National Semiconductor’s decision to leave the consumer PC processor category will have little effect on the downwardly spiraling prices that processors and PCs have endured, but industry watchers are split over who will grab Cyrix’s share of the market: Intel or AMD.
Intel and AMD’s efforts to snatch the 5.5% of the processor market abandoned by Cyrix, in addition to the on-going price war the two have waged, almost guarantee processor prices will keep dropping. Bruce Bonner, a principal analyst with Dataquest, San Jose, Calif., said there may be a marginal price stabilization at the very low end of the market but processor prices will continue to decline.
“Intel would lower prices, which forced AMD lower prices and Cyrix had to follow AMD and Cyrix was finally overwhelmed by this fight,” Bonner said. “The real news of this event is competing against Intel-and AMD is not a bright idea right now.”
The move, if anything, may intensify the price situation because AMD and Intel no longer need to worry about a third party. “I’m not happy about their leaving the business. It’s better when there is more competition,” said Stephen Dukker, CEO of eMachines. eMachines managed to dodge a bullet when it decided earlier this year to move away from Cyrix chips for its third quarter product line.
“If there is no Cyrix it will change some of the [market] dynamics because nobody else is ready to jump in,” said Steve Smith, sales VP of Pionex, a major Cyrix customer.
Cyrix controlled only 5.5% of the processor market when National decided to get out of the business earlier this month, according to Mercury Research, Scottsdale, Ariz., with Intel holding 80.2% and AMD 13.6%.
According to Intelect ASW, Port Washington, N.Y., National trebled its market share in units sold between 1998 and 1999, but the average price for Cyrix processor-powered PCs dropped from $1,296 to $606 during the same period.
Intel is considered the most likely candidate to gain from Cyrix’s downfall. Ahron Schacter, VP and general manager of Datavision, said he expects Intel to quickly pull further ahead of AMD, particularly in technology development.
Sima Vasa, divisional VP of Intelect ASW’s Information Technology Division, gave AMD a long-shot chance because AMD already has deep roots in the low-priced processor segment. However, she added, Intel has taken steps lately to rectify this situation with a renewed emphasis on making its Celeron processors the chip of choice for $399 and $499 PCs.
What National will do with the Cyrix name is also being debated. One PC vendor, requesting anonymity, said National was most likely to sell the name to recoup part of its loss. eMachine’s Dukker said there is enough value in Cyrix’s intellectual property rights for some company to give it a home.
Vasa downplayed these notions saying National would not have publicly announced it was leaving the consumer PC market prior to a sale being completed because in doing so it devalued the brand.