January 21, 2000 [PC Week Online]
Gateway Inc.'s recent rollout of new PCs powered by Advanced Micro Devices Inc.'s
Athlon processor drew widespread attention, Hewlett-Packard Co. was quietly
stocking the shelves at Sam's Club discount stores with two new desktops that
mark its first use of the chip.
HP's addition of the Athlon to its desktop systems means AMD, of Sunnyvale,
Calif., now has its top processor, and the chief rival to Intel Corp.'s Pentium
III, featured in systems made by four of the five largest PC makers in the United
States. The lone holdout remains Dell Computer Corp.
"Certainly we're pleased that interest in Athlon continues to grow and we're
attracting more strategic customers," said AMD spokesman Drew Prairie. "It signals
a continuing trend that Athlon's performance message is getting out there and
there's a strong demand for systems based on it, and OEMs are reacting to that
For its part, HP downplayed the company's unannounced decision to add the Athlon
to its Intel-dominated product line. "Really the choice of Athlon isn't any
more in favor of performance than a Pentium III, it's just a pricing decision
for these models," said Ray Aldrich, a spokesman for HP. HP would not comment
on whether the PC maker would feature Athlon chips in any future products.
also reported it grabbed a bigger slice of total processor sales by garnering
16.6 percent of the market, up from 12.6 percent the previous quarter and its
highest level in a year. Intel's market share slipped from 83.7 percent in the
third quarter to 82 percent for the final quarter of 1999.
from overall strong demand for processors, AMD's return to profitability was
also fueled by Athlon's strong showing in the more lucrative high-end consumer
PC market. Before introducing the Athlon, AMD chips were mainly featured in
low-end systems, where profit margins are much slimmer.
More good news for AMD: it keeps adding key vendors to their customer list,
its profits are up, and it is becoming associated with high-end systems, not
just the low end of the market.
good news for the PC market in general: AMD may finally attain sufficient market
share to keep Intel at bay. In our opinion, reasonable competition (i.e. where
all/most of the competitors actually have a reasonable chance) is a good thing.
AMD's increased strength improves the odds of reasonable competition. A side
benefit relates to pricing - Intel's typical response when threatened has been
to cut prices. Although PC prices have edged up recently, Intel may decide it
is time for another round of price cuts.
Intel may be looking for the license plate of the truck that hit them. It recently
lost its sole-source status at Gateway, a scant three months after getting AMD
booted (See TEC News Analysis article: "Gateway,
Jilted by Intel, Kisses and Makes Up with AMD" January 21st, 1999). In addition,
Dell has publically stated that Intel's inability to meet demand is the cause
of Dell's Q4 supply woes. Intel will certainly survive, but this will probably
put enough fear into it to make some operational and management changes.
This announcement will have only modest effect on the business user - it is
aimed primarily at the consumer market (HP's Pavilion product line). However,
the eventual effect will be to reduce prices on all CPUs: Intel because of its
anticipated response to the AMD threat; AMD because its increased shipments
will reduce chip cost, and it will probably respond in kind to any Intel price
who have already planned to use (or at least consider) systems containing the
Athlon CPU should be encouraged by this. It should give them enough psychological
security (regarding AMD's viability) to allow them to proceed with Athlon purchases
that may have been on hold.
This news will not affect those users totally committed to Intel, unless they
decide the time is right to consider alternative CPUs.