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Sony Computer Entertainment Europe has announced that it will reduce the price of the European PlayStation 2 console from its current retail price of 260 pounds (about $380) to 199 pounds (about $293). The price reduction will take effect on Friday. Along with the price drop, SCEE announced that it plans to launch a new 15 million pound (about $22 million) marketing campaign to support the holiday release of several first- and third-party PS2 games. Titles included in the holiday lineup for the European PS2 include Wipeout Fusion, Airblade, Jak and Daxter, Devil May Cry, Tony Hawk's Pro Skater 3, Silent Hill 2, and Soul Reaver 2, among others.
"SCEE stated at the time of launch that its strategy would be to pass on any future savings to its customers and this is exactly what we are doing now," said Ray Maguire, marketing manager for Sony Computer Entertainment Europe. "With its attractive new price point, with the PlayStation 2's unbeatable technology package, and with a vast portfolio of over 100 software titles, we believe there has never been a better time to enter the PlayStation 2 experience."

Naturally, the drop in the price of the European PlayStation 2 has reignited long-standing rumors regarding a possible price reduction for the console in North America for the holiday season. However, Sony Computer Entertainment America has not commented on that possibility.

News source: gamespot.com

Tuesday's announcement is a "big blow for AMD because Gateway was one of their volume sellers," said Roger Kay, an analyst at IDC.

Joe Osha, an analyst for Merrill Lynch, agreed. "It's a major blow. That was one of their largest customers," he said.

The move could also prove to be a liability for Gateway. The Athlon chip has been popular with gamers and consumers, a target audience for Gateway. And although the PC market is slow right now, an unforeseen chip shortage on Intel's part could also affect sales. Gateway began using AMD's Athlon chip in early 2000 after it couldn't get adequate supplies from Intel.

Emard said Gateway's decision meets three objectives: cutting costs, simplifying product offerings and increasing overall customer satisfaction.

Though processor choice is an element in customer satisfaction, "I think we still offer a huge number of choices," she said. "For now, we feel like we can cover from the very low end to the high end by lining up our product range behind Intel."

Given AMD's off-and-on relationship with the PC seller over the past few years, AMD representatives believe the chipmaker will win future business from Gateway.

"We've been in this position before with Gateway, and we're confident we can work with them in the future," said AMD spokesman Ward Tisdale.

Indeed, Gateway's decision was most likely a direct result of its financial situation, analysts say.

The embattled company has cut staff, closed international offices and closed a number of its Gateway Country stores, among other moves, as it faces the worst PC market ever.

Most PC makers have consolidated their PC offerings in recent months, as it is costly to maintain several separate desktop lines, especially two that use entirely different processor and chipset designs, analysts say.

"All these supply moves are short term," Kay said. "There's no ideology involved. It's a matter of what makes sense economically."

Kay added that, theoretically, "It could be that Intel was willing to give some of its lower-volume customers better pricing if they agreed to give the company an exclusive."

Past mistake

However, past decisions to move away from AMD have been just as damaging to Gateway as they have been for AMD.

One of Gateway's more recent forays into the AMD camp, a line of Select PCs based on the k6-2 processor launched in early 1999, allowed Gateway to price desktops at lower prices than similar offerings based on Intel's Celeron chip. Later in the year, however, Gateway discontinued the Select line and switched another of its K6-2-based desktops, the Profile, to Celeron.

Disaster followed when Intel could not deliver enough of certain Pentium III processors to meet demand that holiday season. Gateway lost sales on some of its most popular systems.

After publicly ripping Intel, Gateway resurrected the Select line using AMD's Athlon processor in early 2000. It has offered Athlon chips since.

This year's move could be just as dangerous. "Even as the firms are all cleaving more tightly to Intel, they're reducing their alternate supply," Kay said. "It's always better to have more than one supplier. From a general business point of view, it's not a good thing to start crippling the only alternate supplier to Intel."

Though Gateway is likely to come back to AMD at some point, the move does not bode well for AMD.

It's a "big blow for AMD, because Gateway was one of their volume sellers," Kay said.

Long term, AMD faces the potential of further consolidation among its customers as Hewlett-Packard and Compaq, its two largest brand-name supporters, merge. AMD also faces intense pressure from rival Intel.

Intel has used price as a lever, dropping prices numerous times on its Pentium 4 chip to bring the chip into the heart of the PC market. Pentium 4 PCs are available at prices starting around $800.

For HP, the proposed HP-Compaq merger is likely to bring consolidation of the companies' two consumer PC lines.

"Both of those (companies) have bets on AMD, but you've got to look at the fact that there's going to be line consolidation when they smash those two companies together," Kay said. "It makes the future look shaky for AMD."

But AMD is determined to show customers it has the superior processor technology. The chipmaker is expected to launch a new marketing campaign next month that will rename its Athlon chip Athlon XP and show consumers that although Athlon is slower in clock speed than Pentium 4, it offers comparable overall performance.

Despite the events, it's too early to write off AMD in the battle with Intel, analysts say. For one, AMD is strong in the market for "white box" PCs, systems manufactured by smaller companies. Such PCs account for as much as 30 percent of the overall PC market, according to some industry watchers.

However, Gateway's decision does point to AMD's poor record in winning support from the major makers of business PCs.

"The critical piece (for AMD) remains the corporate desktop," said Dean McCarron, principal at Mercury Research. "Once AMD gets a few corporate wins, then it really doesn't matter much if somebody comes or goes."

AMD executives have said that the company's best chance for getting into the corporate market is likely through notebooks in North America. Although the company has yet to penetrate the U.S. corporate market in a big way, some manufacturers have introduced Athlon-based systems for businesses in Japan and Europe.