazine’s list of companies with the worst management board in corporate America.
   Precisely the reason why many wondered why did Sanders court Ruiz. They were as apart as chalk and cheese. But Sanders for all his flaws, was also a brilliant man. He knew AMD didn’t need somebody like him to lead it. It needed somebody sane; somebody who understood systems, appreciated innovation and motivated people; a man like Ruiz.
   Born into extreme poverty, Ruiz’s father didn’t have the wherewithal to summon medical help when his mother was expecting Hector.
   Finally, a kind doctor intervened and a grateful couple named their son after him. Because it was Christmas day, the devout Roman Catholic family chose de Jesus as his middle name. That was his first brush with an angel.
   As a 15-year old, Hector de Jesus Ruiz played in a local rock band and dreamt of growing to be an auto mechanic. The dream
drove him into Olive Givins
home. A local American missionary, she was looking for somebody to run the odd-errand and keep her house in order. Ruiz wanted the job. In return for which, he hoped, she would teach him English. Books on automobiles in his native Mexican weren’t easy to come by. The lady agreed.
It didn’t take her long to figure
she had a bright kid on her hands.
She suggested he go to school across the border. If that’s what it takes to be a mechanic, thought Ruiz, then so be it. Armed with $25 every month that Givin provided, Ruiz trekked across the border, daily. Eventually, he went to college and earned a doctorate in electrical engineering. He finally dedicated his thesis to Givin. That was his second brush with an angel.
   He then worked six years at Texas Instruments. Motorola followed, until Sanders weaned him away.
   The Ruiz way
   Those were the days when Intel was working on a new processor it called the Itanium. It differed significantly from the previous generation of processors that could deal with only 32 bits of information. The Itanium could do twice as much. Once Intel got there, Sanders knew AMD would wither away in a few years. Which is why, he tried to focus his efforts on getting there first. But his track record of successful implementations was an impediment. This is where Ruiz fitted in.
   Ruiz knew Sanders was right on the technology. But the problems were elsewhere. AMD wasn’t selling its products right. It focussed first on selling to retail users of desktop computers. Original equipment manufacturers (OEMs) who made laptops and servers that power backbone networks like the internet were not on its radar. This left Intel with a clear playing field. Among the first things Ruiz did was to turn AMD’s approach on its head.
   For a company used to a different pace, this was a shock. But Ruiz had learnt his lessons well
   from the days at Motorola where he was reviled for making tough decisions. He opened up new channels of communication across the rank and cadre of the company.
   Overnight, people from the company could meet the boss without an appointment. His photographic memory snapped up names and profiles of people as they walked in. He also did away with a weekly session his predecessor presided over—Breakfast with Jerry Sanders. Instead, he simply called it a breakfast meeting.
   Of course, his penchant for tough decisions hadn’t jaded. Soon after he moved in, the dot com boom went bust and technology went into a downward spiral. Ruiz responded by laying off 4,500 people and shutting down two factories.
   The worst was still to come. In 2002, the company hit its worst point. On revenues of $2.7 billion, it lost $1.3 billion. That didn’t deter Ruiz from ploughing an astounding 30% of revenues into research and development and acquiring two small chip companies.
   The ruthless persistence paid off when his engineers unveiled a new 64-bit chip for servers called Opteron in April 2003. A few months later the Athlon 64 for its more traditional desktop market followed. It met with rave reviews and found new takers like Microsoft, which was until that point, a traditional Intel ally.
   Thanks to some missteps on Intel’s part, its offering, the Itanium was trashed. Intel grudgingly conceded the round. For the first time, Intel started to work on a strategy similar to AMD’s.
   Early this year, Ruiz fired another salvo at Intel. He dragged it to court for u n l aw f u l bu s i n e s s p r a c t i c e s. The complaint alleges that Intel resorted to bribery and threats to keep virtually every PC manufacturer in the world from using AMD’s chips. If the courts rule in AMD’s favour, analysts reckon the industry will finally be on its way to be a duopoly. Since then, more successes followed.
Earlier in June, AMD finally convinced Hewlett-Packard and Acer to start shipping with processors powered by AMD. Until then, this was Intel country.
AMD now makes profits. But the overworked guardian angel still sees no respite. Intel is still 10 times larger than AMD. The war, for Ruiz, has only begun.

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