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Can AMD (AMD) make cheap, full-featured notebooks a hit?

Thursday afternoon I met with two executives of AMD regarding some things the chip maker’s been discussing at the Computex conference going on this week in Taipei, Taiwan. In brief, AMD is hoping it will gain from sales of something called an affordable ultralight computer. Think of it as a poor man’s Apple (AAPL) Macbook Air, costing between $550 and $850, instead of the $1,799 and up of machines in the Air’s class. They’re expected to start selling in the August to September time frame, with models carrying AMD chips from Hewlett-Packard (HPQ), Taiwan’s Acer, and, later on, Dell (DELL).

The models AMD showed off don’t really look much like the Air; some are more stylish than others, but none of them have quite the elan of the Air. But no matter. What the cheap ultralights are really about is moving the computer buyer up from sub-$500 “Netbooks,” by convincing them that what they really want is not a budget machine with limited capabilities, but rather a full-featured laptop that can play games and movies. AMD owns graphics chip maker ATI, hence, it feels it has an edge over Intel (INTC) in providing affordable graphics on a cheaper laptop.

The success of this move will hinge on the release of Direct X 11.0 along with Microsoft’s (MSFT) Windows 7 on October 11. DirectX 11 is a graphics computing standard that can dramatically reduce the time to encode movies. It also adds “tessalation” to video games, which can substantially refine the features of characters and landscapes in a game. ATI developed this technology for Microsoft’s Xbox and now it’s coming to desktops and notebooks.

The point is, AMD says it will have the first graphics card for DirectX 11 when Windows 7 ships. If it can successfully take that technology down market to affordable ultralights, it could help induce more consumers considering Netbooks to shell out a couple hundred bucks more for machines capable of HD movie playback and sophisticated gaming. That might give AMD a competitive edge against Intel and Nvidia (NVDA) in that segment of the market.

Of course, what no one knows yet is whether cheap ultralights will really slow the Netbook trend, or if they’ll merely add to the cannibalization of more expensive laptops. Either way, it would be upside for AMD.

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Source: AMD Hopes Cheap, Light Notebooks Boost Revenues