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Digital Equipment Corp’s Semiconductor division is making noises that sound distinctly like it will slash prices on the Alpha 21164 RISC chip so sharply that OEM customers will be able to produce sub-$5,000 boxes by the first quarter of next year, half the price of what the cheapest 21164-based machines command today. DEC will undoubtedly position itself as shattering the price/performance structure of conventional Windows NT personal computer and Alpha systems and offer itself as a viable alternative to traditional Intel boxes. In July, a 433MHz 21164 was going for $1,492. Sources say that by November 30 the price will be between $800 and $900. There is also talk of motherboards being reduced by a third. It is unclear whether DEC will have to commit the sin of dumping to effect the price cut and sell the chips at a loss. According to our sister paper ClieNT Server News, sources close to the company say the strategy, which would see it try to mix in the mainstream personal computer arena, is a knee-jerk reaction to its pitiful first quarter performance, together with Wall Street’s reaction to the fact that Alpha shipments are only up 4%, and DEC’s subsequently hammered stock. In answer to queries about the price cut, DEC said the company would present some kind of proof of concept at Fall Comdex in mid-November. Rumor has it this proof might be a prototype fielded by an unidentified partner DEC has been talking to lately. It is not expected to be a first- or second-tier personal computer company, which begs the question: Who exactly is going to mass market Alpha boxes on thin margins? DEC’s own systems side is expected to take its own sweet time producing such low- end boxes. A 21164 box could be put together for around $3,500 and if sold at, say, $4,800, would realize a gross margin of 27%. The price cut, if it goes into effect, would be the forerunner of an attempt beginning in the middle of next year to field sub- $2,500 Alpha boxes based on the new 21164PC chip that DEC and Mitsubishi Electric Corp, Alpha’s nominal second source, have been working on. The 21164PC, which the pair have previously called a low-cost high-volume part, was described recently at the Microprocessor Forum. The 450MHz silicon, which has yet to tape out but should start sampling in the first quarter, was estimated to deliver 14 SPECint and 17 SPECfp, suggesting competitive performance. DEC turned up at the conclave with overheads that said that the 21164PC could produce complete Windows NT systems with 32Mb, 2.4Gb disk, 2Mb video RAM, eight times speed CD and 17-inch monitor that cost no more than $2,288 with a 30% gross margin built in. Such a price would only be fractionally more than the $2,176 that DEC figures a comparable Intel Pentium Pro Klamath machine could be priced at, Klamath’s motherboard and case-power supply being cheaper. Sources say Digital Equipment Corp has projected that the market for sub- $4,000 Alpha machines would be up to some 200,000 units in 1997, and rising up to nine million units by the end of the century.

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