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Gateway says it will double AMD chip use

Faced with a continued shortage of Intel processors, the PC maker says it will double the amount of chips it gets from Advanced Micro Devices.

Faced with a continued shortage of Intel processors, Gateway said this week that it will double the amount of chips it gets from Advanced Micro Devices.

"We'll probably double our AMD mix or better this quarter in our consumer space," Gateway chief financial officer John Todd said in a Banc of America Securities conference call.

The move comes about four months after AMD regained a spot in Gateway's lineup. In January, Gateway chief executive Jeff Weitzen blasted Intel for failing to deliver a steady supply of processors, something Gateway said led to lower-than-expected fourth-quarter sales. Weitzen vowed never again to let problems with a supplier cut into Gateway's growth.

Days later, the direct PC seller announced it would resume using AMD processors. Gateway is now "far and away" AMD's largest customer for its Athlon chip, said AMD spokesman John Greenagel.

Gateway executives also said they are comfortable with analysts' estimates for both revenue and earnings for the current quarter, though Todd noted that Gateway gets the bulk of its sales at the end of the quarter. Analysts are expecting Gateway to earn 36 cents a share, according to First Call.

"Right now we don't see any issues with supply affecting our ability to deliver the top line on a consensus basis," Todd said. "It does limit some of the upside from a consensus basis."

An Intel representative did not comment beyond reiterating Intel's earlier statement that supplies will continue to be tight this quarter, with constraints easing in the second half of the year.

Greenagel said AMD is counting on other big-name PC makers to follow Gateway's lead. The chipmaker has said it expects to ship 1.8 million Athlon units this quarter, up from 1.2 million in the first quarter. In the second half of the year, AMD expects to ship more than 10 million units.

"What you're seeing from Gateway is what we're expecting from other customers," Greenagel said.

As for Gateway, Todd said that beyond tight stocks of Intel processors and flash memory, the PC maker is enjoying ample access to disk drives, DRAM and flat-panel displays.

"It really comes down to managing the motherboards and the chip supply," Todd said.

Greenagel rejected the idea that AMD's business is improving just because Intel is stumbling. He noted that pressure from Intel once led AMD to try to improve speeds more quickly than was feasible and said the same thing could be happening at Intel.

"It's more than just Intel's failure," Greenagel said. "The fact is we've got great products."