Advanced Micro Devices Inc., chief rival of computer chip industry leader Intel Corp., yesterday launched the personalcomputer industry's first 650-megahertz microprocessor, a chip called Athlon.
"With the debut of [Athlon], AMD is setting the pace in the megahertz race," said W.J. Sanders III, chairman and chief executive of AMD. Intel's top of the line Pentium III chip operates at 600 MHz.
Megahertz ratings, a measure of how often the chip cycles on and off electronically as it does its work, are one measure of speed, and important in impressing consumers. However, other factors such as chip and computer design can affect how fast a computer operates.
AMD stock rose $1.87 1/2 to close at $19.25 yesterday. Still, analysts were skeptical of Athlon giving AMD a sustainable edge over Intel. "From the technical point of view, Athlon is as good as any AMD has ever released," said Drew Peck, analyst at S.G. Cowen & Co. "But unfortunately, this is a wrong chip at the wrong time," he said.
Analysts believe the microprocessors now available on the market are powerful enough for both individual and corporate users and that more speed will not necessarily mean more market share for its maker.
"The market is not as receptive to high-end chips as it was five years ago, because consumers are unable to take full advantage of even mid-range chips," Peck said.
Intel, based in Santa Clara, Calif., has an overall market share of about 80 percent. AMD, which has lost money in many recent quarters, has spent the better part of the decade trying to catch up in the speed game. Mostly, however, it has been relegated to the low-price, low-end of the market.
Computer makers started getting Athlon chips late last quarter and Athlon-based PCs are scheduled to be available this month.
AMD, based in Sunnyvale, Calif., hopes the chip will help it break into the high end of the market. But in the past, AMD has had trouble with chip manufacturing. When the company launched its 233 MHz K6 microprocessor in 1997, it was unable to increase volume because of manufacturing bottlenecks.
That gave Intel crucial time to come up with a faster chip. Analysts fear the Athlon could run into similar problems when AMD tries to ramp up volume.
Also, Atiq Raza, the chip designer who helped turn around AMD with its NexGen microprocessor, recently quit the company. "There is no top-notch management team at AMD and the future looks ominous," said Ashok Kumar, managing director of U.S. Bancorp Piper Jaffray.
"The real issue is whether AMD is able to leverage volumes to win in this high-fixed-cost business," said Megan G. Hackett, director of technical research at S&P Equity Group.