The Future for Dark Horse AMD Gets Darker

AMD says the loss of its president won't hurt its near-term survival. But what about its long-term race with Intel?
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SAN FRANCISCO -- Now that Advanced Micro Devices' (AMD) - Get Report Athlon chip is hitting the market with the promise of turning the company around, analysts are wondering whether its next chip, the K8, is already in jeopardy.

Although the K8 is only in the early development stage, many in Silicon Valley feel the chip's future -- and possibly the long-term survival of AMD itself -- depends on Chairman and CEO Jerry Sanders replacing President and CTO Atiq Raza quickly with someone who can keep the chip's engineering team intact.

"Atiq's departure could cause a few of the engineers to think that without him the chances of success are dismal," says Keith Diefendorff, senior analyst at technology research firm

MicroDesign Resources

and a former member of the AMD team that designed its groundbreaking K6 chip several years ago. "Atiq is a tremendous loss for AMD. He had a number of very talented engineers who respect him highly."

Raza abruptly resigned July 14, just weeks after the company announced the first shipments of the Athlon, or K7, the success of which, Sanders himself has acknowledged, AMD now

depends on for any chance at profitability.

Raza's departure shocked not only Wall Street but an engineering community in Silicon Valley that is usually half a step ahead on rumors of any major event. When Raza resigned, Sanders assured financial analysts that his departure wouldn't affect production or sales of the Athlon, but he didn't even raise the question of the K8.

At the

BancBoston Robertson Stephens

Semiconductor Conference Wednesday, Ben Anixter, director of external affairs at AMD, told

that there is no need to worry about the K8. "We have a K8 program in place and we have it staffed," Anixter said.

The Athlon will give AMD a year and a half lead over


(INTC) - Get Report

, he said. "To worry about the next product when we have a 1 1/2-year lead is a little bit prosaic," Anixter said. "We do have the successor to the Athlon in place and it will come out in time."

The Athlon will take AMD only so far, says Diefendorff. If AMD can produce the Athlon in volume, it may prove to be faster than any chip Intel has on the market, but only until Intel comes out with its next-generation Willamette chip by the end of next year. After that, AMD will need an entirely new chip, and designing one takes years, Diefendorff says.

"As long as their focus and intent is to compete against Intel, they have to have next-generation new architectures," Diefendorff says. "It's a terribly difficult treadmill. If you stumble on the treadmill, it could be a disaster and I think that's the case here."

AMD doesn't have time to waste. "They will want to have a new processor core sometime in 2001 and 2002, which means they need to begin working on it now," says Nathan Brookwood, a chip analyst at technology research firm

Insight 64


AMD is at a crucial point in its attempted transformation from a struggling Intel-clone maker that's always two years behind Intel to a company that can beat Intel at its own game: Selling chips into high-priced computers where profits have been high.

The worst-case scenario for AMD would be that it loses key members of its K8 design team as a result of Raza's departure, says Brookwood. Microprocessor architects are very hard to find and designing new microprocessors is extremely difficult.

It's not as if the team wouldn't have anyplace to go. Such engineers are among the most sought-after in the technology field. Companies such as




Sun Microsystems

(SUNW) - Get Report

are always on the lookout for designers of superfast chips, Brookwood says.

AMD is more susceptible to losing its K8 team as a result of Raza's departure than the team that has designed the Athlon, says Diefendorff. While the Athlon is led by Dirk Meyer, who came to AMD from

Digital Equipment Corp.

, the K8 team is led by Fred Weber, who came with Raza from



Anixter said talk about departures is pure speculation and even so the loss of some engineers would not mean the collapse of the K8 team. "We have an awful lot of AMDers in that group," he said.

In his quest to beat Intel, AMD CEO Jerry Sanders is most like:

Mark Hamill as Luke Skywalker in

Star Wars

: "It's not that I like the Empire; I hate it!"

Elizabeth Taylor as Velvet Brown in

National Velvet

: "I want it all quickly 'cause I don't want God to stop and think and wonder if I'm getting more than my share."

Graham Chapman as King Arthur in

Monty Python and the Holy Grail

: "On second thought, let's not go to Camelot. It is a silly place."

Mike Myers as Austin Powers in

Austin Powers: International Man of Mystery

: "I've been frozen for 30 years. I've got to see if my bits and pieces are still working."

Wile E. Coyote as Wile E. Coyote in

Scrapes of Wrath

: "I'm such a genius!"