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AMD surging in consumer PC market

Though Advanced Micro Devices isn't bowling over Wall Street, it's certainly swamping archrival Intel at retail stores across the country.

Though Advanced Micro Devices isn't bowling over Wall Street, it's swamping archrival Intel at retail stores across the country.

In a scenario that would have seemed unbelievable only a year ago, AMD has swept the shelves at many consumer outlets. And the success comes despite less-than-encouraging earnings reports from the Sunnyvale, California-based chip manufacturer.

Sunday paper inserts are awash in AMD green. "We make more money on the AMD systems," said one representative at a CompUSA store in suburban Philadelphia. "It's all AMD...that's what they send us," quipped a sales person.

Importantly, AMD's momentum stems from design wins among the top three retail suppliers--Compaq, IBM, and Hewlett-Packard.

But Intel isn't standing still. On January 4, the company released new Celeron processors and pledged to win back retail market share. Price cuts on chips have flown from Intel since, and even faster Celerons are on the way next month. The company has also dedicated millions to a marketing effort around Celeron.

AMD's rise can be seen at CompUSA, the largest PC retailer, where desktop PCs using Intel processors are completely absent in some lines. The store sells consumer systems from all three of the major consumer PC makers.

At some stores surveyed on the West and East coasts, CompUSA had no Compaq systems on the sales floor using Intel processors. All models, with exception of one or two that come with a Cyrix chip, were based on the AMD K6-2 processor.

An OfficeMax store on the East Coast had no Intel systems.

In a large downtown CompUSA store in New York, the makeup of consumer models from IBM is similar: AMD K6-2 across the board. An IBM spokesperson confirmed that most of its consumer systems use AMD chips but said this could change anytime. IBM evaluates the components it will use in consumer PCs month to month, he said.

"Megahertz sells," said Mike Feibus, a principal at market researcher Mercury Research. The megahertz rating, also known as clock speed, is the principal benchmark that consumers use to distinguish models.

At any given price point in the low end, AMD sells more megahertz, Feibus said. "This was Intel's wake-up call...now you see fast and furious price declines and speed bumps [increases] from Intel trying to correct this."

HP is also keen on using the K6. HP systems that appear at CompUSA and also electronics stores such as Circuit City and Microcenter, are also mostly AMD, though there are one or two Intel models.

A CompUSA store south of San Francisco carried no Intel-based systems from Compaq or IBM, though there were two HP models with Intel Pentium II chips. However, a sales person did say that new Pentium III systems from one or all of these vendors are expected in the coming weeks.

Not surprisingly, "AMD is using its beachhead in U.S. retail to push into other spaces that have historically been Intel-only market segments...areas such as notebooks, direct, and possibly even the corporate channel," Feibus said.

But Intel hopes new processor models will thwart those plans. On the 26th, the chipmaking giant will introduce the Pentium III processor, and high-end consumer systems from Compaq, IBM, and Hewlett-Packard are expected. Moreover, Intel continues to dominate business and corporate systems including notebooks, desktops, and servers.

News.com's Michael Kanellos contributed to this report.