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Compaq edges closer to AMD

Compaq is using chips AMD-branded in some computers, possibly pointing the way to a closer relationship with the chip maker.

Compaq Computer (CPQ) is using chipsets from Advanced Micro Devices in some computers, possibly hinting of a closer relationship with the chip maker.

The Net PC Compaq is exhibiting at PC Expo this week runs on a chipset from Advanced Micro Devices (AMD). Lynn Schlemeyer, a Compaq vice president, said the displayed Net PC is a prototype of the commercial version that will ship later this year.

A chipset works in tandem with the main processor to form the core electronics in a PC. The main processor in the Net PC is from Intel.

Sources familiar with system claim the AMD-branded chipset is based on a design from Via.

The presence of the AMD chipset inside the Net PC indicates that the chip company is competing more effectively against Intel (INTC). (Intel is an investor in CNET: The Computer Network.)

Analysts and various computer executives state that Compaq, among other top-tier PC makers, is testing the waters with AMD's high-end K6 processor and possibly its chipsets.

"They [Compaq] are testing the K6," said Eugene Glazer, technology analyst at Fortis Adviser. "If you are going to go to AMD, it would make sense that it would be in a segmented portion of your product line," he added.

"They are certainly considering it. They've been supportive of non-Intel processors in the past," said Linley Gwennap, editor in chief of Microprocessor Report, an industry newsletter based in Sebastopol, California. "I would expect to see something [with a K6 from Compaq] late this summer...It will probably be in consumer products."

AMD would not comment on the matter but acknowledged that the company continually pursues new partnerships.

AMD has actively been trying to land major manufacturers to adopt the K6 microprocessor since its release this year. So far, Digital Equipment (DEC), German manufacturer Vobis, and Fujitsu have been the largest makers to adopt the K6. Digital announced that it would adopt the K6 shortly before it filed its lawsuit against Intel for patent infringement.

In March, Hewlett-Packard (HPW) announced that it would incorporate the K5 processor into its Net Vectra 500 computers.

For the most part, price has been the deciding factor for companies that have opted for AMD. The K6, which runs at speeds of 166, 200, and 233 MHz, competes with Intel's Pentium II processor but costs less. K6 chips obstensibly can be used in any machine designed for Intel chips, including Net PCs.

To complement the K6, AMD released the chipset, which supports high-performance data transfer in multimedia applications.

Although different brands will work with any processor from the same chip generation, they tend to work best with those from the same manufacturer. The MMX-compliant AMD chipset is the likely set to be incorporated into Compaq's Net PC.

AMD's incursion into the corporate market, however, will have to overcome some fairly significant hurdles, the first being price. Intel has slated aggressive price cuts on its main lines of processors, a move that could make it difficult for others to woo computer makers.

"It's price, price, price," said Todd Bakar, an analyst with Hambrecht & Quist, an investment bank in San Francisco. "I don't suppose Intel is going to sit idle and let others take away business."

Secondly, AMD has yet to establish itself with corporate buyers, which in turn will make computer manufacturers wary about adopting the platform for its main business lines or Net PCs.

"The corporate guys tend to be more concerned about the processor brand. To date, there is no real evidence that AMD can be a corporate brand," Gwennap said. "All the top-tier manufacturers used the AMD 486 chips, but in their consumer machines."

Historically, AMD and other smaller makers have also had difficulty in keeping up with demand, a fact that makes PC vendors hesitant to rely on them.