August 18, 1997 5:10 PM PDT

AMD lands IBM

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Advanced Micro Devices' (AMD) quest for a top-tier manufacturer to adopt the K6 processor came to fruition today as the company announced that IBM would adopt the microprocessor for certain models in the Aptiva line.

IBM's consumer division will adopt the K6 microprocessor for Aptivas priced at $1500 and below, said Bill Hughes, an IBM spokesman. Specific models and prices were not announced, although Hughes said that that new K6 Aptivas would be out before the end of the year.

"It [the IBM deal] is significant. The ideal for AMD is to get as many tier-one vendors as they can get and sell higher volumes," said Dean McCarron, a principal at Mercury Research..

Getting manufacturers to adopt the K6, which competes against high-end Pentium MMX and low-end Pentium II chips from Intel, has been an uphill battle since the processor's debut this past April. Until the IBM announcement, Digital and Acer America were the only major U.S. vendors using the K6.

Digital adopted the K6 right before it filed a patent infringement suit against Intel and has claimed in court documents that Intel may attempt to use its allegedly de facto monopoly position in semiconductors to damage Digital's business.

Price has been one, but not the only, obstacle for AMD. Intel cut prices on its entire processor line earlier this month and is expected cut prices again in November. Combined, the cuts have reduced the price of some Pentium MMX processors by up to 50 percent. MMX-enabled chips are even expected to appear in sub-$1000 computers by the end of the year or by early 1998.

AMD has cut prices to keep up with Intel, but with bargain basement prices for Intel equipment, there is little incentive to switch processor brands, according to a wide number of analysts. One of the Acer computers with a K6 sells currently for $999 without a monitor while a Digital system with a 166-MHz K6 chip has been repriced at around $1000.

AMD also must counter Intel's marketing. Intel has earmarked close to $1 billion for its "Intel Inside" advertising campaign, which essentially will go to computer companies that agree to put the logo on their computers and feature Intel in their own advertising.

The K6 has received greater success in Europe and Asia, where the "Intel Inside" campaign has not been carried out with the same gusto, said Brian Matas, an analyst with Integrated Circuit Engineering.

Cyrix landed a similar deal with IBM recently, though smaller in scope. In that deal, IBM agreed to use the Cyrix 6X86 chip in the Aptiva E40, which will be sold in Radio Shacks, said Stan Swearingen. IBM chose the Cyrix chip for certain Aptiva models for the European market as well, said Swearingen.


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