VULNERABLE INTEL LEAVES PC INNARDS OPEN BLUE-CHIP COMPUTER RIVALS TAKE MARKETING OFFENSIVE

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If there was ever a chance for microprocessor marketers to close the gap on Intel Corp., this is it.

High-profile customers IBM Corp. and Compaq Computer Corp., believing their personal computers are getting second billing to Intel chips, have curtailed participation in its "Intel inside" branding program. Also, sales of Intel's most powerful chip, the Pentium, have fallen short of expectations.

As a result, Advanced Micro Devices, Cyrix Corp. and the PowerPC chip consortium have a golden opportunity to take business from Intel, which owns 75% of this field.

These marketers are rolling out plans, along with new chips, to convince PC marketers and end users that their chips should be inside PCs.

"There's nothing we can do in marketing that's as effective as what Intel's doing for us," says Steve Domenik, VP-marketing at microprocessor company Cyrix, referring to Intel's spats with PC marketers.

What AMD and Cyrix will be doing for themselves is avoiding Intel's pull-through branding strategy, which they feel is neither affordable nor good for industry/customer relations.

"End users are not concerning themselves with the brand of microprocessor," says Bob Kennedy, ad manager for AMD. "That's not realistic."

PC marketers "recognize us as a more natural strategic partner. They know we're not going to try to sell around them" to the end user, Mr. Domenik says.

AMD has been touting its 486 chips' compatibility with Windows in trade press ads, from Hodskins, Simone & Searls, Palo Alto, Calif., aimed at end users and volume PC buyers, Mr. Kennedy says.

In addition, AMD will be gearing up for the release of its Pentium-class chip, the K86, in the second half of 1995 with a "major" corporate communications effort. AMD soon will name its first corporate ad agency, and Hodskins is among the competitors.

Mr. Kennedy says the 1995 campaign will go beyond product advertising to include corporate image promotion.

"The objective is to reinforce that AMD is a major manufacturer of semiconductors," Mr. Kennedy adds.

At the product level, Windows compatibility will be a critical message, Mr. Kennedy says.

"We need to make people understand that the issue is compatibility with software, not with Intel," he says. "It shouldn't matter who makes the chip."

Perhaps as a sign of this belief, Compaq and Digital Equipment Corp. have signed AMD as a supplier of Intel-compatible 486 microprocessors, which runs most computers sold today.

For its part, diminutive Cyrix is planning a "highly nontraditional" advertising and promotion campaign for the M1 chip beginning at the end of this year, says Mr. Domenik.

"If we run and spend head on, we'll fail," he says. "We will not try to match Intel dollar for dollar."

Cyrix generated some publicity last year with its "Ditto" knock-off ad of the "Intel inside" campaign. That ad prompted Intel to sue Cyrix, which still uses the tagline "Cyrix instead" in print ads.

Jerry Banks, principal analyst for the microprocessor group at Dataquest, a computer market research company, says market perception is that AMD chips will run Windows, but that Cyrix must eliminate fears over the M1 chip's compatibility.

Although AMD and Cyrix might not have Intel's capital, another chip competitor, the PowerPC chip developed by Motorola, Apple Computer and IBM Corp., could give Intel a serious run for its money.

Jim Venable, PowerPC marketing program manager at Motorola, says attendees at this month's Comdex show in Las Vegas will see a PowerPC marketing blitz, with ads from BBDO Worldwide, San Francisco, aimed at end users, volume purchasers, resellers and PC marketers.

"We want to let people know that the current technology is at the end of its life cycle and is fixing to hit a brick wall," Mr. Venable says.

The problem for PowerPC right now is a lack of software, says Mr. Banks.

"A [native] operating system on a PowerPC chip is a long way away," he says. "PowerPC is not going to fly" on operating systems such as Apple's Macintosh System 7 and Microsoft Corp.'s Windows NT.

What the consortium needs in the short term is a major PC marketer such as Compaq or AST Research introducing a Windows NT server based on a PowerPC chip.

With its competitors buzzing, Intel has modified its "Intel inside" campaign in the last year to focus more on product.

"Our branding [effort] is as strong as ever," says Sally Fundakowski, director of processor brand marketing.

With its lead in the corporate market, Intel is now betting that home PC buyers, a traditionally "non-techie" market, will care about who makes their computer chips.

Intel will spend $150 million in a 10-month effort that ends in December on Pentium marketing.

As part of its retail focus, Intel is also lining up software marketers to place a sticker reading "Runs even better on a Pentium processor" on their boxes. Marketers that have signed on include Access Software and Sierra On-Line.

"The software message becomes more important as software that takes advantage of Pentium becomes available," Ms. Fundakowski says. "It would be easy just to talk performance until we were blue in the face."

By year's end, Intel will have shipped more than 5 million chip units-short of its goal of 6 to 7 million, but still a respectable number, Mr. Banks says. He projects 1995 Pentium shipments to hit 20 million units, though that could depend on pricing.

By the time mass production of the AMD and Cyrix chips begins in mid-to-late 1995, Intel will have produced a version of Pentium with performance on par with K86 and M1.

Still, Intel is taking no chances in its marketing. In an ad from Dahlin Smith White, Salt Lake City, that began running in trade and business books in late August, Intel compares 386-based PCs, 486-based PCs and Pentium-based PCs to a cat with nine lives. The message: Pentium has nine lives left, and its predecessor chips are dead.

But Cyrix for one is not backing down.

"We're anxious to do a little mud wrestling with them," says Mr. Domenik, adding that the $120 million company's margins are a fraction of Intel's.

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