AMD Gets More Inside Lenovo

The ThinkPad will still use Intel chips, but the expansion into the PC line spells progress for AMD.
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Advanced Micro Devices

(AMD) - Get Report

and

Lenovo

strengthened their relationship Tuesday.

But it wasn't the marriage that many investors have been eagerly awaiting.

Lenovo will offer AMD microprocessors in its line of ThinkCenter desktop PCs, the computer maker's second global brand to offer AMD processors.

For many people, however, the only brand that matters is ThinkPad, the vaunted line of notebooks that China-based Lenovo picked up from IBM in 2004 as part of its $1.25 billion acquisition of the PC business.

For now, ThinkPad remains an

Intel

(AMD) - Get Report

-only institution. And while AMD's announcement illustrates how much progress the company has made getting its chips into mainstream systems, it also underscores how much work lies ahead for AMD in its battle with Intel.

"ThinkPad is the crown jewel there," said Samir Bhavnani, director of research at Current Analysis.

Bhavnani said that AMD still needed to make some progress in its brand-acceptance among large corporations, which is where the ThinkPad notebooks are primarily aimed.

"The very largest companies still insist on Intel," Bhavnani said.

While Lenovo does not break out specific results for the ThinkPad, it said last week that notebook shipments jumped 23% year over year in its most recently ended quarter, for a total of $1.8 billion in sales, thanks to its "strong position in the higher-priced" segments of the market.

Notebooks accounted for 52% of the company's overall sales in the second quarter.

Shares of AMD finished the day down 1.2%, or 25 cents, at $20.22.

A Lenovo representative said that any comment about AMD chips in ThinkPads would be "speculation" at this time.

AMD Worldwide Marketing Director Bruce Shaw said he could not comment on Lenovo products such as the ThinkPad, but he seemed confident that the relationship between AMD and Lenovo would continue to bear fruit.

"We think the fact that they've decided to put us in their largest brand speaks volumes about where they see the relationship going," said Shaw.

AMD now has its chips in just about every part of Lenovo's product portfolio save the vaunted line of laptops. Earlier this year, Lenovo

introduced a new global line of desktop PCs aimed at small-business users that are available with both Intel and AMD chips.

"That would give the stock a nice boost if they can get it," said U.S. Global Investors' All American Equity Funds co-manager Romeo Dator, regarding AMD getting some of the ThinkPad business.

However, because of the fierce price war the two companies are engaged in,Dator for now is sitting on the sidelines, avoiding shares of both AMD and Intel.

Both Intel and AMD reported disappointing financial results recently.

ThinkPad or not, of course, AMD's entry into the ThinkCenter desktops is a significant win for the chipmaker -- particularly as it comes before Lenovo has announced any equivalent ThinkCenter destkops based on Intel's new Core 2 Duo chip.

Lenovo was

conspicuously absent from the grand launch party for Intel's Core 2 Duo processor last month, at which other PC heavies, such as

Dell

(DELL) - Get Report

and

Hewlett-Packard

(HPQ) - Get Report

, unveiled systems featuring Intel's new chip.

At the time, a Lenovo representative said that the company had not issued any product announcements regarding Core 2 Duo but confirmed that Lenovo would offer ThinkCenter and ThinkPads with Intel's chip by the end of the third quarter.

Lenovo's ThinkCenter A60, which is now shipping, is available in versions featuring AMD dual-core and single-core Athlon processors, as well as the lower-end Sempron processor.

The new systems will continue AMD's plan of increasing its sales to corporate PC buyers who have already shown a liking for AMD's server processors.

Shaw said that AMD will finish 2006 with twice the number of commercial platforms, or PCs and servers based on AMD chips, than it started the year with.

Intel shares closed the regular session down 17 cents to $17.32.