March 25, 1997 10:45 AM ET
AMD will price K6 25 percent below Intel prices
By Lisa DiCarlo

On April 2, Advanced Micro Devices Inc. will find out just how close it can get to Intel Corp. pricing without shooting itself in the foot. The chip maker will announce its K6 family, called K6-PRII, in 166MHz, 200MHz and 233MHz versions. While AMD will price the CPUs below comparable Intel parts, observers said the discounts may not be deep enough to entice PC makers into abandoning Intel. In 1,000-unit quantities, a 166MHz K6 will be priced at about $210, a 200MHz chip at about $315 and a 233MHz part at about $450, said sources familiar with the pricing. The prices put AMD's processors at about 25 percent below Intel's Pentium Processors with MMX Technology, sources said. "AMD is pricing the products with the same arrogance that Cyrix [Corp.] did when it rolled out the M1," said Ashok Kumar, analyst at Southcoast Capital Inc., in Austin, Texas. Cyrix last year priced its then-new 6x86 at a premium and paid for it, as it was forced to fight a price war both with its manufacturing partner, IBM, and with Intel itself. Kumar estimated that PC makers could save between $50 and $75 per PC by using an AMD processor--costs that could be passed on to customers--but that is not enough for top-tier PC makers to leave the Intel fold. "We do not believe that the increased profit per seat that AMD offers is incentive enough for the Tier 1 OEMs," he said. Despite the cost, however, at least one large PC maker, Hewlett-Packard Co., is nearing a deal with AMD to use the K6 in its small-business-oriented Vectra 500 line, sources close to the situation said. The ballyhooed K6 line is a do-or-die product for AMD. The company is still smarting from its K5 debacle; that line of microprocessors was about six months late to market last year, and was given bargain-basement pricing to make up for lost time. Because of AMD's huge fab capacity and projected positive yields, analysts give the K6 a good chance of success, but flawless execution is required. "For them to attract big PC makers, they need to offer between 30 and 40 percent discounts over Intel parts," Kumar said. AMD officials in Sunnyvale, Calif., could not be reached by press time. Copyright(c) 1997 Ziff-Davis Publishing Company. All rights reserved. Reproduction in whole or in part in any form or medium without express written permission of Ziff-Davis Publishing Company is prohibited. PC Week and the PC Week logo are trademarks of Ziff-Davis Publishing Company. PC Week Online and the PC Week Online logo are trademarks of Ziff-Davis Publishing Company. Send mail to PC Week