$30 million review: AMD chips away at image of rival Intel

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Everyone knows Intel. Only the geeks know AMD. Now, Advanced Micro Devices, the No. 2 processor chip maker and long-time underdog to much bigger rival Intel, wants to change that by branding itself beyond its loyal fan base.

AMD kicked off a review of its estimated $30 million account last week. But even in an agency search, led by AMD Director-corporate branding Bob Kennedy, AMD plays second fiddle to Intel, in the midst of its own review. AMD's agency of record, Interpublic Group of Cos.' McCann Erickson seems to have chosen the bigger business opportunity as it has become Interpublic's lead shop chasing Intel.

"We are extending our reach to the mainstream, to the novice, to everyone. There should be no group of consumers that doesn't know AMD," said Tracey Brown, AMD director-worldwide consumer marketing. "We're not trying to educate people on the technical specifications of the processor, but letting them know that with AMD processors you get a better experience or a better lifestyle."

Already AMD is a better known brand than it was just a year ago, analysts report. "Interestingly, the perception of its gains on Intel vs. its actual gains are radically different. The past few quarters, I would say, they've been perceived as going great against Intel. The actual gains have been on the order of about one-tenth of share per quarter. So [the marketing strategy] seems to be working," said analyst Dean McCarron of Mercury Research.

Helping fuel AMD's perception of success was its innovation with a 64-bit processor, which it got out ahead of Intel. Intel also had a few missteps-such as a recalled server chip set and Pentium 4 chip shortages-that caused vendor partners to look AMD's way. AMD microprocessor sales grew year over year by 29% in the fourth quarter, according to results it announced last week. Both Hewlett-Packard and IBM use AMD chips in their computers, and Dell executives have repeatedly said they are considering them. AMD plans to launch a Centrino competitor, the Turion 64-bit mobile chip, in the first half of this year.

Both by design and by lack of funds, AMD's marketing strategy is the opposite of Intel's mass-market branding message using the famous Blue Man Group and the co-op advertising dollars of the Intel Inside program."

AMD spent $2.2 million on measured media in the first nine months of 2004, and $2.6 million in 2003, according to TNS Media Intelligence/CMR. But the chip maker has recently made branding of several of its new chips and processors a priority. In company reports, AMD said it spent 13% more in 2004's third quarter or about $30 million, to advertise its AMD Athlon 64 and AMD Opteron brands, and the launch of the AMD Sempron microprocessor products.

supporting the underdog

"Intel's quarterly marketing budget, although they won't reveal it, is probably close to AMD's total annual sales," said Mr. McCarron. "AMD is much more likely to leverage their fan community who happen to be very brand loyal. ... It plays on the long-held feeling by some in the tech community to support the underdog, whether that's Apple or AMD."

AMD's account was handled out of the San Francisco and London offices of McCann Erickson, but its current campaign using the tagline "The Way to Go," was created by WPP Group's SicolaMartin, Austin, Texas. Both relationships became complicated once Intel began its review. WPP's pitch is being led by Berlin Cameron/Red Cell, with help from Y&R Advertising, the network SicolaMartin reports through. Interpublic's pitch is being led by McCann.

AMD does offer its partners co-op dollars, Ms. Brown said, but added that AMD is not trying to copy Intel. "Intel is more than twice our size and so our marketing approaches are very different," she said. "You'll probably never see us do a mass-marketing, carpet-bombing approach."

With a 16% market share in PC processors to Intel's 82% (according to Mercury Research), AMD will likely never overtake Intel in total sales, although it could do better in certain categories.

"Being a quality alternative works, especially when the primary vendor stumbles," said analyst Rob Enderle, Enderle Group. "Intel has scared vendors enough now that they want an alternative for no other reason than to keep Intel on track. ... Ultimately, though, AMD has to stay on game all the time."

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