Athlon PCs Grow Scarce in Mainstream Market
Gateway's defection and HP/Compaq merger could drive AMD fans underground.
Tom Mainelli, PCWorld.com
Thursday, September 27, 2001
In test after test, systems based on Advanced Micro Devices' Athlon chip continue to match or better the performance of comparable Intel Pentium 4 PCs. Yet Gateway this week became the latest vendor to announce it will stop building Athlon-based systems. If Athlon works so well, why is it getting harder to find such systems from mainstream vendors?
Blame the poor economy and struggling PC industry, says one analyst.
Desperate PC vendors are looking for ways to cut costs, says Rob Enderle, research fellow with Giga Information Group. As for Gateway, the vendor was simply eliminating one of its secondary parts vendors, Enderle says.
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Intel continues to cut the prices of its Pentium 4 chips, and there's little chance of a buying surge so large the chip maker can't meet demand, he says. Economically, it probably makes more sense for Gateway to go all-Intel--even if it loses some potential Athlon systems sales.
Ironically, Gateway turned to AMD and the Athlon after publicly suggesting Intel failed to meet its supply demands in late 1999. That's not the case today.
"AMD is the secondary vendor in the market, and in a down market the secondary vendor gets hit hard," Enderle says. In fact, Gateway's decision likely had little to do with AMD or the quality of its processors, he notes.
No Hard Feelings
A Gateway spokesperson confirms Enderle's theory.
"Gateway is just simplifying its product lines and reducing its suppliers," says Lisa Emard. "AMD has been a great partner, and we're not closed off to working with them again."
Gateway will continue to offer a single AMD-based PC until its supply of Athlons is gone--most likely for a month or two, she says.
Regardless of Gateway's reasons, however, its decision looks bad for AMD, says Giga's Enderle. But it is more of a perception problem than anything, for now.
"It looks worse than it is," he says, noting that the struggling PC vendor hasn't been selling as many systems as it once did. That said, the loss of Gateway could affect the company's overall processor market share, and if that begins to slide, more defections could follow.
"The trickle could become a flood," he says.
Gateway's decision may have come at a particularly bad time for AMD; the company is expected to make some major product announcements in the next few weeks.
First, AMD is launching the next version of its Athlon processor, code-named Palomino. Around the same time, analysts expect the company to switch to a new processor naming convention.
Latest Defection
Gateway isn't the first major vendor to drop AMD in recent times, despite continued strong reviews and a growing share of the market. IBM once carried AMD-based PCs for consumers in stores, but the company retreated from retail sales in the United States back in 1999. In May, Big Blue stopped offering built-to-order AMD systems, too.
Now, the only two major PC vendors offering AMD products are Compaq and Hewlett-Packard. With their proposed merger, soon only one major vendor will support the chip maker, Enderle points out. As the companies plan their future together, they may reconsider AMD products as well.
It's not inconceivable that customers seeking AMD products will have to look beyond the major vendors to find AMD, he says. "It may well be the case that people will have to white box vendors," he says.
AMD: Not Worried
Clearly AMD isn't happy about Gateway's decision, but the company isn't reeling, either, says spokesperson Ward Tisdale.
"Obviously we value Gateway as a customer," he says. "They like our products--this was just a move they felt they needed to make."
AMD devotees shouldn't worry about a dearth of PCs with Athlon chips, he says. "Availability has never been better," Tisdale says, noting that thousands of vendors worldwide are now offering AMD-based systems.
In fact, recent market statistics show AMD's CPU market share continues to rise. Mercury Research shows AMD holding 22 percent of the worldwide X86 processor market, Tisdale says.
An August report from Gartner estimates AMD now owns roughly 20 percent of the PC market, primarily in the consumer and small to midsize business markets.
Tisdale acknowledges that vendors such as AlienWare and Falcon Northwest, still selling AMD-powered PCs, aren't as well known as Gateway. But he points out that PC World routinely reviews systems from these vendors and notes "the white-box market is very strong."
Challenging Times
Strong enough to keep the chip maker alive during this lean season? Enderle thinks so.
"They should be able to weather this," he says. In fact, while AMD may suffer more greatly than Intel during the downturn, it is likely to benefit more from the market's eventual rebound, he says.
In the meantime, a certain core group of PC users will stick by AMD through thick and thin, Enderle says. He calls them "tuners," characterized as the users who like to get under the hood and upgrade and improve their PCs constantly, adding new parts and even overclocking their CPUs.
"The people who will stay with AMD are the ones who want the ultimate power machine," he says. |
