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Gateway moves back to AMD with new PC

The computer maker jumps back into the AMD camp with a new line using the Athlon chip, although how the relationship will play out remains unclear.

Gateway jumped back into the AMD camp this morning with a new computer using the Athlon chip, although how the relationship will play out remains unclear.

As expected, Gateway today announced that it is including a 600-MHz Athlon processor in its Select line of consumer PCs while executives said faster versions of the Athlon will appear in Gateway systems in the near future.

The move comes days after Gateway chief executive Jeff Weitzen blamed lower-than-expected earnings for the for the fourth quarter on a shortage of Intel chips and promised that the company would take "definitive and aggressive steps" to make sure such shortages never hurt Gateway again.

Today's deal, however, seems more like a marriage of convenience rather than undying love. Gateway has picked up the Athlon because it is a better buy than competing chips from Intel, said Mike Ritter, director of product marketing for Gateway's consumer line. Gateway in fact will assiduously avoid selling Intel- and AMD-powered computers that fill the same market niche, to avoid customer confusion

"The proposition is value at this time," Ritter said. The 600-Mhz Athlon chip will essentially displace a 450-MHz Pentium III--one of the chips that was in tight supply--in Gateway's $1,299 PCs.

Unfortunately for AMD, history has favored Intel. Gateway discontinued using AMD's K6-2 processors because there was substantial overlap with Gateway's Celeron-based computers, he said. Last fall, Gateway also scuttled a 600-MHz Athlon computer because of price/performance overlap with a Pentium III systems.

"Were we to get in a situation where we have a Pentium III and Athlon (system) at the same price point, we are not going to offer both," Ritter said. Gateway decided against an Athlon system earlier because "at that point in time, that was the situation we were in," he explained

Still, AMD could be better positioned to serve Gateway than in the past, said Kevin Krewell, an analyst with MicroDesign Resources. AMD is providing more cohesive support for Athlon than the last time around, he noted. Gateway has also learned the hard lesson about relying on a sole chip supplier.

"It does require more effort and expense by Gateway but does provide them with an effective hedge on technology," he said. "I think a two vendor solution is the best bet--it gives Gateway, and their customers, more choices."

January is shaping up to be a hot month for the microprocessor market. Via is expected to release its "Joshua" processor for low-cost PCs in the near future. The chip is based around designs the Taiwanese company acquired when it bought Cyrix from National Semiconductor.

Next week, meanwhile, Intel is slated to release new Pentium III processors for notebooks that feature its latest technology for better battery life. A day later, Transmeta, the secretive Silicon Valley start-up, is expected to reveal the technology behind its Crusoe processor, which sources predict will be targeted to portables.