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Gateway embraces AMD chips

In a major win for Advanced Micro Devices, the PC maker says it will use AMD's chips in upcoming systems in addition to processors from Intel.

In a major win for Advanced Micro Devices, PC maker Gateway said it will use AMD's chips in upcoming systems in addition to processors from Intel.

Gateway said the move would help it offer affordable computers to its customers.

"Both Intel and AMD offer a broad range of high quality and competitively priced product lines," said Jim Booth, Gateway's vice president of Global Materials and Supply Management in a prepared statement. "We made the decision to take advantage of AMD's offerings to add flexibility to our product line and to give our clients choices."

The company recently said it would ship systems in Japan with AMD chips, but today's move represents a more significant blow against Intel.

Gateway is the second largest direct vendor of PCs and a significant player in the consumer market. Gateway's Booth did say, however, that Intel would "represent the bulk of [its] microprocessor purchases."

Systems using AMD chips are expected to ship as early as the second quarter of 1999.

Regardless, the move will help boost AMD's market share against Intel, which has struggled some in its attempts to offer chips for the low-cost PCs that now make up nearly 60 percent of the retail marketplace. Nine out of the top 10 PC vendors now use AMDs chips, leaving only Dell Computer on the sidelines while it ponders whether or not it should offer low-cost PCs--the market where AMD currently reigns.

"AMD is continuing to hold on in the retail market," said Stephen Baker, senior hardware analyst with PC Data, a market research firm. According to Baker, the K6-2 was the overall best selling chip in the month of January, representing 41 percent of all PCs sold in retail superstores and mail order/online stores.

But can AMD make money?
The news comes on the eve of the announcement of its new K6-3 chips, slated to be introduced on Monday. AMD is counting on the new chips to boost earnings, but the company has in the past had trouble producing enough of its fastest chips--which can command higher prices. For its part, Gateway noted that it was satisfied that AMD's production capability "met flexibility and demand requirements."

Additionally, AMD's market share gains have not come without a price--the company is slugging it out with Intel in ongoing rounds of price cuts. The result of the rapid drops in prices: AMD warned investors that it might incur an operating loss for the current quarter.

Systems using AMD chips are expected to ship as early as the second quarter.