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Pentium III delays could give AMD the lead

A two-month delay to Intel's "Coppermine" Pentium III chip could mean AMD will take the performance crown in desktop processors and get a valuable head start.

A two-month delay to Intel's "Coppermine" Pentium III chip could mean that AMD will take the performance crown for desktop processors.

The delay to Coppermine--a high-performance version of the Pentium III--means that the Intel chip will not appear until November. That may mean that the chip won't appear in many PCs in 1999, because new systems don't often come out so late in the year.

Intel's stock was down about 5 percent this morning to $54 on the news of the delay while analysts from Credit Suisse First Boston and Morgan Stanley Dean Witter lowered their rating on the stock and cut their earnings per share estimates for 1999 from, respectively, $2.32 and $2.35, to $2.25.

"Intel is going to have a long, dry summer," said Charles Glavin, an analyst with Credit Suisse, as there are no "sexy, gee-whiz" products on their road map. Coppermine's delay doesn't help.

Meanwhile, the anticipated summer release of AMD's K7 means that the company will have several months to market its new product as the industry's top performer. The K7 is expected to exceed standard Pentium IIIs but be closer to Coppermine.

The potential turnabout will likely become one of the more closely watched PC market events during the second half of the year, and provide an opportunity for Advanced Micro Devices to crawl out of the red.

"Assuming AMD should manage not to trip up and actually deliver the product, AMD will have the fastest PCs," said Nathan Brookwood, an analyst with Insight 64. If all goes well for the company, "AMD will be able to maintain that position until the end of 1999 and into 2000."

Intel late yesterday confirmed that it will delay the 600-MHz Coppermine Pentium III processor from September to November. Faster than current Pentium IIIs, Coppermine will also be built on the more advanced 0.18-micron manufacturing process and contain 256KB of integrated secondary cache. Standard Pentium IIIs are built on the less-advanced 0.25-micron process and contain more--but slower--secondary cache memory.

In addition, the first Pentium IIIs for notebooks, still due in September, will only come out at 500 MHz. The 600-MHz version will be delayed to November as well.

Lower yields
Intel has delayed the release of Coppermine because of lower yields, said an Intel spokesman. Intel is getting adequate yields of Coppermine at 500 MHz but not at 600 Mhz.

Because of the delay, Intel will now release a standard Pentium III running at 600 MHz in the summer.

Under different circumstances, the delays might be irrelevant, but AMD is currently preparing to release its K7 processor. The chip will be announced later this month and start to roll out in volumes later in the summer at speeds of 500 MHz, 550 MHz, and 600 MHz, said several sources. Benchmarks released by AMD recently show that the chip will outperform the Pentium III and even the more-upscale Xeon processor on certain benchmarks.

"It does seem likely that the K7 will be no slower than the Pentium III. It is also clear that, unlike the situation with the K6, the K7 will be no laggard in floating point and multimedia performance," wrote Michael Slater in a recent Microprocessor Watch newsletter.

Head start for K7?
The Coppermine delay essentially lets AMD exploit the advantages of the K7, noted Brookwood. With Coppermine postponed, AMD can more effectively claim to have a superior processor. The headroom built into the K7 also gives the company the means to keep up with, or potentially even overtake, Intel in clock speed.

More interestingly, the summer release of the K7 means that K7-based PCs will come out this year. PC makers typically don't like developing new models in the fourth quarter, added Brookwood, which means they could delay Coppermine units until 2000.

The expected slowdown in buying because of the Y2K bug won't help Intel either, he said.

Intel's decision to manufacture a standard 600-MHz Pentium III will help, but "it's not as impressive as the earlier plan," said Credit Suisse's Glavin.

AMD, of course, will have to be able to manufacture sufficient quantities of the K7. Unfortunately, the company has a history of failing to produce adequate numbers of its fastest chips at a time when they can command premium prices. AMD eventually makes enough of the chips, but they come out after Intel has either come out with faster chips, cut prices on equivalent processors, or both. As a result, AMD has to discount their products to compete.