August 8, 2001 12:30 PM PDT

AMD works on its megahertz image

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Chipmaker Advanced Micro Devices will start prodding consumers to jump over the megahertz gap next month.

AMD is preparing to launch its next desktop Athlon processor, a 1.5GHz chip, in late September, sources said.

The new desktop processor will be AMD's fastest chip. But despite performance boosts, the 1.5GHz Athlon will still be a clock speed underdog compared with rival Intel's Pentium 4 processor line, set to hit 2GHz later this month.

As a result, AMD faces a huge marketing challenge: shifting the terms of its ongoing speed battle with Intel from pure clock speed to pure performance.

"I would expect to see (AMD) marketing shift to emphasize...the architectural value of a (processor) core and the fact that for the same amount of clocks, you're getting more performance," said Dean McCarron, principal analyst with Mercury Research in Scottsdale, Ariz. "That's a challenge. It's not easy to convey."

The clock speed issue has dogged AMD before, but the chipmaker intends to address it head-on this time with a marketing campaign that will stress that numbers don't tell the whole story, according to sources familiar with the company's plans.

The issue is more pressing now because AMD will lag Intel by a full 500MHz in clock speed--the speed at which a processor executes instructions.

But the new Athlon chip won't necessarily be slower. Because of its design, the Athlon processor core handles more instructions per clock cycle than the Pentium 4. This allows the Athlon to keep up and in some cases exceed the Pentium 4 in performance, depending on the application and the hardware configuration.

In many published reviews, the slower Pentium 4 chips, such as the 1.5GHz, have tested no better in performance than a 1.1GHz or 1.2GHz Athlon. Analysts say the 2GHz Pentium 4 should perform better processing images for the computer game "Quake 3" and certain other media benchmarks. The 1.5GHz Athlon, meanwhile, is expected to perform better on most Winstone benchmark tests, which mirror more ordinary PC tasks, such as creating a document.

Intel believes Pentium 4 will prove the better chip. Over time, the company says its faster clock speed coupled with improvements to the Pentium 4's underlying architecture, dubbed NetBurst, will allow it to lead in performance.

"As we move the Pentium 4 up in clock speed and fine tune it over time, you will see the Pentium 4 increase it's current lead in performance and megahertz," said Intel spokesman George Alfs.

The new Athlon will also be boosted by a pre-fetch Level 2 cache, which anticipates data needed by the processor core and stores it ahead of time in high-speed "cache" memory. The chip will also sport the SSE multimedia instruction set, aimed at enhancing multimedia performance.

Athlon "is an extremely competitive processor, even at the lower frequency," said Kevin Krewell, senior analyst with MDR/Instat (formerly MicroDesign Resources) of San Jose, Calif.

The Athlon trails in clock speed, and "that's perceived to be slower, but it's not," Krewell said. "It's just a perception in that respect."

Herein lies AMD's marketing problem. While sophisticated PC buyers may consider the current Athlon a better buy or understand that a 1.5GHz Athlon can keep up with the 2GHz Pentium 4 in overall performance, analysts say the vast majority of PC buyers just look at the numbers and go with the bigger one.

"We've got a market that's conditioned to using megahertz as a proxy for performance," McCarron said.

It will be up to AMD to convince PC buyers otherwise. As a result, the chipmaker must wage a battle to change PC buyers' decision-making process away from clock rate to a wider view of total PC performance.

AMD executives declined to comment on unannounced products.

The company could adopt a performance rating, similar to measurements used in the past by AMD, Cyrix and other Intel competitors to rate chips based on their equivalency to an Intel processor.

Cyrix sold a Cyrix M2 PR300, for example, as equivalent to the Pentium II 300MHz, though the M2's actual clock speed was much slower.

But it's unlikely AMD will go down that path. Instead, it is likely to take a more direct approach with customers, likely using advertising to spell out its position.

AMD could also take a page from Apple Computer, whose Macs use PowerPC chips that lag Intel chips in clock speed but compete with or exceed them in most aspects of real-world performance.

Apple CEO Steve Jobs, during his Macworld keynote address in New York last month, went to great lengths to discuss overall processor performance vs. pure clock speed. His talk included a lengthy tutorial by Apple hardware guru Jon Rubinstein on chip design.

To date, AMD "hasn't done anything from a marketing point of view to help its case," Krewell said. He suggested that advertising would help AMD deliver its performance message and also build its brand name among less-sophisticated PC buyers as the back-to-school and holiday buying seasons approach.

If AMD is unsuccessful in educating PC buyers, analysts say, the chipmaker will likely be forced to keep pace with Intel price cuts, selling its flagship 1.5GHz Athlon chip at lower prices than a chip of its performance could otherwise command. Such a situation could further drag down average selling prices for AMD chips, an important element in the company's goal to break even in its current third quarter.

AMD may not have much of a choice on price cuts, however, if Intel follows through with steep discounts expected by some analysts. Lehman Brothers analyst Dan Niles issued a report this week forecasting that Intel would chop Pentium 4 prices in half late this month, with further cuts in October if sales don?t pick up.

 

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