Advanced Micro Devices Inc (AMD)

[avatar]

AMD: Barely an Underdog?

http://www.businessweek.com/technology/content/may2004/tc20040519_3643_tc024.htm

It's gaining rapidly again on Intel, especially among consumer buyers, and that could help boost it among corporations
The last week of April was a very good one for chipmaker Advanced Micro Devices (AMD ). For the first time in recent memory, desktop computers built with AMD chips outsold those based on processors from archrival Intel (INTC ), 52% to 47%, according to research by Current Analysis of La Jolla, Calif. "It speaks volumes that AMD is O.K. with consumers," says Current Analysis analyst Toni Duboise. "AMD has done something that it hasn't done in a number of years."

The numbers show just a part of the larger story: Current Analysis counts retail sales only, so they don't factor in corporate purchases or direct sales such as those by PC leader Dell (DELL ). And AMD still trails far behind Intel in notebooks, the hottest category in computers. Nor did the perennial No. 2 stay on top for long. By the following week, Intel was again No. 1 in desktops, 51% to 47%, though AMD was making significant gains in notebooks. Says NPD analyst Steven Baker: "Intel doesn't tend to let them have that opportunity for very long."

HALO EFFECT. Make no mistake, however, the long-running horserace between these two PC-processor makers is getting tight again. AMD's desktop share has doubled from 25% since the fourth quarter. And in the first week of May, the latest period for which data are available, AMD claimed 24% of notebook sales, up from 17% the week before. The last time the competition was this fierce was back in the late 1990s, when AMD was aiming its slingshot at Intel's Pentium III chips.

One reason for the narrowing race is that consumers continue to get savvier about purchasing computers. Increasingly, they see little difference between the performance and reliability of AMD's and Intel's chips. And it doesn't hurt that Hewlett-Packard (HPQ ), which is No. 1 in retail PC sales and No. 2 overall, has a longstanding relationship with AMD. Three of AMD's top-selling models for the week of Apr. 24 were HPs, Duboise says.

AMD's stellar reputation with PC enthusiasts is also giving it a lift. Computer gamers who demand lots of horsepower have embraced AMD's Athlon64, a 64-bit microprocessor that Intel so far hasn't matched. And while that's a narrow niche, it may have created a halo effect that has enhanced its image with mainstream consumers. "There has been a recent glow," says IDC analyst Roger Kay.

EARLY ADOPTERS. The $64,000 question: Will AMD's recent retail success finally translate into acceptance in the corporate market? AMD has a small presence in business PCs, which accounted for 63% of total sales in the first quarter, according to IDC. And Dell, the top seller, remains an all-Intel shop.

Duboise believes that consumers are increasingly becoming the early adopters of technology and influencing corporate-buying decisions. And if AMD continues to gain acceptance there, it could see its profile among business buyers rise, too. "The consumer space is a more important market than ever," she says. At least for now, AMD is nipping at Intel's heels again.


--------------------------------------------------------------------------------

By Andrew Park in Dallas
Edited by Douglas Harbrecht