Clevo predicts strong market move to AMD in 2011

Things seem to have been looking up for AMD over the past year or so. Its big win against Intel in the courts has been backed up by a huge lead in bringing DX11 technology to market and re-establishing trust in the channel after the Dell debacle in 2006. That’s how it seems, but a conversation with senior Clevo personnel in a private room at Computex confirmed something much more important. Could the balance of power tip toward AMD in 2011? KitGuru investigates.

First, is the mobile processor space really interesting? Definitely. The move from desktop to laptop has been consistent. Over the next 12 months, each desktop sold in the UK will be matched with up to 4 laptop sales. Speaking with one of the industry’s most respected editors after the launch of AMD’s Phenom II processor, he was distinctly downbeat. When we asked why, he said “Mate, the world is going mobile and AMD has nothing. AMD could launch the fastest desktop chip ever seen, but if it uses over 100 watts then how is that going to help them?”.  Fair point.

Second, who is Clevo?  It’s one of the ‘real manufacturers’ alongside companies like Compal and Quanta. You go to a shop and buy a laptop that says Acer, but it’s really made by Wistron or Great Wall. These huge manufacturing companies underpin the brands that we buy, from Apple to HP.
Crazy?  Well, think about it this way: ‘The milk says Tesco, but it comes from a farm’. The Farms are where the real work happens and they deal with orders on such a huge scale that their strategic view of the market is much better than any local player.

Third, just how big are the ‘real manufacturers’ like Clevo?   Massive.  As a local PC manufacturer in the UK, you know your company is significant when you become a Microsoft Named Account/Gold Partner. However, you can achieve this with sales of under 10,000 units a year. Clevo measures annual sales in the millions. Yep. That’s what KitGuru calls big.

The world market for PCs is way over 300 million units a year. The desktop market is eroding fast. With no serious threat to Intel in the mobile space, AMD’s stock should have continued to dwindle past its $1.78 low at the end of 2008.

It has actually gone the other way.  That gives us a bizarre 1-2-3:

1. The market is going mobile
2. AMD has had nothing of note in the market
3. Yet AMD's share price has increased by up to 500% over the past 18 months

Interesting.

.
Originally, we put this down to (a) continued success of the Phenom II products – including the X6 and (b) Radeon desktop graphic cards taking market share from nVidia by delivering a full line up of DX11 products a long way ahead of its Santa Clara-based rival.

That's enough to explain why AMD has done well so far, but the stock market is based on future performance. These recent successes are not really enough to explain what we're seeing.

There's something more going on here.

In spite of the recent economic issues, Wall Street genuinely prefers backing winners. Your share price only goes up like AMD's when serious investors believe the trend will continue.

Chatting with a senior Clevo insider at Computex, we were given a different perspective.

In previous discussions, Clevo’s roadmap (plan for future products) was completely dominated by Intel in the CPU socket and Intel/nVidia in the graphics space.  Clevo’s new roadmaps are quite different.

AMD has been talking about Fusion since 2006, but no amount of promotion or presentation has been able to change the minds of the major manufacturers or the stock market.

At Computex, KitGuru learned that there has been a change in thinking by the major Far East players and that change is directly related to important changes in senior personnel at AMD.

Clevo and others have now included many more AMD products in future SKUs because AMD’s sales force, led by VP John Byrne, has been driving the message in a much more convincing  and credible way.

Prior to 2006, Byrne was a key contact man for ATI into the main Taiwanese brands.  Initially, after AMD’s acquisition, Byrne drove desktop graphics, against a backdrop of a serious global economic downturn and that worked well for the new company.

Over time, Byrne has been given more and more responsibility and it seems that, several months back, AMD entrusted him with its key Far East partnerships.

Now those very same partners, Clevo included, are finally starting to see things AMD’s way. They have bought Byrne’s message that Fusion is real, that Fusion is at hand and that it is the future (or at least a part of the future).

AMD is still doing what all engineering companies do, innovation, but (big) customer perception has changed with the help of a refocused message.

Without great new technologies you cannot compete, but getting major customers like Clevo to buy in volume needs something more.

Clevo needed to be sold on AMD's roadmap before it lined up big orders. Selling the sizzle at least as well as you sell the sausage is something that Jen Hsun Huang has done very successfully as nVidia‘s CEO for the past 10 years. Now it seems that Byrne is leading something of a AMD-cultural revolution out East which could see a fundamental change in mobile market share through 2011.

Our summary?

Since the merger of the two companies, AMD has done a good job of winning nVidia market share in the graphics space but, overall, has done almost nothing to impact Intel’s global sales in the mobile space.  Having spoken to Clevo, and seen several key SKUs change from Intel to AMD, KitGuru now understands just how much of a difference Byrne’s aggressive approach has made. Right now, those roadmap changes are just little AMD logos on a spreadsheet. Next year, those little gren and black squares will equate to a significant increase in factory output of AMD-powered products. That movement in the factories will translate directly to more AMD being sold to all of us, in stores across the world.

KitGuru says: Watching AMD’s share price increase 500% was amazing. Intel will have noticed this too. Right now, the biggest processor R&D budget this planet has ever seen will be focused on stopping the march of Byrne’s sales team into (what they see as) hardcore Intel territory. Whoever wins this encounter, two things are certain: It won’t be boring and we’ll all get much better value for money in 12 months’ time.

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