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Quality, quantity key for AMD

AMD promises to take on Intel's upcoming Pentium II on price, but its success hinges on how fast it can get 233-MHz K6 chips out and who uses them.

Advanced Micro Devices (AMD) promises to take Intel's upcoming Pentium II to the mat in terms of pricing, but its success hinges on how fast it can get the competitive 233-MHz K6 chips out the door and who uses them.

AMD's high-performance 233-MHz version of the K6 processor is not expected to be available in any kind of volume until late in the second quarter, about the same time that Intel's Pentium II chips will be shipping in volume, sources said. Intel's Pentium II chips are expected to run at 233 MHz initially and soon thereafter at 266 MHz.

Lower-performance 166- and 200-MHz K6 processors, which compete with existing Pentium MMX processors and the Pentium II, should begin shipping in volume in April, according to sources at a major motherboard and system manufacturer that is planning to offer both motherboards and systems based on the K6 processor.

So AMD and system vendors will try to emphasize price as a critical differentiator for the K6: The chip is cheap and can plug in to existing PC designs, which are also cheap since they've been around long enough to plummet in cost.

PCs which use the AMD K6 processor should be priced between $300 and $500 less than comparable Pentium II PCs, according to Mercury Research, a Scottsdale, Arizona-based marketing research firm. For example, a 233-MHz Pentium II system might be priced at $3,000, while a K6 system running at the same speed may be priced at $2,500, according to the firm.

A quick look at the price difference between K6 motherboards and Pentium II motherboards makes clear why this is. A motherboard is the main circuit board in a computer and holds the core electronics, as well as much of the computer's value.

A 166-MHz K6 motherboard with the processor installed is expected to have a street price of about $325, according to the sources. A 200-MHz K6 motherboard should command prices of about $425, while a 233-MHz board should be about $650.

These prices compare very favorably, if not dramatically, with Pentium II motherboards. Boards from this manufacturer carrying the Intel chips are expected to range in price from about $1,000 to $1,200. Intel-made motherboards are expected to be less expensive, ranging between $600 and $900, according to sources, but still significantly more expensive than AMD K6 boards.

"The end-user perception is that AMD is low-end and cheap," an official at the motherboard company said.

But price alone won't cut it. To drive large profits, AMD's K6 processors have to find their way into systems from top-tier vendors.

"This depends on AMD's volume and product portfolio. How deeply they can penetrate the top tier is based on the road map," said Mike Feibus of Mercury Research, referring to AMD's ability to show a long line of processors that compete aggressively with Intel on not just price but on production quantities and performance.

Companies such as Hewlett-Packard and Compaq and are strong candidates for the K6 processor and may indeed opt for it in certain products. But a lasting commitment to AMD will depend on the chip maker emulating, to some degree, Intel's ability to deliver the goods at high performance and high volume, something AMD has yet to prove.

"There's a certain amount of fear of Intel [at PC vendors]. So they want to make sure the [the K6] will carry them through," Feibus added.