Tasting A Bit of a Microchip Dip

+ TALK PERSONAL COMPUTERS AND YOU ARE TALKING microprocessors — the tiny silicon chips that are the PC’s “brains.” Talk microprocessors and you are talking Intel. The company, based in Santa Clara, California, is the world’s leading PC-brain maker. Part of Intel’s success has been its ability to stay a step ahead of the chip manufacturers making cheaper versions of Intel’s high- performance product line. One of these is Advanced Micro Devices Inc. (AMD), based in nearby Sunnyvale, which has just scored a coup in the constantly changing world of chip competition: a judge overturned a jury verdict that AMD did not have the right to sell a clone of Intel’s popular 486 chip. Naturally, AMD said it would immediately begin selling its own 486 chips.

Wall Street reacted quickly; Intel stock dropped 11% in one day. But the market was clearly overreacting. Intel is still the world’s largest 486 maker and will continue to be so — by far. Given its comparatively modest manufacturing capacity, “AMD is going to be limited to 5% of the market share,” predicts Montgomery Securities analyst Thomas Thornhill. Perhaps more important, Intel has already launched the next generation chip, the Pentium, destined to leave the 486 in the dust.