An update on the GTW/AMD collaborations. M. Edelstone does not think Dell will pick up the Athlon.
___________________________________________________________
Intel's supplies woes seen helping rival AMD
By Therese Poletti
SAN FRANCISCO, Jan 6 (Reuters) - Personal computers makers leery of putting all their chips in one basket, may learn a lesson from Gateway Inc.'s <GTW.N> problems with its sole supplier of microprocessors, Intel Corp.
Intel's <INTC.O> main rival in microprocessors, Advanced Micro Devices Inc. <AMD.N>, is expected to benefit from Intel's supply problems and will soon be named as a second source supplier to Gateway, analysts said on Thursday.
San Diego-based Gateway warned on Wednesday that it would report lower-than-expected fourth quarter earnings, citing supply problems with its key processors from Intel and a slowdown in corporate, government and education sales due to Y2K concerns.
"Supply of key processors and motherboards was severely constrained, spotty and unreliable, particularly in our consumer sweet spot in the $999 and $1,299 price range," Gateway's Chief Financial Officer John Todd, said on Wednesday. Intel currently supplies all of Gateway's microprocessors, after the PC maker dropped AMD as a chip supplier last summer.
An Intel spokesman in Santa Clara, Calif., declined to comment, citing the company's quiet period ahead of earnings. The company will report fourth quarter earnings on Jan. 13.
Intel stock fell 4-7/8 to 78-3/4 in heavy trading on Nasdaq, as Gateway's woes fueled investor jitters about Intel's fourth quarter. AMD was up 3/4 at 30-3/4, while Gateway was down 2-9/16 at 59-11/16, both on the New York Stock Exchange.
Earlier this quarter, Intel -- which supplies processors to more than 80 percent of the world's PCs -- noted several times that it was seeing very strong demand amid a tightening of supply of its products. In mid-November, Intel said it would have trouble filling orders beyond existing commitments.
Intel's supply woes could be a boon for arch-rival AMD, which has emerged in the past few months as a more fierce competitor to Intel with AMD's new Athlon chip family, analysts said.Most other PC makers already use AMD's K6 family of chips in their lower-cost PCs, with the exception of Dell Computer Corp. <DELL.O>.
"I doubt that Dell would break away from Intel," said Mark Edelstone, a Morgan Stanley Dean Witter analyst. "AMD has a shot to do very well with their Athlon processor. And it helps to have Gateway as a customer."
AMD's Athlon chips, which briefly held the speed crown in the Intel-compatible arena, will enable AMD to compete at the higher end of the PC market, including the corporate PC space.
At the same time, Intel has been transitioning to a new manufacturing process, which was one factor causing it to report lower-than-expected earnings in the third quarter.
"What's happening is the execution miscues from Intel last year have been amplified," said Ashok Kumar, an analyst with U.S. Bancorp Piper Jaffray. He added that by not being able to supply Gateway with all the processors it needed, "(Intel) left a lot of money on the table, too."
Analysts and industry sources said they expected Gateway to make an announcement, possibly as early as next week, that it has signed up AMD again as a supplier of Intel-compatible chips.
"Within days, Gateway is expected to announce a second source for microprocessors (AMD)," said Salomon Smith Barney analyst Richard Gardner, in a note to clients.
"We are not about to stand by and let the actions of others determine what Gateway products customers can buy," Gateway President and Chief Executive Jeff Weitzen told analysts on a conference call late Wednesday. "In the next week or so, you will hear about some definitive and aggressive steps we are taking to make sure this doesn't happen again."
Scott Allen, a spokesman for AMD in Sunnyvale, Calif., said that AMD has done business with Gateway in the past.
"He (Weizen) has made it pretty clear in terms of what their plans are, and we, like many companies, don't pre-announce customers," Allen said. "We continue to compete for their business."
16:47 01-06-00
Copyright 2000 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. All active hyperlinks have been inserted by AOL. |
