Gateway to drop AMD from its lineup

Chip maker Advanced Micro Devices (AMD) saw things go from bad to worse on Tuesday.

On the same day the company announced it would lay off 2,300 employees, PC vendor Gateway Inc. said that once its current stock of AMD-based PCs is depleted, the company will standardize on processors from industry leader -- and AMD rival -- Intel Corp.

AMD announced on Tuesday that it would lay off about 15 percent of its staff and close two fabrication plants in Austin, Texas, amid hard times in the chip industry. Gateway on Tuesday confirmed press reports that it would no longer sell PCs using AMD processors once its current stock was gone. "They will still be available for the next couple months," spokeswoman Lisa Emard said.

AMD responded to the reports Tuesday by issuing a statement that said it planned to continue working with Gateway to determine how it could help meet the needs of Gateway customers.

Gateway had moving toward an Intel-only line over the last few months, Emard said. "We're looking across the board at ways we can simplify," she said. "This move is part of Gateway's strategy to simplify our product lines and reduce the amount of component suppliers in our lines."

Those moves will help Gateway cut costs and ensure quality, she said. "It will reduce the cost of our engineering and manufacturing process," Emard said. "And we get more control over product reliability."

Gateway already offered more Intel-based systems than those based on AMD, she said. "With Intel, now we can get into the low-end class of PCs without having to do a totally separate qualification," Emard said.

This is not the first time Gateway has moved away from AMD. In 1999, after offering PCs based on AMD chips for less than a year, Gateway decided to use Intel as its sole supplier. However, when delays in shipments of Intel processors cost Gateway an estimated US$200 million to $250 million in one quarter, the company decided to return to offering processors from both companies.

It would be fairly easy for Gateway to resume offering AMD processors again this time, Emard said. "For now this is the right decision," she said. "We're not totally closed to ever working with AMD again."

By dropping AMD from its lineup, Gateway joins two other top-five PC vendors in North America: Dell Computer Corp. and IBM Corp.

IBM dropped AMD-based PCs from its lineup in North America in May. Dell has used only Intel processors since its inception.

This leaves Hewlett-Packard Co. (HP) and Compaq Computer Corp. as the last of the big PC vendors in the U.S. offering AMD processors in their products, and those two companies are aiming to become one.

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