HP bumps AMD up to business class

Hewlett-Packard will drive Advanced Micro Devices' Athlon XP processor to work this week.

HP plans to use AMD's flagship chip in its new Compaq D315, targeting the education, government and small-to-medium business market. The release of the new computer marks the first time that one of the "Big Three" PC makers--IBM, HP and Dell Computer--has adopted Athlon in a business desktop.

"AMD has been trying to get this kind of design for a long time," said Kevin Krewell, an analyst with The Microprocessor Report, an industry newsletter. "I can't say this opens the floodgates for AMD, but it's a big win at a major supplier in this marketplace."

The D315 is expected to sell for $650, before rebates. It will include an Athlon XP 2000+ processor, 128MB of RAM, a 20GB hard drive, a CD-ROM drive and no monitor. The machine also uses Nvidia's nForce chipset. HP initially plans to offer a $100 rebate on the D315.

Athlon, introduced by AMD in August 1999, earned rave reviews and early acceptance in the consumer market. Despite outperforming some chips from rival Intel early in its career, the chip still found a lukewarm acceptance in the business market, especially in the United States. Overseas, Fujitsu-Siemens and NEC did adopt Athlon for business PCs, while several smaller manufacturers, such as Micron PC and Gateway, began to sell Athlon XP computers.

On the portable side, pre-merger Compaq adopted AMD's Athlon and Duron chips in its Evo N115 notebook for small and medium-sized business customers.

Meanwhile, AMD pushed ahead with an aggressive marketing campaign, working to convince major manufacturers of Athlon's power and bragging to the industry that it would win a deal for a corporate desktop with a major manufacturer by the end of 2000. The sudden decline in PC sales in August 2000, however, dampened these plans. What's more, IBM and Gateway dropped the Athlon chip in favor of Intel's Pentium 4 early in 2001.

Although HP has no plans to market the new Compaq system to large corporate buyers, the victory is nevertheless important.

"Over the last 18 months, our customers in small and medium business, government and education, have started asking for AMD by name," said Jeff Groudan, head of commercial desktop marketing for HP's Personal Systems Group.

While customer demand helped AMD get its foot in the door, pricing sealed the deal, analysts say. A Dell Optiplex GX260 with a similar configuration and 2GHz Pentium 4 will cost $770 before rebates, according to Dell Web site. Dell is also offering a $100 rebate on the Optiplex.

The competitive price for the D315 may mean AMD likely had to sell HP its Athlon XP chips at a very low price, Krewell said. This is the cost of doing business, he said, when "there aren't a whole lot of players in this space that AMD can go to."

After being squeezed by Dell and now by HP's low-price Athlon computer, PC makers such as IBM and Gateway may find AMD's low price attractive and approach the chipmaker about using Athlon, said Krewell.