Thursday, Packard Bell NEC is expected to announce that it will begin to incorporate processors from Cyrix in a number of its computers, a bold move for the ailing vendor that will likely bring industrywide PC prices down further.
Packard Bell is expected to introduce a number of PC models across a range of price points using Cyrix processors, according to industry sources familiar with the rollout. Packard Bell will use the MediaGX processor for lower-end machines as well as the 6X86MX processor family for midrange computers. Cyrix processors will allow Packard Bell to bring out PCs as low as $599.
Packard Bell is adopting Cyrix processors primarily as a way to bring its prices down and revive sales, said sources. The company has been losing market share in the consumer PC arena to such rivals as Compaq, which began to match Packard Bell in pricing last year. Packard Bell has also been under pressure from parent company NEC to turn a profit.
The deal will likely be a boon to Cyrix too, which lost a major desktop PC partner when Compaq started to use chips from Advanced Micro Devices earlier this year. Cyrix processors are substantially less expensive than Intel processors running at approximately the same speed. (Intel is an investor in CNET: The Computer Network.)
Though previously wedded to a policy of using only Intel processors, Packard Bell now needs to take bold measures to arrest its market share slide, said Nathan Brookwood, an analyst at Dataquest, a marketing research firm. He added that they really have nothing to lose anymore by going with Cyrix processors.
An overriding concern about antagonizing Intel is often brought up by analysts as a reason that many PC vendors do not stray from an Intel-only policy.
But Packard Bell, with a reputation to uphold as the low-price consumer PC leader, has been devastated by Compaq's strategy. In particular, Compaq?s brash move to go with Cyrix processors for its low-cost boxes shook up the PC market and have been popular with consumers, eating into Packard Bell's market share.
"This will improve their competitive play" by making their systems cheaper, said Roger Kay, computing analyst at International Data Corporation.
Packard Bell's timing is also impeccable, he added. Currently, Intel is under investigation by the Federal Trade Commission for allegedly monopolistic business practices. As a result, it is unlikely that the chip maker will try to apply pressure, or authorize incentives, to get Packard Bell to switch directions again.
"They are not going to make any waves that could be considered anti-competitive at the moment," he added.
However, although Cyrix chips will make Packard Bell machines more competitive, the shift is a titanic break in tradition. Packard Bell has depended upon Intel processors and technology since its founding and never used rival products. Intel, in fact, loaned $500 million to Packard Bell earlier in the decade when the company found itself stuck with excess inventory. NEC is also one of Intel's largest worldwide customers.
While Compaq and IBM have adopted a multiprocessor strategy, most other major vendors have not.
Recently, Intel has also been quick to react to competitors and these days can usually offer PC vendors a chip at almost every price point in the market, a major disincentive for some vendors when they begin to consider alternative suppliers.