Advanced Micro to sell Intel-chip clone


SAN FRANCISCO -- Advanced Micro Devices Inc. said yesterday that it would immediately begin shipping clones of Intel Corp.'s 486-series computer chip in light of a federal judge's decision to overturn a jury verdict that had blocked sales of the chips.

While the initial shipments by Advanced Micro will be small, the decision's long-term impact could include higher earnings for Advanced Micro, slimmer profit margins for Intel and still lower personal computer prices for consumers.

Intel shares plummeted $12.25 yesterday, closing at $97.75 in Nasdaq trading, while Advanced Micro rose correspondingly, to close at $28, up $3.875.

The 486 is at the heart of most new personal computers and has helped make Intel the most profitable semiconductor company in the world. Sales of the chip represented the bulk of Intel's $2 billion first-quarter revenue.

But the entry of Advanced Micro into the 486 market could change the dynamics, as Intel has already seen happen with the predecessor to the 486 chip -- Intel's 386 microprocessor. Since winning an arbitration decision last May in a separate legal battle regarding Intel's 386 chip, Advanced Micro's share has grown to more than half the 386 market.

Still, some analysts cautioned that the new threat to Intel's 486 hegemony should not be overstated.

"To put this in perspective, AMD is probably going to ship about 20,000 units of the 486 this quarter; Intel is going to ship six million," Rajiv Chaudri, an analyst with Goldman, Sachs, said. "But obviously it has tremendous psychological impact, and you're seeing that in the market."

The new challenge to Intel's 486 dominance came Friday, when Judge William A. Ingram granted Advanced Micro a new trial on the issue of whether a 1976 agreement with Intel granted Advanced Micro a license to use Intel microcode in its various chips. Microcode is software embedded in a chip that provides the instructions for the device's basic functions.

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