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Advanced Micro Devices has lost some ground in its evolving price war with Intel, as IBM says it is dropping AMD's Athlon chips from PCs sold in North America.

IBM offered AMD chips as a build-to-order option for consumer models, but discontinued the AMD option in May. The IBM NetVista A40i consumer PC will no longer offer the AMD processor as an option and will only be sold with an Intel chip, says Anouk Bikkel, an IBM spokesperson. IBM hopes to make its NetVista offering more clearly defined to customers by making it all Intel-based, she said. The NetVista A40i system has scored as a Best Buy in PC World reviews.

Additionally, the cost of designing separate chip sets for each processor brand used in a product line has become too expensive, says Ray Gorman, an IBM spokesperson. Though low-end NetVistas are targeted at consumers and not businesses, consumers don't express much processor brand loyalty, he says.

IBM ultimately chose Intel because business customers prefer Intel over AMD, Gorman adds.

IBM has already ceased to promote computers with AMD chips worldwide. IBM will continue to sell AMD-processor computers until its inventory is cleared, Gorman says.

Before IBM decided to drop AMD chips as an option, Dell was the only vendor among the four top-selling PC makers that did not market systems that use Athlon CPUs. PC system sales leaders are IBM and Dell, Hewlett-Packard, and Compaq.

Dell made some exploratory gestures regarding AMD chips when it asked customers about their preferences in a June online poll. Both Compaq and HP make extensive use of AMD Athlon and Duron processors in consumer PCs.

Fierce Contest

The ongoing CPU wars between the two leading CPU makers have been heating up over the past year. They continue to leapfrog each other in releases of chips supporting greater speed.

Intel's newest Pentium 4 chips hit the 1.8- and 1.6-GHz marks. AMD currently tops out at 1.4GHz. However, gigahertz aren't everything; some of the faster chips are benchmarked at slower performance than their rivals.

Both are also revving up in the mobile chip front. Intel is preparing to release this fall a mobile version of its Pentium III, called the Mobile Pentium III Processor-M (previously code-named Tualatin). It's due to perform at 1.13GHz. AMD's next-generation mobile entry is the Athlon 4, which is based on a core code-named Palomino that will appear on desktop CPUs this fall. Palomino is already implemented in some Athlon MP CPUs, and available at clock speeds between 850MHz and 1GHz.

A recent report by Lehman Brothers Holdings chip analyst Dan Niles says Intel plans to detonate a "price bomb" later in August. The chip leader is expected to slash prices on its high-end Pentium 4 processors by about 50 percent, to take more market share from AMD.

Joris Evers in Amsterdam contributed to this report.

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