I
t’s a strategy that’s done wonders
for the sales of Corvettes, Michael
Jordan Sneakers, and even Beanie
Babies: If you can create an aura of brand
exclusivity around a limited-supply
product, consumers will not only tolerate
higher prices, they’ll go after the product
in droves.
But as savvy PC enthusiasts already
know, that’s not quite the approach
that Intel and AMD are taking with the
launches of their new top-of-the-line
CPUs. Intel’s Pentium 4 Extreme Edition
(P4EE) and AMD’s Athlon 64 FX are both
high-performers—no dispute there. And
true enough, the two chip gargantuans
are focused on selling small numbers of
these extremely expensive CPUs to the
upper echelon of power users. The new
sales strategy, however, might be more the
result of desperation than design.
“The desire for the leadership position
is causing [Intel and AMD] to do
unnatural things with server products.
[Both] are selling server CPUs as limited-
edition gaming CPUs,” says Dean
McCarron, principle analyst with Mercury
Research. The reasons are pretty simple,
McCarron says: “There has long been a
halo effect in the PC industry: What’s
considered the fastest ends up benefiting
the slower-performing parts within the
same brand.”
This isn’t exactly a new phenomenon.
Car companies have been banking on
the halo effect for years. For example, the
halo that hovers over Chevy’s Corvette
line also shines some light on the Monte
Carlo line as well. You can call it “virtue
by association.” The Monte Carlo might
not be an actual sports car, but surely it
has some Corvette DNA streaking through
its veins, right? Or so the optimistic buyer
convinces himself.Although PC power users may
appreciate the fact that the new chips
are based on high-end server procs, it’s
unlikely that anyone will appreciate the
chips’ pricing and availability. AMD’s
Athlon 64 FX-51 is currently selling for
about $800. Intel’s P4EE, due to hit the
streets soon, is expected to hover around
$900. Ouch.
AMD has even outlined a plan that
will keep its FX series expensive and
elite: When faster versions of the chip hit
market, slower versions will be phased
out quickly—thus consumers will never
be able to buy second-fastest versions at
a lower price, a convention with which
we’re all familiar. Intel says that it might
adopt a similar sales strategy as well.
For the time being, both companies’
chips are fairly hard to buy. AMD
wouldn’t release details on how many
64 FX chips it expects to produce by the
end of 2003, but analysts and system
manufacturers have predicted that 10,
chips or so might reach consumers. That’s
a pittance compared with the 140 million
CPUs sold each year.
McCarron says Intel will be in better
shape because the company produces
about 200,000 Xeon MP processors each
year, and could easily pull all the P4EEs
it might need from the Xeon’s existing
production run.
Still, analysts say that demand, and
not availability, is the biggest question
mark for both companies. Please consider
that, according to Mercury Research,
the majority of PCs sold in the last six
months featured 2000+ Athlon XPs or
2.4GHz P4s. Not quite enthusiast-level
CPUs, eh? We can only assume that Intel
and AMD are banking on the mindshare
created by their über-chips to supercharge
their entire product lines.“Even though [power users] represent
a small percentage of the market, they are
disproportionately influential,” says Roger
Kay, a hardware analyst with IDC. “These
guys are the modder gamer guys who can
get down in the weeds with the innards
of the PC, and a lot of other people look
to them for guidance. They’re not going
to only influence co-workers and the IT
shop, but also their friends and family.”Quick Start The beginning of the magazine, where articles are small
14 MAXIMUMPC DECEMBER 2003
Server Chip, Gaming CPU:
What’s the Diff?
By reinventing their enterprise chips as consumer processors,
Intel and AMD are banking on the “halo effect” to spur overall sales