Today's price cuts will allow AMD to better position Athlon-based computers for the back-to-school shopping season, typically the second strongest consumer market of the year.
To date, Athlon, which came out a year ago, has largely been adopted in the performance segment of the consumer market. The new cuts will effectively allow computer makers to adopt the line more broadly across the price spectrum. For example, the 850-MHz Athlon, which has been mostly used in $1,500 computers, dropped from $507 to $282.
The cuts also presage the release of the 1.1-GHz Athlon, which will cost $853 in volume. As reported earlier, this chip will hit shelves on August 28.
Getting Athlon into the budget category is important for AMD because of a hiccup in the adoption of Duron, an inexpensive version of Athlon. AMD introduced Duron in June. U.S. computer manufacturers, however, had already completed their designs for the back-to-school cycle. AMD has also used its factory capacity, which is tight in comparison to demand, to produce the more expensive Athlon, according to analysts.
As a result, Duron PCs won't hit shelves in the United States until at least a month from now, leaving AMD vulnerable in the sub-$1,000 space, analyst Stephen Baker of PC Data said earlier this month.
Under the price cuts, the 1-GHz Athlon drops 38 percent, from $990 to $619, in volume quantities, according to AMD, while the 950-MHz falls 39 percent, from $759 to $460. The 850-MHz version was lowered 44 percent, from $507 to $282 in volume, and the 800-MHz version is discounted 40 percent, from $359 to $215.
Actual retail prices will vary. Some of the Athlon chips, for instance, have been selling for less than the official wholesale price at some dealers. Intel is expected to counter with price cuts of its own in September, according to, among others, Joe Osha, an analyst at Merrill Lynch.
The discounts roughly coincide with the first anniversary of the Athlon, a processor family that has been a major force behind the company's renaissance. A year ago, AMD's stock was trading at around $20, a decline attributed to a bruising price war with rival Intel and consecutive quarterly losses. Atiq Raza, the company's COO and then-likely next CEO, had also announced his departure in July. Job cuts had taken place earlier in the year.
Despite these issues, Athlon gained rapid acceptance in the consumer market and is starting to make inroads into the commercial market. Barring unforeseen problems, AMD will likely post an annual profit this year, the first time since 1995.
Along with the Athlon cuts, Duron chips were cut from 33 to 28 percent. The Duron price cuts, however, will not greatly affect the prices of U.S. consumer PCs just yet. Duron won't appear in Gateway computers until late September, while Compaq won't come out with a Duron system until the holiday buying season, according to representatives with both manufacturers. A Hewlett-Packard spokeswoman added that the company wouldn't come out with a Duron computer until the first quarter of next year.
IBM has adopted Duron in Canada and parts of Asia, while NEC Packard Bell, which still exists in Europe, has released Duron-based computers on the continent.