Renee James Tries to Hit Former Employer Intel Where It Hurts

(Bloomberg) --Former Intel Corp. President Renee James has created a new chipmaker that is producing server computer processors aimed at the most lucrative business of the world’s second-largest chipmaker.

Ampere Computing, backed by Carlyle Group Inc., has sent samples of its first model to prospective customers and has even better ones in the works, James said. It’s targeting cloud-service providers such as Alphabet Inc.’s Google, Amazon.com Inc.’s web services unit and the other members of the “super seven” that account for an increasing amount of industry sales. The processors, which Ampere is designing in house, use technology from ARM Holdings Plc.

James, who spent 28 years at Intel rising to become the second-highest ranking executive before leaving in 2016, believes the time is ripe to compete in a market her former company has dominated for more than a decade. The move to outsource computing over the internet is gathering pace and causing sweeping changes in the industry. Companies such as AWS and Google build their own hardware and control their own software -- meaning they have specific needs for processors that can be better met by companies taking a fresh approach.

“The future isn’t going to be like the past,” she said. “The cloud is totally different. What customers want is different.”

The past and present have rewarded Intel very well. The company has more than 99 percent of the market for server chips. Its data-center unit had revenue of $19 billion last year and that business’s sales surged 20 percent in the fourth quarter. For 2017, it produced operating income of $8.4 billion. Sales to companies such as Google rallied 35 percent in the fourth quarter.

James said her products will target the cloud area where most of the growth expansion is coming from, and will not be aimed at general corporate servers, where Intel excels. Companies are buying fewer servers as they outsource their computing needs to cloud providers.

Ampere’s first product is a chip that has 32 processing cores capable of running at up to 3.3 gigahertz. They cost $950 each and are manufactured by Taiwan Semiconductor Manufacturing Co. using 16-nanometer process technology. It will compare favorably to Intel because it requires much less electricity, she said.

As a former employee of what was the world’s largest chipmaker for more than 20 years until Samsung Electronics Co. took Intel’s title in 2017, James knows that scale is important in determining success in chips. She acquired a team that had already started designing a chip and is continuing to add to her more than 300-person headcount. Rather than raising cash from venture capitalists who wouldn’t typically offer the amount of money needed for such an undertaking, she won the support of private equity firm Carlyle Group where she had been working as an adviser.

While at Intel, James was the most successful female executive in a $390 billion industry dominated by men. She sought the advice of her mentor, Intel co-founder Andy Grove, before making the decision to start her own company. He told her the industry needs more chip startups to keep it healthy, though there are a lot of easier jobs in the world.

To succeed, James will have to make an impression on Intel dominance that’s only increased even as challengers and customers alike have said the market was ripe for alternatives. She harks back to when Intel itself first tried to get into the server business in the 1990s and companies such as Sun Microsystems Inc. publicly ridiculed it. Sun no longer exists.

“Nothing lasts forever in this business,” she said.