AMD CEO looks to Spansion IPO, quad-core chips

SAN FRANCISCO - The last five years have not been easy for Hector Ruiz. As Chief Executive Officer of Advanced Micro Devices, he has presided over some tough times at the Sunnyvale, California, chipmaker. Formerly in charge of Motorola's semiconductor division, Ruiz took the helm at AMD just as the PC industry entered into a major slump. But after racking up well over $1 billion worth of losses over several money-losing years, his company finally turned things around in 2004. With the launch of its first dual-core Opteron processors last week, AMD has the jump over its rival, Intel's server chips, an area where AMD has been slowly gaining market share over the past years.

Though microprocessor sales helped AMD turn a profit in 2004, things weren't so rosy in the company's Spansion flash memory unit, which makes chips used in mobile phones. Under price-cutting pressure from Intel, flash prices were battered over the year, dropping as much as 30 percent for certain products, according to AMD. Spansion is operated as a joint venture between Fujitsu and AMD.

Now AMD is looking to persuade other investors to put their money into that same flash memory business, in an effort to free up resources for its microprocessor division. Earlier this month, AMD filed papers with the U.S. Securities and Exchange Commission (SEC) to take Spansion public. The IPO is expected to raise $600 million, but it may be a tough sell, given the state of the flash memory market. And Ruiz's colorful comments on Spansion, made during a January conference call, may not exactly inspire investors. "In our flash business, we had an awful quarter," said Ruiz at the time. "It makes me puke to lose $39 million."

On Monday, Ruiz shared his thoughts on multicore processors, the Spansion IPO and the future of his company with IDG News Service correspondents Robert McMillan and Tom Krazit. Following is an edited transcript of that interview.

IDG News Service: Spansion is coming off two bad quarters. Given that it has significantly contributed to AMD's bottom line in the past, why move toward an IPO?

Hector Ruiz: It takes so much work and effort to file an S-1, I wouldn't want anybody to think we timed the filing to a bad quarter.

When I joined the company five years ago, if AMD had a shot of becoming a relevant player in the microprocessor business, we had to focus more and more of its efforts on that [business]. The intent of Spansion was to separate the businesses. The businesses are completely different: the customers are different, the business models are different. Flash is low margin, low G&A [general and administrative expenses] low R&D [research and development expenses]. The microprocessor business is high margin, high G&A, high R&D. And so we took that step to create the joint venture.

When we did that, we also thought we should consider moving it into an IPO or an outright sell. When it became clear that Mirrorbit [AMD's flash memory technology] had solidified its position, we concluded that with this powerful technology, it made sense to take the next step and IPO the business.

IDGNS: Given the performance of the business in the last few quarters, how do you plan to attract investors?

Ruiz: If we do decide to continue with an IPO, by the time we're ready to do that, who knows what the market's going to look like? That thing could be printing money, and then you would probably think we're geniuses.