III's A Crowd: AMD Takes on High End

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February 26, 1999 (3:27 PM EST)

By Kristen Kenedy and Doug Olenick,

AMD's efforts to claim a share of the high-end retail PC market seem to be working. As systems based on the K6III, AMD's new high-end CPU, go on sale in stores this week, research shows AMD gaining ground in PCs with price points above $1,000.

Once strong only in the sub-$1,000 market, where it held about a 50 percent share in January, AMD's cut of the $1,000-to-$1,500 PC market grew from 33 percent in November to 39 percent in January, according to PC Data, in Reston, Va.

"AMD has made tremendous inroads in the last two months, and they will continue to do so," said Jeff Kirschblum, vice president of marketing, Nationwide Computer, in Edison, N.J.

AMD enlisted Compaq as the first PC OEM to use the 400-MHz K6III, a redesigned K6-2 that integrates 256 kilobytes of fast L2 cache and supports additional cache on the motherboard. AMD officials said tests show that adding up to 2 megabytes of cache increases application performance up to 8 percent, although some analysts question this.

Compaq will offer the 400-MHz K6III in its BTO PC kiosks, and will release a 450-MHz K6III system via BTO within 30 days.

Compaq K6III systems will start at $1,399 with 1 MB of L3 cache, 64 MBs of RAM, a 10 gigabyte hard drive, a 6X DVD-ROM drive, a 56K modem, 2x AGP graphics, and a 17-inch monitor. AMD said systems based on the K6III, and the new 450-MHz K6-2, will target early adopters and businesses.

"They're trying to seed corporate [sales] through the retail market," said Steve Baker, senior hardware analyst for PC Data.

As Intel promotes 266-MHz and 300-MHz mobile Celerons at low prices, Pollitt said AMD holds the upper hand: "One big issue we face is perception. Right now, AMD has an advantage in clock speed."

Regionals and independents point out that AMD pays commissions and offers in-store training to small retailers; Intel offers these programs only to top-tier chains.

"I see AMD as the Avis of the computer business. Avis' slogan is 'We try harder,' and AMD does," said Steve Hassell, PC buyer at American Appliance, in Pennsauken, N.J.

Kirschblum said AMD develops POP displays and in-store training, which generates enthusiasm among the staff. "We sell 4,000 PCs a month, which provides a steady customer base for AMD," he said.

Dave Sheffler, AMD vice president of sales for the Americas, said regionals and independents are "significant" to AMD. "When one of the other guys drop the ball, it just creates a vacuum for us," he added.

To be successful at high price points, AMD must deliver high-speed K6-2 and K6III chips on schedule. Analysts said AMD's primary weakness is its inability to execute plans effectively. More important, AMD must meet delivery schedules for the new K7, expected to ship in the first half of the year.