Quiet power

Advanced Micro Devices CEO (and bicycling enthusiast) Hector Ruiz is getting his company in shape for the marathon competition with Intel.

Hector Ruiz is no stranger to challenge, but when he took over as CEO of Advanced Micro Devices from Jerry Sanders, in 2002, Ruiz signed up for the trifecta: a first-time CEO taking over from a founding entrepreneur and taking on the most successful semiconductor company in the world.

AMD had held its own against Intel for years, but at the turn of the century, the company appeared to have lost its way. Sales were dropping. Profits were headed into the tank. Word on the street was that AMD had good technology but made bad strategic decisions or just couldn't get products out the door. Sanders, the ultimate high-profile Silicon Valley CEO, kept the company in the spotlight, but unless it could start delivering on its promise, it seemed doomed to keep dropping farther and farther behind Intel.

Flash forward to today. AMD has focus and execution down cold, and the company has been using them to take Intel to the woodshed. At last year's Intel Developers Conference, Intel CEO and President Craig Barrett announced that Intel would follow AMD's 64-bit standard rather than its own. In May AMD shipped its dual-core processors for servers, beating Intel to the punch by six months (Intel is shipping dual-core processors for the desktop).

These success stories were already developing when Ruiz took the helm. But without his leadership, it's not hard to believe that they would have fizzled instead of taken off. By focusing on fundamentals, Ruiz has made AMD a better competitor, reenergized employees and brought gravitas and stability to the CEO's office at a company that sorely needed it. He's also figured out a way to honor his roots, working to help others conquer the disadvantages he had to face (see the sidebar, "Ruiz's Legacy," below). For all of these reasons, ELECTRONIC BUSINESS names Hector Ruiz CEO of the Year for 2005.

AMD struggled with execution throughout the late 1990s, and Sanders is the first to admit that the company had problems under his regime. The company built the K5 chip to compete with Intel's Pentium chip but couldn't ship it until 1995, almost a year late. "It took us a long time to get it right, and Intel had moved on to the Pentium II," says Sanders. "We stumbled and lost almost a whole generation."

AMD acquired Austin-based microprocessor vendor Nexgen and used the company's multiprocessor core to create the K6. But although the K6 was introduced on schedule in 1997 and was technically solid, it wasn't pin-compatible with Intel chips, which made design wins more challenging. "The knock on AMD, which I don't think is fair, was that we would drop the ball and fumble on the goal line," laments Sanders.

"He's not a micromanager, but when he coaches you, you'd better listen to the details, because he's done his homework."—Len Debarros

Sanders understood that his successor would have to counteract that image, fair or not, and he was adamant that anyone who took over from him when he retired at 65 had to have operational chops. AMD named the CEO of Nexgen, Atiq Raza, as cochief operating officer in October 1998 and president and COO in May 1999, but he resigned just eight weeks later, because of clashes with Sanders, according to news reports at the time.

Ruiz was the general manager of Motorola's semiconductor division and had been negotiating with Sanders over some microprocessor technology. Sanders, impressed by Ruiz's broad grasp of everything from operations to tech development, offered him the COO position, with the promise that he would become CEO upon Sanders' retirement.

The change couldn't have been more dramatic—Ruiz is as soft-spoken and reserved as Sanders is outspoken and flamboyant. But Ruiz had traveled a long path to the top of the semiconductor industry. Born in the border town of Piedras Negras, Mexico, Ruiz attended high school across the river in Texas, at Eagle Pass High School, where he became the valedictorian. He went on to the University of Texas in Austin, where he got his bachelor's and master's degrees in electrical engineering, and then to Rice University, in Houston, where he got his doctorate in electronics in 1973.

Even before he got his Ph.D., he had started working at Texas Instruments, where he worked in both research and manufacturing. In 1977 he took over as the operations manager of Motorola's CMOS and NMOS manufacturing facility in East Kilbride, Scotland. He eventually worked his way up through a variety of positions at Motorola, including general manager of the paging products group. In 1997 he became president of the Semiconductor Products Sector, where he worked until Sanders offered him the job of COO at AMD. Ruiz accepted, and then—as promised—took over as CEO in 2002 and as chairman in 2004.

Ruiz set about remaking AMD, using his trademark tool set: preparation and perseverance. "He's not a micromanager," says Len Debarros, who worked with him at Motorola's paging group, "but when he coaches you, you'd better listen to the details, because he's done his homework." Ruiz invited Debarros to hunker down with him when Hurricane Andrew hit Florida in 1992, and even while the winds were howling, Debarros says, Ruiz was making a list of things the paging group would have to deal with once cleanup commenced. "Hector is a process guy," says former AMD CEO Sanders. "He does things methodically, even if it means slogging away at a problem."

His first move was to flip-flop Sanders' strategy. Sanders believed that AMD could beat Intel on price, making compatible processors cheaper. "I became disillusioned with that," Ruiz says. "I didn't think it was working. I wanted us to become a company that could create our own future and our own destiny and do things our competitors couldn't duplicate."

Ruiz also shifted the focus from what Intel was doing to what AMD was doing, allowing the company to develop a strategy based on its own abilities rather than reacting to Intel. "We understand better what the vision is," says Gino Giannotti, AMD's vice president of marketing for the microprocessor group and a 13-year AMD veteran. "With Jerry, the vision was, 'We're going to kill Intel.' Hector is different, unassuming. Hector understands what he needs to do, what the company needs to do, and what his key leaders need to do to survive and prosper in a market dominated by Intel."

