Athlon enjoys impressive debut, but may lack stamina in long run

Despite the impressive performance of its new Athlon processor – or maybe because of it – at least one industry observer said it’s do or die time for Sunnyvale, Calif.-based microprocessor vendor Advanced Micro Devices Inc.

And, to a certain extent, it’s the enterprise customers that will decide how Athlon ultimately plays out, experts add.

Earlier this month, AMD stole some thunder from its well-established rival, Intel Corp., with the release of the 650MHz Athlon (formerly K7) chip – which AMD claims is now the “seventh generation,” or fastest x86-type processor available on the market.

In tests conducted by ComputerWorld Canada sister publication PC World, the Athlon 650MHz came in roughly 14 per cent faster than the 600MHz Pentium III. And analysts agree Athlon has got comparable Intel chips beat.

Athlon chips feature 128KB of L1 cache – a store of memory that sits adjacent to the processor, designed to speed up data access — which is four times the L1 cache found on the Pentium III, and improved 3D capability.

“This is PC industry history in the making, systems costing around US$2000 that are built around someone else’s processor. It just hasn’t been done,” said Mike Feibus, principal analyst with Scottsdale, Ariz.-based Mercury Research.

But by engaging in a performance war with Intel, the struggling AMD has upped the stakes to a critically high level, Feibus added. “Basically, if Athlon fails, the company is insolvent. They’re bleeding money, and it will really take Athlon to turn it around.”

Analysts said AMD has not been very good at delivering chips to market on time in the past. And to compound AMD’s challenges, the company is in the process of building a new US$2 billion manufacturing plan in Germany.

Even if AMD performs a flawless execution with Athlon, said Mike Margevicius, senior research analyst with Stamford, Conn.-based Gartner Group Inc., a big part of Athlon’s success is entirely out of AMD’s hands.

“Most customers don’t look at the processor as the lynchpin, or deciding factor. It’s really other factors that play into that, including service and support, availability, warranty things of that nature. And those things are not really dependent upon AMD. It’s the partners.”

Compaq Computer Corp. and IBM Corp. are set to ship Athlon-powered desktops this month. The first Athlon processors will run at clock speeds of 650, 600, 550 and 500MHz, based on AMD’s 0.25 micron technology.

But to pose a serious challenge to Intel, AMD will have to break out of its low cost, retail PC niche, where it has made major inroads with its AMD-K processor line, and scale up into the enterprise, he added.

And before that can happen, the company has to overcome what Gartner refers to as Intel’s “market intertia” – referring to its ubiquitous brand presence, and the cautious approach of enterprise customers who prefer the known to the unknown.

One AMD spokesperson said AMD is committed to wrestling away some of the enterprise market from Intel. As part of the plan, AMD is dividing the Athlon family into three distinct segments, aimed at the value PC, PC and high-end market. AMD Ultra, designed for workstations and servers, should be ready by early 2000 at the latest, the spokesperson added.

AMD also plans to add multiprocessing capability, supporting anywhere from two to eight chips, and perhaps more, according to the company.

That’s why the next six months – the time between the release of Athlon and a possible Intel counter-release sometime in early 2000 – are crucial for AMD, according to Rich Partridge, research director for parallel systems with DH Brown & Associates in Port Chester, N.Y.

Partridge said those six months will let AMD show enterprise customers a consistent track record of beating Intel’s chip performance, something that might finally catch their eye. “There’s a window there for AMD to capture a significant piece, but that’s not a long term window, because Intel will try to keep it close,” Partridge said.

“This is not just having a few wins to have some presence, but enough of the share of the pie to be viable and continue forward.”

But as much as he admires AMD for “flying in the face of the wind,” attitude in its battle with Intel, Gartner’s Margevicius isn’t holding out much hope AMD will steal some of the high-end market from its resource-rich competitor.

“I know that in the corporate space, things tend to move much slower than the market would like, and a move off a standard like Intel will take several quarters, if not years, for many organizations to do. I don’t know if AMD can last that long in that space.”