AMD’s marketing challenge

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Hours before rival Intel turned in stellar quarterly results, I had breakfast this morning with John Taylor, a marketing guy at Advanced Micro Devices (AMD), to talk about its prospects for 2010 and beyond. The underdog chipmaker has a good chance to mount a comeback after some damaging missteps over the past couple of years, and I wanted to know whether there’s a plan to take on Intel.

The biggest challenge for AMD right now isn’t technology. Yes, Intel (INTC) does have AMD whipped in the technology department at the moment; Intel’s processor lineup is great, and its manufacturing operation is humming. But AMD has a solid line of value priced processors and a top-notch portfolio of graphics chips to offer, and there’s no reason AMD shouldn’t be able to carve out a decent amount of business.

Really, AMD’s biggest challenge is marketing. To succeed over the next couple of years, AMD needs to learn to better engage that mainstream consumer who’s shopping for a laptop at Best Buy (BBY).

AMD has made some good strides in that arena. It has convinced several new PC brands to offer its chips; the last two major holdouts are Sony (SNE) and Apple (AAPL). Its message is getting sharper, too; in time for this past holiday season, AMD launched its “Vision” campaign –  a clever labeling system that points shoppers to AMD-based PCs that have enough graphics horsepower to handle visually demanding tasks such as YouTube (GOOG) streaming, 3D gaming, and video transcoding. AMD’s financial results from the holiday quarter aren’t in yet, but it will be interesting to see whether Vision helped boost AMD’s profit margins.

Starting pretty soon, though, AMD is going to have to tackle a far more formidable marketing challenge. This year the company will begin to produce a new product called Fusion, which combines traditional PC processing cores and graphics cores on a single chip. Fusion is AMD’s big opportunity to make a case for technological superiority over Intel, because AMD is far better at making graphics cores than Intel is. And graphics power is indeed an increasingly important ingredient in a PC. Not only do modern operating systems use it for their animations, but activities like HD video and photo management make serious use of a computer’s graphics smarts.

If AMD can show the masses the value in Fusion’s mix of efficiency and graphics power, it might steal some market share from mighty Intel. But it will be an uphill battle. Unlike shoppers in Europe and elsewhere, mainstream computer buyers in the U.S. have never really cared much about graphics processing. The marketing folks at AMD have a few months left to figure out how to sell it.

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