Jim - Re: "I don't see any Pentium MMX Compaqs selling for <$900, so I would think it was a K6 box"
Maybe it was both:
smartmoney.com
INTEL'S CHEAP CHIPS STRATEGY
WILL Compaq's (CPQ) good fortune shine on
Advanced Micro Devices (AMD)?
The PC giant announced Monday that one of the few
bright spots in its upcoming quarterly filing is its $899
home line of personal computers, a product for which
AMD has been a supplier of microprocessors.
Analysts expect Compaq to just break even this
quarter, with a loss of more $5 billion after special
charges for purchasing Digital Equipment last fall.
But today's Wall Street Journal has the company
stating that the $899 PC has been its most profitable
personal computer for the consumer market,
demonstrating that it may be possible to make
money on really cheap computers. The model in
question, a version of Compaq's Presario, uses
AMD's K6 chip in some models, Intel's Pentium in
others. That's a business that caused AMD to lose
45 cents per share in the latest quarter, reported last
week, as AMD cut prices almost to the bone to
compete. It's fair then to say that much of Compaq's
upside has come from AMD's pain.
The question is, will Compaq's good fortune in the
sub-$1,000 market shine on AMD? Don't count on it.
Ashok Kumar with Piper Jaffray says the success of
the $899 model will prove little comfort to AMD now
that Intel has made clear it is willing to slash profits
drastically to maintain processor share. Price cuts on
Intel's low-end Celeron chip, and the upcoming
release of its next budget processor, code-named
Mendocino, are designed to allow Intel to compete
across the board, giving original equipment
manufacturers systems they can sell at $799, $999,
and $1,199.
Intel's product road map will continue to cause AMD
trouble. The company plans to take Mendocino to
speeds of 450 megahertz by about the first quarter of
next year, says Kumar, while AMD's ability to
produce 350 and 400Mhz chips by the end of this
year is still an uncertainty. "It requires all kinds of
process tweaks," says Kumar of AMD's challenge.
"[AMD is] still struggling to put out a 333 megahertz
[chip]." And Intel is changing the way Mendocino
attaches to computer motherboards, abandoning its
Slot 1 interface in favor of a different pin
configuration, which could make it very difficult for
AMD to sell parts at all.
The long-term result of Compaq's success in the
sub-$1,000 may be simply to emphasize how
desperately Intel is willing to play loss leader in order
to pummel AMD. Intel is expected to ship 21 million
units of its microprocessors this quarter, vs. 18
million a year ago. The cost of increasing sales is
extreme, however. The company today reported 66
cents in profits per share before special charges,
down from 92 a year ago. Things have gotten so
desperate at Intel that chip equipment research firm
Infrastructure says the company has started replacing
costly maintenance services it usually outsources to
Applied Materials (AMAT) and other equipment
makers with its own in-house staff in order to cut
costs.
Does AMD have any hope of survival if Intel has
taken the attitude that "Only the homicidal survive?"
AMD is losing money despite hitting its targets, but
the losses are worth it, say some observers, if AMD
can increase its speed grades over the next six
months and win some deals for more expensive
chips. "A lot of [AMD's sales] came from fire sales of
trailing edge products," says Michael Slater, founder
of Microdesign Resources. But now, says Slater,
AMD must produce faster chips if it hopes to
compete against an Intel that has suddenly been
converted to the religion of the sub-$1,000 PC.
-- By Tiernan Ray
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Paul |
