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AMD moves further ahead of Intel with chip

The chipmaker officially launches new processors--the 1.2-GHz Athlon and the 800-MHz Duron--that will appear in systems from Compaq Computer, Gateway and Hewlett-Packard.

Intel just can't get a break.

While the market braces for some potentially tough news in Intel's earnings report Tuesday and the company grapples with a string of recent glitches, Advanced Micro Devices has taken another swipe at the struggling chip giant.

Sunnyvale, Calif.-based AMD on Tuesday released new processors--the 1.2-GHz Athlon and the 800-MHz Duron--that will appear in systems from Compaq Computer, Gateway and Hewlett-Packard. Micron Electronics sells a Duron system at Best Buy stores, and IBM sells some Duron PCs directly.

As previously reported by CNET News.com, the chips had been on sale well in advance of their official release.

The move allows AMD to grab some market share from its rival, as Intel deals with a delay delivering its Pentium 4 processor and a recall of its 1.13-GHz Pentium III chips.

Price, however, has emerged as a problem for both companies. Microprocessors from both companies have been dropping in price in recent weeks, due partly to slower than expected PC sales. AMD CEO Jerry Sanders also said last week that the company would likely throttle Duron sales in the fourth quarter to avoid a price war in the budget segment.

In what has been a tense race of clock speed, AMD can, for now, claim to have the fastest processors on the planet.

The Pentium III recall "hurt the image of Intel a lot. And now AMD is ahead of the game, ahead of the curve, and that's huge, really important," said Technology Business Research analyst Humberto Andrade.

To high-end users demanding performance, whether from chips, cars or bicycles, "image is important," Andrade said. "When you've won the race, it looks like you have the best technology, and that boosts the sales of low-end chips."

AMD released its Duron processor in June, but has seen limited interest in the budget chip. With Tuesday's chip launch, HP becomes the first major PC maker to move aggressively to the processor.

"AMD consistently beat Intel, and suddenly the whole market and the end users start to realize Intel isn't the only choice. That's huge," Andrade said.

AMD certainly thinks so. "We're seeing strong demand for all of our products," said Mark Bode, divisional marketing manager for AMD.

The 1.2-GHz Athlon and 800-MHz Duron are available, respectively, for $612 and $172 in quantities of 1,000. Other Athlon prices in thousand-unit lots: 1.1 GHz, $460; 1 GHz, $350; 950 MHz, $282; 900 MHz, $215; 850 MHz, $193. The 750-MHz and 700-MHz Duron are $112 and $88, respectively, in lots of 1,000.

The prices, however, are largely theoretical. AMD chips typically sell for less than their "official" posted price. The 1.2-GHz Athlon, for instance, sells at many dealers for around $500. Intel chips are also selling below posted wholesale prices.

AMD has had better luck than Intel because it moved more recently to a newer chip architecture, with more allowance for increased clock speed. Intel's hope lies in the Pentium 4, which frees the company from the constraints of a chip architecture introduced with 1996's Pentium Pro processor. Even so, analysts say the Pentium 4 will not dominate Intel sales until 2002.

Intel has also suffered setbacks backing Rambus DRAM, which will affect its ability to quickly ramp up Pentium 4 volumes. The Pentium 4 works only with Rambus memory, but there is increasing demand for the less expensive Double Data Rate (DDR) DRAM, so Intel must create a chipset--the piece of silicon that connects the microprocessor to the rest of the computer--that will allow PC makers to use DDR DRAM.

"They can't ramp it in quantity until they get the DDR chipsets out," said Nathan Brookwood, an analyst at Insight 64.

In the meantime, Intel plans to offer PC makers rebates for using Rambus memory, so systems can be more competitively priced with AMD systems.

AMD will come out with its first chipset to handle DDR DRAM toward the end of the year. When DDR DRAM comes out, Athlon speeds will jump by 133 MHz, rather than 100 MHz, with each upgrade, Bode added. Computers with the memory will be out before the end of the year.

"DDR is on track to debut in Q4," Bode said.

Analysts say Intel's recent string of problems has more to do with execution than with any inherent weakness with the company's technology.

Andrade said the problem is lack of focus. "They're spreading their management resources all over the place. There is lack of focus on their main products, their main business. And AMD has kept that focus."