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AMD renames K6, may reprice

The chipmaker renames its K6 3D chip just before launch and gives some indications that it may try to price its lead processor against the Pentium II.

Advanced Micro Devices has renamed the K6 3D chip just before its launch and given some indications that it may try to price its lead processor against Pentium II chips for the first time.

The K6 3D is now the K6-2, chief executive officer Jerry Sanders announced yesterday at meeting for AMD shareholders.

Set to be formally released on May 28, the chip is particularly tuned to run graphical applications such as games. It features better floating point performance than standard K6 chips, an important feature for pixel manipulation, and is compatible with motherboards featuring a 100-MHz system bus, which improve the speed at which main memory and the processor communicate.

The boost in floating point performances comes from the addition of 3D Now, a series of 21 new instructions. Both Cyrix and IDT will also adopt the technology.

While AMD has contemplated the change for some time, the actual decision to change the name came late last week, according to an AMD spokeswoman.

Interestingly, the new line of processors could provide AMD an opportunity to hike its prices. Throughout 1997, AMD kept the cost of the K6 at 25 percent below Intel Pentium MMX processors running at the same speed. This put the K6 far below the prices of Pentium II chips.

But MMX processors are currently being phased out in favor of generally more expensive Pentium II Processors and also less expensive Celeron processors. Sanders and other AMD executives have said that they won't price their products against Celeron processors running at equivalent speeds, however, because of negative reviews associated with the Intel chip.

In fact, AMD is really stating that the K6-2 is really a competitor to the Pentium II. "The K6-2 will perform comparably to the Pentium II of a comparable speed," stated AMD's spokeswoman.

If AMD can pull off such a pricing shift, it would likely fatten company revenues. The 266-MHz K6 costs $156--roughly the same as the 266-MHz Celeron--but $86, or 55 percent, less than the 266-MHz Pentium II. (Intel is an investor in CNET: The Computer Network).

Unfortunately, the strategy is untenable, according to Ashok Kumar, semiconductor analyst at Piper Jaffray. AMD may well try to price the chip at five percent below Intel's pricing, he thinks, but would fail because Intel provides substantial marketing dollars to computer vendors. The monies would liquidate the slight discount and take away any financial incentives for computer vendors to convert to AMD.

"Once again, AMD has its head in the clouds," Kumar stated.

Additionally, Intel will no doubt be cutting prices during the year.

After the K6-2's May debut, AMD will follow up in the second half of the year with a 350-MHz version of the K6-2 as well as the K6-3D+, code-named Sharp Tooth. The latter, which will contain an additional secondary or "cache" memory similar to the Pentium II, will also get a new name upon release, the spokeswoman added.

Computer vendors are expected to release, or at least announce, consumer PCs based on the K6-2. IBM will probably become one of the first companies to adopt it, as Big Blue is one of AMD's largest partners and will begin manufacturing K6 chips later this year. IBM received early allotments of AMD's last processor, the K6-300, when that was released earlier this year.

While the 100-MHz system bus figures as one of the key features of the new processor, most of the motherboards and computers released simultaneously with the K6-2 will contain slower system buses. Only a few motherboards using the 100-MHz system buses will be commercially available in late May, according to analyst sources and executives at chipset companies. In practice, the 100-MHz system bus is unlikely to become a common feature until the third quarter.