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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Jim McMannis who wrote (44898)	1/5/1999 4:16:00 PM
From: Bruce A. Thompson	Read Replies (4) \| Respond to of 1570835

\|\|\|\|\|\|\|\|\|\|news\|\|\|\|\|\|\|\|\|\|\|\|\|\| Industry indexes News Index NewsWatch Earnings Surprises StockWatch How To Spend It Business Travel Renegades Technical Trading The Gadfly Internet Economy Intel-AMD chip battle as semiconductor stocks surge AMD looks for corporate Gateway By Binti Harvey, CBS MarketWatch Last Update: 2:54 PM ET Jan 5, 1999 NewsWatch NEW YORK (CBS.MW) -- Intel's aggressive pricing of its Celeron chip has Advanced Micro Devices working to maintain control of the low-end retail market. Yet AMD has launched its own offense, quietly courting Gateway to infiltrate Intel's hold on the corporate segment. Breaking News Wall Street hits accelerator Vodafone makes bid for AirTouch Amazon.com sales more than triple Chips rally on comments, lift technology shares Flashes from frontier: Gold, HDTV More top stories... CBS MarketWatch Columns Updated: 1/5/99 4:04:28 PM ET Intel (INTC) has thrived on recent coverage of its all-out pricing attack on AMD's (AMD) K6 chip, a lower-cost alternative to Intel's Pentium line. A latecomer to the low-end market, Intel is attempting to regain ground via aggressive price competition with its low-cost offering, the Celeron chip. Meanwhile, semiconductor stocks of most types surged Tuesday. Stock indexes with chip makers in them rose as much as 6 percent. See Silicon Stocks. AMD's K6, is featured in almost 70 percent of computers priced under $1,000, primarily in the retail market. Analysts expect the demand for AMD chips to continue to increase in 1999, buoyed by the company's release of higher-speed chips in the first quarter, but pricing pressure from Intel may make it more difficult to grow profits. Intel has slashed Celeron prices twice since August, and pushed up the release date of its 400 MHz version to the first quarter, instead of the original release date in April. Intel's strategy is to limit the average selling price of the K6, forcing AMD to depend on greater unit sales to increase profitability. "Clearly, competition is going to intensify dramatically, especially on the retail side, which AMD has cornered," said Drew Peck, semiconductor analyst at SG Cowen & Co. AMD is not simply taking the abuse. The company is making its own strategic moves to unseat Intel's dominance in the corporate market. AMD has been seeking an avenue to get into the corporate PC market -- which holds the greatest opportunity for profit, and Gateway may be the company's ticket to the big time, analysts say. "A key strategic imperative for both companies in the first quarter is Gateway, as Gateway continues to show interest in K6 but has yet to introduce any systems," said Goldman Sachs analyst Joe Moore. Although Intel is working overtime to keep Gateway in its pocket, Peck notes that its focus on low-end chips may be detrimental to its higher margin business. "The decision to fight it out in the trenches with AMD may represent a danger to Intel, because it could cannibalize its mainstream business and corporate PC products," Peck said. Peck noted that ultimately, Intel's 1999 outlook doesn't hinge on the lower end of the line, but on its high-end Xeon line for corporate workstations and servers. Nevertheless, Peck doesn't expect AMD to topple Intel's supremacy in the corporate space. Peck recalls a recent conversation with an unnamed chief executive of a leading computer manufacturer, who said, "In the consumer market, nobody cares whose processor is in there, but in the corporate market, you still can't give away a non-Intel based PC."