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IBM embraces new Athlon chip, direct sales push

Big Blue roundly endorses AMD's new chip with a broad direct sales push, marking an overhaul of its consumer PC line and a bid to gain market momentum.

IBM roundly endorsed AMD's new Athlon chip today with a broad direct sales push, marking an overhaul of its consumer PC line and a bid to gain market momentum.

Most of the new Aptiva computers introduced today will be sold direct, with certain models only available directly from IBM, indicating that Big Blue has pulled out all the stops out to emulate Dell Computer and Gateway in the consumer and small-business segment.

IBM will also launch Internet initiatives including free CompuServe service and models with high-speed ADSL modems--including a waiver of steep installation fees--in some markets.

Big Blue has been laboring to gain ground in the consumer PC market: In the first quarter of this year, it was still ranked behind Compaq Computer, Packard-Bell NEC, and even No. 5 Emachines in the consumer market, according to International Data Corporation (IDC).

The direct sales strategy should help their cause, however.

"They've been laggards. IBM is finally moving along [to direct sales]," said Roger Kay, an analyst at IDC. "They seemed to fret over this for a long time."

Kay says that a well-executed direct push can shave about five percent in costs almost immediately.

The new S series and E series Aptiva models are aimed at more sophisticated users and not the sub-$1,000 segment that so many PC makers have been targeting during the last 18 months. "If you look at these systems, they fit the profile of buyers that can jump right on the Internet and go shopping," Kay said.

The top echelon of the line is comprised of an S series 865 model with AMD's fastest Athlon chip running at 650 MHz. The 860 comes with a 600-MHz processor, 128 MB of memory, a DVD-ROM drive, a 20 GB hard drive, an Nvidia graphics subsystem, and Intel "AnyPoint" Home Network.

Athlon, formerly known as the K7, is AMD's newest processor and was formerly introduced this week. Analysts have raved about the chip's performance, stating that it will outperform the Pentium III. The big question now is whether AMD will be able to manufacture the chip in large enough volumes and capture market share from Intel in the high-end performance computing segment. The chip is coming out at speeds ranging from 500 to 650 MHz.

"This is a major change to the PC landscape," said Mark Del Tufo, a manager in the Aptiva group. "AMD has actually eclipsed Intel [in performance]." IBM appears more enthusiastic about AMD chips than those from Intel--even at the high end which has been Intel's stronghold. "For our customers, Athlon delivers better value and better performance [than Intel]," he added.

But not everybody is as keen on the Athlon processor as IBM. A Gateway spokesman stated that the company decided not to add Athlon to their performance-PC line at this time and instead will stick with current processors, or the Pentium III from Intel. Gateway broke away from the Intel-only camp this year and has been a fairly heavy consumer of K6-2 processors. Gateway was expected to adopt the Athlon.

IBM also released a bevy of E series boxes targeted at small businesses as well as consumers. The models use lower speed grades of the Athlon chip.

Prices for all systems range from just above $1,000 for the E series to $2,299 for the high-end S series. Most models will be available in 30 to 40 days. Exact pricing and configuration were not yet available for the E series models which will be sold via the "ShopIBM" direct sales route and in retail outlets. A program with OfficeMax in select markets offers E series models at IBM "stores" located within OfficeMax outlets.

The S series computers will be sold as direct models only.

In addition, IBM customers will get six months of free Internet Service from CompuServe with the purchase of systems before October 2.

Big Blue is also collaborating with Pacific Bell to offer ADSL models in what IBM is calling a "pilot program." In the San Francisco area, Pacific Bell will waive the ADSL equipment and service installation fee for residents who purchase a DSL-enabled Aptiva model 800 or 902 via the ShopIBM Web site and sign a one-year DSL service contract, the company said.