AMD hungry for notebook market

Chip maker releases K6-2 processor -- readies "Sharptooth" processors for notebooks.

Taking a second stab at one of the industry's most lucrative markets, chip maker Advanced Micro Devices Inc. unveiled on Tuesday its low-power AMD-K6-2 line of processors for notebook computers.

The new processors, which include AMD's 3DNow! 3D-accelerating technology, will replace the company's current K6 line of notebook chips and will be available at 266MHz, 300MHz, and 333MHz. "We are moving into our second phase of our mobile strategy with the K6-2," said Dana Krelle, vice president of AMD's computational products group. "Compaq and Packard Bell NEC have already adopted our products, and our the latest addition is Toshiba."

Toshiba announced that it would use the AMD processor in its new Satellite 2520 notebook, which will be only sold in Japan. "We expect Toshiba in the coming months to come to the US with an AMD-based product," said Krelle. The addition means that AMD counts the top-two laptop makers as customers. The move also attacks one of AMD rival Intel Corp.'s highest margin markets -- notebooks.

On Tuesday, Intel (Nasdaq:INTC) announced that its profit margins on processors bounced back to 58 percent in the final quarter of 1998 based on higher margin products, such as Pentium II chips for laptops. Previously, the chip giant had gone as low as 49 percent.

Yet, AMD has a long way to go before its share of the notebook market threatens Intel, said Katrina Dalquist, industry analyst with market watcher International Data Corp. "Most notebook sales are to businesses," she said, "and there the rule still is 'Intel Inside.'" Last year, about 6.5 million notebook computers were sold in the U.S. at an average price of $2,500, said Dalquist.

The new mobile solution should also give a boost to AMD's average processor selling price -- a price that president and CEO Jerry Sanders III has previously said needs to top $100 for the company to be profitable. Prices on the new product are $106 for the 266MHz chip, $187 for the 300MHz chip and $299 for the top-of-the-line 333MHz chip. At those prices, the chips will find themselves in notebooks priced under $2,500, said AMD's Krelle.

"They could find themselves a popular laptop in the small office and home business crowd," said IDC's Dalquist. AMD hopes to add more enthusiasm for its line up this summer, when the company releases a version of its 'Sharptooth' processor, also known as the K6-3, for the notebook market. The processor will add a 256KB cache on the chip, boosting performance.

Today, the primary difference for customers in considering AMD's K6-2 processors is the 3-D accelerating instructions known as 3DNow. While originally intended to speed 3D games by increasing the amount of data the processor can send to the 3D graphics board, 3DNow instructions have limited use in business.

However, Krelle pointed out several possible applications that could benefit from AMD's special instructions, including voice recognition, soft 3D audio processing, soft DVD playback, and especially compression and decompression of Internet content. "Compressing and decompressing data for Internet transmission is probably be the most ubiquitous benefit of 3DNow for businesses," said Krelle.

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