Compaq adopts AMD for cheap PCs

AMD's 233-MHz K6 will appear in Compaq's Presario consumer line, said Ashok Kumar, a semiconductor analyst with Loewenbaum & Company. At least one of the Presario-AMD computers coming out next month will cost $999, he said, and Compaq will follow up these releases with a 266-MHz K6 machine in the second quarter.

The Compaq-AMD alliance, as reported in October by CNET's NEWS.COM, comes as manufacturers and customers alike are flocking to the sub-$1,000 PC market, a phenomenon unforeseen only a year ago. Compaq's plans make it clear that AMD and Cyrix are emerging as major processor players in the market for inexpensive PCs, an area that chip giant Intel has addressed only as an afterthought.

Manufacturers have turned increasingly to chipmakers like AMD and Cyrix as the PC companies are forced to find ways of squeezing profits from the sub-$1,000 computer, whose margins are unforgiving. In many cases, processors from AMD and Cyrix cost much less than comparable offerings from Intel. (Intel is an investor in CNET: The Computer Network.)

Compaq's AMD machines are being shipped to the distribution and retail channels now but won't be announced until January to avoid dampening any holiday sales, Kumar said.

"They won't be out for Christmas," he said. "If they announce it next week, [the new machines] will hamper Compaq's Christmas sales."

Compaq has thus far enjoyed a fair amount of success in the non-Intel sub-$1,000, market. The Presario 2200, which uses a Cyrix MediaGX chip and costs less than $1,000, has been one of the best-selling consumer computers in the second half of the year, according to Computer Intelligence.

Cyrix executives have also said that they are in discussions with large manufacturers about inserting the MediaGX into mobile computers in 1998. "We expect to see notebooks based on the MediaGX in early 1998," stated Steve Tobak, vice president of corporate marketing at Cyrix.

Tobak would not confirm whether a deal had been signed with Compaq, but pointed out that the notebook field is made up of only a few vendors.

Compaq is not the only major PC maker looking at the non-Intel processors. Sources close to Cyrix said Digital Equipment is in negotiations with Cyrix about building a low-cost corporate machine around the MediaGX.

Besides bringing potential market share to Cyrix, the Digital deal would be significant in that it would mark the first time that a major vendor uses the MediaGX in a corporate box. So far, most K6 and MediaGX chips have been used in consumer computers.

AMD chairman Jerry Sanders told NEWS.COM earlier this year that his company is in negotiations with still another major manufacturer, which could result in AMD-powered computers in the second quarter of 1998.

But profit margins for AMD could suffer because the company is feeding at the bottom of the market while Intel continues to reap the financial rewards of the higher-end, higher-margin businesses.