Contrary to reports and indications from AMD chairman and chief executive Jerry Sanders, Microsoft will not use AMD's Athlon processor in its forthcoming X-Box games console. Instead, it will use a 600MHz Intel chip. A spokesperson for Intel today said that the X-Box would feature a Pentium III chip, but refused to give further details. Sources suggest AMD lost the deal with Microsoft within the last 48 hours in circumstances similar to those suffered by the company at the hands of Gateway when it launched its Athlon processor. Sanders told ZDNet last month that Intel muscled in on AMD's Gateway deal with the promise of better discounts and marketing than AMD could manage. The shock announcement that Microsoft has chosen Intel "for technological" and business reasons will no doubt send AMD's share price into nosedive. However, in 18 month's time, the price of a 600MHz Athlon chip (currently around £179) would represent barely enough margin for AMD to dedicate spare fabrication resources, leading some observers to suggest the loss of Microsoft as a partner in the booming console industry will leave AMD free to concentrate on its core strategy, which is to win corporate hearts. Making sure that the X-Box is competitively priced has obviously played a large part in this shock decision. J Allard, general manager for the X-Box platform, Microsoft's very own "Minister for Fun", refuses to go into detail about the decision to pick Intel over AMD, but says: "Frankly, our decision was a combination of consumer expectations, developer needs and hitting a fair price point. That was absolutely part of that equation." Having made this decision, however, Microsoft will inevitably stand firmly by it, as UK director for games and retail, Chris Lewis, is keen to demonstrate. He goes as far as to state that using Intel, "will bring the most powerful platform possible to gamers." The X-Box may be more powerful than the Sony PlayStation2 when it's officially launched at the end of 2001. With a 600MHz processor, however, it will lag behind many desktop computers in terms of speed. If the X-Box comes with a Pentium III, it will also be using three-year-old technology. The planned launch date for X-Box also means that Sony will have sold many millions of its PlayStation2 consoles -- not to mention games. Allard believes Microsoft will have no problem breaking into this. "There were a lot of Sega genesis's out there when Sony introduced the PlayStation. We think we're making that same kind of quantum leap beyond PlayStation2 by having a hard disk built in, along with additional memory, 3X graphics performance, a higher-powered CPU and networking," Allard said. The decision to make the X-Box incompatible with PC games also means that those with more powerful PCs will be have to buy another device if they want to play X-Box games. Allard doesn't believe PC gamers will take exception: "The PC gaming community is very excited about this." Will Knight contributed to this report. Bill Gates is like a pushy salesman. If he can get one foot in the door, he'll barge on through. Go to AnchorDesk UK with Jesse Berst for the news comment. There is a mad, suicidal race to the gigahertz barrier according to Guy Kewney of AnchorDesk UK, go and read the news comment on the AMD/Intel race. Find more X-Box news on GameSpot. What do you think? Tell the Mailroom and read what others have to say.