In Market Coup, AMD Chips Win Role Throughout High End of HP PC Line

Brandweek,  Feb 21, 2000  by Todd Wasserman

Tags: Advanced Micro Devices Inc., chip, Hewlett-Packard Co., PC

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Intel's shortage of high-end chips has led at least one major PC maker, Hewlett-Packard, to go with an all-AMD lineup on its high-end consumer systems in April, a retail source said.

AMD took advantage of Intel's temporary shortage to get high-end placement with a major PC vendor, a boon for a company that is known as a low-end competitor to Intel and still charges far less than Intel for chips of comparable power. PC manufacturers pay $595 for AMD's top-of-the-line 850 MHz Athlon versus $749 for Intel's 850 MHz Pentium III, said analyst Dean McCarron of Mercury Research, Scottsdale, Ariz. Despite its recent engineering advances and continued price differential, AMD still held only 15.9% of the market versus Intel's 82.5% for the fourth quarter, he said.

HP quietly introduced some PCs based on AMD's high-end Athlon chips last month, but the April rollout would be the first from a major vendor to use exclusively AMD at the high end. HP is currently the No. 2 PC vendor at retail, next to Compaq Computer, per IDC, Framingham, Mass. HP'S apparent move follows complaints from Dell and Gateway that fourth-quarter PC sales suffered because of shortages of high-end Intel chips.

"It looks like the party's over," said the retail source, referring to Intel's domination in the high end.

AMD marketing director Bob Kennedy said he had no firsthand knowledge of Intel's shortages, but acknowledged, "It does seem like they may be having issues delivering product." But he declined to discuss, or even confirm, the high-end placement with HP.

Intel's shortage stemmed from the company's pre-announcement of its 800 MHz Pentium III chip in late December and a factory transition to a new chip-making process. "Normally, when Intel pre-announces a chip, they have a pile of them in a warehouse, but this time it looks like they didn't," said McCarron.

He said Intel likely pushed up its pre-announcement date to undercut AMD's 800 MHz Athlon chips, announced in early January.

The factory switchover exacerbated the shortage, said Kelly Spang, senior analyst with Technology Business Research, Hampton, N.H.

"In the fourth quarter [Intel] met all its up-front demand, but it couldn't meet additional orders, so they're still catching up," she said.

To get the message out to business customers, AMD will continue the print portion of a $15-18 million campaign it launched in October via agency Hill, Holiday Connors, Cosmopoulos, Boston. With its far greater firepower, Intel launched a $150 million TV and print effort via agency Messner Berger McNamee Schmetterer/EURO RSCG, N.Y., in September.

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