- In one of the most stunning examples
yet of PC makers breaking ranks with Intel Corp., longtime Intel loyalist
Gateway Inc. is preparing to introduce in March PCs based on the forthcoming
K6-3 chip from Advanced Micro Devices Inc.
- The North Sioux City, S.D., company has
been evaluating the chip, code-named Sharptooth, for some time, according
to sources, and plans to offer the new computer line at prices unattainable
when equipped with Intel chips.
- More significant than the forthcoming
Gateway (NYSE:GTW) systems, however, is the negative impact Gateway's move
to AMD, and others like it by Gateway rivals, could have on Intel.
- "In retail, [AMD] has basically
changed the whole business," said Stephen Baker, an analyst at PC
Data Inc., a Reston, Va., company that tracks North American PC retail
and corporate sales. "Intel is not going to dominate the market again
anytime soon. [AMD] is here to stay."
- PC makers have been able to price PCs
based on AMD's K6-2 significantly lower than those based on Intel (Nasdaq:INTC)
Celeron chips, according to PC Data. The average price for an Intel-based
PC in December, for example, was $1,195, while AMD-based systems averaged
$981. PCs equipped with National Semiconductor's MII chips in December
came in at $602.
- As a result, Compaq Computer Corp.'s
Presario 5150, which ships with a 350MHz K6-2, was the second-best-selling
retail PC in December, behind the company's Presario 5170, which features
a 350MHz Intel Pentium II.
- Aiming at corporates Despite its success
in the retail PC space, however, AMD (NYSE:AMD) has not been able to penetrate
the business segment. Hewlett-Packard Co. (NYSE:HWP), IBM (NYSE:IBM), Compaq
(NYSE:CPQ) and NEC Computer Systems Division do not use AMD chips in any
of their commercial brands.
- But Gateway's adoption of AMD chips,
and AMD's forthcoming K6-3, which is due in March, around the same time
as Intel's Pentium III processors, could help change that. After that release,
AMD will ship by midyear another chip geared for the business PC, the 500MHz
K7. The next-generation chip uses the same whopping 200MHz bus architecture
as Compaq's Alpha 21264 processor.
- One hurdle AMD will face with the K7
will be getting widespread OEM support for the chip, since the supporting
motherboards and chip sets are proprietary.
- In addition, the Sunnyvale, Calif., company
still faces an uphill battle with regard to mind share. "We are very
slow adopters [of technology]. At this point, we wouldn't take a look at
AMD," said Joe Fischer, a systems analyst at John Hancock, in Boston,
and a PC Week Corporate Partner.
- Still another challenge is Intel's marketing
muscle. For example, Intel, of Santa Clara, Calif., has offered hard-to-ignore
incentives, namely the Intel Inside program. The program reimburses OEMs
up to 66 percent of their advertising budgets if they follow program guidelines.
For PC makers with large volumes, the program can save them millions of
dollars in advertising costs.