The New Battlefield
One week after Intel’s recall notice, on Valentine's Day, AMD sent out some snarky cards teasing Intel about its current situation. It complemented the cards with a lot of chocolate. That chocolate was very tasty. AMD even went so far as to launch a new marketing campaign titled “Ready, Willing, and Stable” as a reminder of Intel’s stop-shipment action. Leslie Sobon, AMD’s VP of Product and Platform Marketing, said in an interview with Dow Jones Newswires that "We have some customers and retailers who have come to us specifically as a result of Intel's chip problem. Some retailers have had to take things off their shelves, so they call us to ask what they could get from our OEMs that are similar. And OEMs are asking us for product as well."
According to our contacts at Best Buy and to those in the motherboard business, this probably isn't as optimistic for AMD (or its investors) as it might seem. Motherboard makers did not increase AMD motherboard production to compensate for the loss of Sandy Bridge-based sales. Similarly, stores didn't see any substitution effect in the buying habits of consumers. According to sales personnel, customers are still excited about Sandy Bridge, and the recall doesn't seem to have tempered interest in the product.
Unfortunately, even the best marketing attempts won’t make a difference in AMD’s market share right now. The stark reality is that there is no equivalent to compete with Sandy Bridge microprocessors. Full shipments of B3 chipset-based motherboards have already begun. Meanwhile, we expect to see Llano samples at Computex, but this still gives Sandy Bridge a three-month head start.
Until the launch of Llano (AMD says the first Llano parts are already shipping, but what does that mean to us if they're in the hands of OEMs and not enthusiasts?), AMD gets to focus on its Zacate and Ontario APUs, which have already seen marginal success. The price of notebooks based on these solutions is still rather high, though. And "doorbuster" models are often revenue losers. However, the high volume of budget notebooks sold is hard to ignore. AMD's Brazos platform allows notebooks to be sold for $400 without the negative stigma of Atom. But overall, performance just isn’t that much improved.
Microprocessor shipments are expected to grow about 10.1% this year, compared to the 17.1% growth in 2010. Large- and mid-sized corporations are expected to drive most of this growth with notebook sales for their employees. Meanwhile, consumer purchases are expected to remain weak because of economic concerns and competition from tablets.
There is some good news. Our motherboard contacts are very impressed by their preliminary look at Llano (CeBIT 2011: AMD Demos Llano Behind Closed Doors). As AMD tries to do battle on Intel's turf, it's battling the effects of time to the same extent it's throwing down with its major competitor. Competitive solutions only stay competitive when they are delivered on time, and most of the Llano news we're used to seeing starts with something about a delay.
As one motherboard VP stated, “AMD needs to deliver soon. They can’t keep spending cash the way they have and expect to remain profitable quarter after quarter.” It’s true that AMD is spending a lot on its Fusion initiative, which is why there is a great deal riding on Llano. Regardless of price, AMD can only go so far by selling processors that match the performance of Intel's previous generation.