The Cutting Edge: COMPUTING / TECHNOLOGY / INNOVATION : Cyrix Makes a Move to a New Type of Chip : Technology: With the 486 market having dried up, the firm is betting big on its M1 processor.

SAN FRANCISCO —  Cyrix Corp., hard hit by a lack of demand for 486 computer chips, is betting big on a new generation chip to compete with the highly popular Pentium processor from Intel Corp.

Like another competitor, Advanced Micro Devices Inc., Cyrix has found the 486 market virtually dried up.

“The 486 suppliers have realized the obvious,” said Mona Eraiba at Gruntal & Co. “Companies do not want to buy the 486 at any price or speed.”

The stock of Cyrix, which said Friday that it expected to post a fourth-quarter loss and would write off its 486 inventory, was down $2 at $23.125 in trading on Nasdaq.

The company warned the fourth-quarter loss could exceed 40 cents a share because of poor pricing, sales and a write-off of its 486 inventory. A year ago, Cyrix earned 63 cents a share, or $12.7 million, in the fourth quarter.

The company began shipping its new 6x86 chip, also known as the M1, at the end of September, and expects to ship at least 100,000 units in the first quarter, a spokesman said.

“The key thing is that there is no margin for error, no margin for delays, no margin for anything,” Eraiba said.

“They have to execute flawlessly in 1996. They have to get adoption rapidly, and get manufacturing to produce in volume, with no margin of error. There’s no room to have any issues,” she said.

Michael Gumport, an analyst at Lehman Bros., said that although the stock is viewed as a poor choice for this year, it could be a buy for 1996, depending on the success of the M1. “The short-term prospects for the company are not especially rosy,” Gumport said. “As 1996 progresses, there is potential of a good year for the company.”

Montgomery Securities analyst Tom Thornhill said the write-off is “the right strategic move for the company, since purging the 486 inventory will allow Cyrix’s sales force to focus on the [M1 chips].”

Thornhill said several computer companies are currently using the new microprocessor, both in the United States and Europe. Thornhill said that although International Business Machines Corp. has not yet formally announced the use of the new chip, he believes that it will probably use the M1 in its Thinkpad notebook line, and possibly some desktop systems.

Cyrix has signed an $88-million equipment leasing deal with IBM. It confirmed Tuesday that it was in violation of the agreement because of the expected loss for the quarter. Cyrix said it is in talks with IBM to extend a waiver on the violations.

Analysts said Cyrix will make 1 million to 3 million M1 chips during 1996. The company said the M1 will go head to head with the Pentium.