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Digital pushed into AMD's arms?

In the wake of legal wrangling with Intel, Digital readies new systems with AMD K6 chips.

In the wake of some legal sparring with Intel (INTC), Digital Equipment (DEC) is preparing to launch new systems with processors from Intel competitor Advanced Micro Devices (AMD).

Next week, Digital will be the first major computer vendor to announce systems using AMD's speedy new K6 processor. Only smaller PC manufacturers to date have announced boxes with AMD's K6 processor. Digital announced soon after the AMD introduction of the chips in April that it intended to use the chips in commercial desktops.

The AMD K6 competes with Intel's high-end Pentium processors as well as its new Pentium II and is seen as AMD's first truly competitive offering in terms of performance.

While industry analysts believe that the timing of the introduction is only coincidental, Digital may in fact be forced to get chummier with AMD if its heretofore cozy relationship with Intel takes a turn for the worse.

Digital and Intel are embroiled in a legal fight that Digital initiated last month when it sued the chip giant for allegedly violating Digital patents on processor technology. Intel upped the ante when it countersued May 28, charging Digital with illegally holding onto certain intellectual property that belonged to Intel. When Intel also threatened to cut off chip supplies to Digital, the computer maker shot back that it might file an antitrust lawsuit if Intel carried out its threats.

Digital may well be increasing its commitment to AMD's K6 processor because of the current state of relations between Digital and Intel, according to Dean McCarron, a principal at Mercury Research.

Intel has decided not to seek a preliminary injunction in its countersuit, an Intel spokesman said today. "We will just let this case take its course," he added. This means that for the time being, Digital can continue designing new systems using unannounced Intel processors.

"On a quarter-for-quarter basis, we review processor supply agreements with customers and we have a contract with Digital through the third quarter," said an Intel spokesperson. In the fourth quarter, the agreement will be renegotiated along with those of all other Intel customers. The Intel spokesperson added that "the relationship with Digital is no longer what it was before."

Intel is more than capable of playing favorites, according to industry observers. "Intel by no means treats all of its customers equally. Customers have various levels of disclosure on Intel's future plans, various levels of access to initial prototypes, various degrees of access when production parts are on allocation, and of course various discounts off of list price," says Linley Gwennap, editor-in-chief of the Microprocessor Report, an industry newsletter.

"Intel chooses which customers to favor in these situations; this choice is typically based on the size of the customer, but clearly other factors come into play, and Digital's blatant attack on Intel is not being received well in Santa Clara," Gwennap says.

Gwennap and other observers don't really expect Intel to cut off Digital altogether, mostly because this might raise restraint-of-trade issues that would draw attention from the federal government. But the company could try to make life difficult for Digital.