"I would love to be more of a marketing whiz."

—Hector Ruiz, CEO, AMD

Ruiz recounts the story of an employee who told him that when Ruiz started, AMD's operations reminded the employee of watching his 6-year-old playing soccer. "The kids are running all over the field. Sometimes they hit the ball this way, and sometimes they hit it that way," the employee said. "Now I see a mature soccer team with a plan."

Giannotti says that the tone Ruiz sets not only helps AMD succeed but also makes the company a more enjoyable place to work. "He sets goals and objectives, and they get promulgated and driven," says Giannotti. "That allows us to be far more focused, and there's an excitement around here, a sense of achievement I haven't seen before."

The positive results of Ruiz's leadership can be seen all over AMD. Technologically, the company is on a roll, after the 64-bit Opteron sucker-punched Intel and the 64-bit Itanium processor Intel developed with Hewlett-Packard. "It's toasting Intel in performance," says analyst Rob Enderle. "AMD got to dual-core first, and Opteron is a better processor. Intel outspends AMD in R&D and engineering, and yet AMD is outexecuting Intel. That's like a first-year rookie getting on a track team and creaming the seniors."

The financial picture looks a lot healthier too: Sales are double what they were when Ruiz took over and, at $5 billion, are even higher than the $4.6 billion AMD made at the height of the boom. Profit is still down from 2000 ($222 million versus $889 million), but it's a positive number for the first time since the turn of the century.

AMD's third-quarter revenue, announced in October 2005, was a record $1.523 billion, with income of $44 million. According to a statement by CFO Robert Rivet, the results established quarterly records in unit and dollar sales, gross margin and operating income. Wall Street is happy: AMD stock is up from just over $5 in the first quarter of 2003 to around $24 at press time.

Perhaps even more impressive is that Ruiz has turned AMD's numbers around while steadily increasing the investment in the company's future; in 2005 AMD spent more on R&D than it made in profit in 2000 (see the chart, "AMD At-A-Glance" box, below).

"When it became clear that a competitor would be getting the jump on us, Hector would almost explode."
—George Fisher, former CEO, Motorola

Enderle likes the new discipline Ruiz has brought to AMD. "He's really getting the financials and operations in good order and making strong management and organizational decisions, as opposed to going after every opportunity on the planet," says Enderle, citing the spin-off of the flash memory unit into a joint venture with Fujitsu called Spansion. "Those decisions are very hard to make, because a lot of folks only want to acquire companies, and the end result is a complex mess that can't be managed."

AMD's customer list has also become a lot healthier. Every major server manufacturer except Dell now sells AMD-based servers, and AMD touts its processors' use in everything from Cray supercomputers to George Lucas' Lucasfilm studio. With the release of Microsoft's 64-bit desktop operating system Vista next year, look for a proliferation of PCs using AMD chips as well.

According to John Joyce, with equity firm Silver Lake Partners, that's a ringing endorsement of not only AMD's technology but also its execution. "Someone may have the world's greatest product, but if you don't get it on time and it's priced wrong, the fact that it's great is irrelevant," says Joyce, who was CFO of IBM when the latter first starting using AMD's Opteron chips in its servers. "Hector brought discipline in terms of cost management, but just as important, he's made AMD a more reliable supplier, and that's why the business has done as well as it has."

Although Ruiz is the right man for AMD at this juncture in its history—and we believe he is—there may come a time when AMD needs a little less grind and a little more sparkle. And then, Ruiz may not be the right man for the job. "Hector is not a marketing guy," says Enderle. "AMD underfunds marketing to an extreme level. "I'd rather see an efficient team with too little money than an inefficient team with too much money, but AMD needs to get its marketing house in order."

Ruiz acknowledges the weakness. "I would love to be more of marketing whiz," he says. "[Management guru] Peter Drucker has said that a great corporation has two things—innovation and marketing. I think we've done well in innovation, but I would like to be better at marketing our company. I'm not talking about hype, but it's important for people to know our strengths and weaknesses, so they can decide whether to invest in us."

"The knock on AMD was that we would drop the ball and fumble on the goal line."
—Jerry Sanders, former chairman

On the other hand, Ruiz may have more up his sleeve than he'll admit to. In June 2005, AMD made a very high-profile move: it filed suit against Intel, accusing it of antitrust activities and "unlawfully maintaining its monopoly power" in the X86 market.

Surprise! "Litigating was a decision I would have expected Jerry to make, not Hector," says Enderle. Although Ruiz seems laid-back and modest in person, people who know him say that he nurtures a strong competitive streak. "I can remember how, when technical reviews at Motorola made it clear that a competitor would be getting the jump on us, Hector would almost explode," says George Fisher, the former CEO of Motorola. It's not that Ruiz would scream, Fisher cautions, but "you could almost see his blood pressure rising. He likes competition, and he likes to win."

In fact, the Intel lawsuit could actually be viewed as classic Ruiz: a strong, focused move backed by methodical preparation. "We've known for a while that the way Intel has managed its customers was not right and that it was illegal," says Ruiz. "As we were gaining traction on great technology such as the Opteron, we had to deal with it."

But no matter how the suit pans out, Ruiz already has AMD moving in the right direction. He's hit a home run in his first job as CEO, he's got a huge competitor looking over its shoulder and he's even got the company founder singing his praises. "Hector had to show that we don't stumble anymore," says Sanders. "He's on his way."

Electronic Business Executive Editor Howard Baldwin can't understand why Hector Ruiz didn't make Time's list of the 25 most influential Hispanics in America last August.