AMD Hopes to Rebound With Humbler Chip

Updated from 1:48 p.m. EDT

SAN FRANCISCO -- Advanced Micro Devices(AMD - Cramer's Take - Stockpickr) has finally matched Intel(INTC - Cramer's Take - Stockpickr) in the battle of silicon specifications, fielding a quad-core desktop microprocessor after months of missteps and delays.

But the real hope for troubled AMD may not lie in quad-core chips after all -- at least not in the near-term battle to power desktop PCs. Instead, the company is chasing the mainstream slice of the PC market, by combining humbler, triple-core chips with its various pieces of graphics-processing technology.

The Sunnyvale, Calif., chipmaker released a slew of new desktop PC processors late Wednesday, including several versions of its quad-core X4 Phenom, and two iterations of the triple-core X3 Phenom.

Many of the processors were originally slated for release in 2007, but were held up as a result of a bug in the chip. AMD has shipped limited versions of the affected Phenoms with a special patch to fix the bug, but Wednesday's release will make bug-free versions of the processor widely available for the first time.

Intel, meanwhile, has had quad-core chips available for more than a year, establishing a strong position as the chip of choice in top-of-the-line PCs. And Intel's existing crop of quad-core processors still boasts higher clock speeds than AMD's newest offerings.

"They [AMD] simply can't come out and say we're going to beat Intel on performance because that's not true, except for a very select set of applications," says analyst David Kanter of Real World Technologies.

Result: AMD seems to be de-emphasizing its quad-core chips, even as it finally gets them out of the gate. According to AMD marketing VP Patrick Moorhead, the new quad core chip is aimed at high-end, PC "enthusiasts," which he said represent a mere 4% of the desktop PC market.

For the other 96% of the market, AMD has the triple-core chip.

That sounds like a step down for a tech company, where more is usually translated as better.

But it may present the best turnaround chance for AMD, which lost $3.3 billion last year and has seen its share price fall by more than 60%.

AMD's contention is that the technical details of a processor, including the number of cores and the clock speed, is no longer the key selling point for the average consumer. What matters is the experience provided by the overall PC, particularly when it comes to watching video and playing video games.

And analysts say AMD can offer a compelling package of technology in that respect, by pairing the triple-core processor with its various graphics components, such as the recently-announced 780 integrated graphics processor.

"When you get into some of these really graphic-intensive applications, like gaming, the graphics plays a much bigger part than the central processor," says In-State analyst Jim McGregor.

"This gets them [AMD] back into the ballgame in terms of the mainstream market, which is good," says McGregor, who notes that the mainstream market still represents the largest portion of the desktop market.