Burt and Intel Investors - Intel's Price Cuts and 450 MHz Pentium II
Here is the first "Post-Cut" story on Intel's pricing and products.
Paul
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news.com
Pentium II prices cut, 450-MHz chip due
By Michael Kanellos
Staff Writer, CNET NEWS.COM
July 27, 1998, 10:55 a.m. PT
update A new round of price cuts arrived from
Intel, while a 450-MHz chip--the fastest
Pentium II yet--should hit the streets next
month.
The reductions are
the latest in this
year's flurry of pricing
activity by the
chipmaking
behemoth. The July
round is the fourth
desktop processor
price cut in 1998, and at least two more are
scheduled for September and October.
Both will likely be deeper than estimates
from the early part of the year. In past years
Intel cut prices four times in the whole year.
Intel maintains the cuts and last week's
forwardly revised release date for new
Celeron processors stem from
better-than-anticipated results in rolling out
its most advanced commercial production
process, referred to as the 0.25-micron
process, but various analysts have said that
excess supplies of PCs and processors as
well as slower demand have also conspired
to drive down prices.
In addition, Intel is feeling pressure from
Advanced Micro Devices, which has been
rapidly gaining market share in the hot
sub-$1,000 computing segment.
An AMD spokeswoman stated that, AMD
can be expected to follow with cuts that will
put its processors at 25 percent below
equivalent Intel chips.
Expected sooner rather than later, the
450-MHz Pentium II will follow today's price
cuts and appear in time for the "back to
school" computer buying season, according
to an Intel spokesman. Sources say that
means a release in August.
The fastest Pentium II will come out at a price
of $655 in volume quantities, according to
the sources. Some retailers are already
booking advance sales for the chip at $779
in single-lot quantities.
While this price will make the 450-MHz
version the most expensive Pentium II, it will
cost less than earlier anticipated. In the
spring, the 450-MHz chip was expected to
debut for a price of $776, according to an
analyst at Technology Business Research.
Last month, the debut price was estimated at
$669 by the consulting group.
The debut price will also be lower than the
historical premiere price of Intel's high-end
chips. Just a year ago, the 300-MHz Pentium
II was dropped from $1,900 to $850, for
example. The prices listed above apply to
1,000-lot quantities and are available to
circuit board vendors and other wholesale
purchasers. Prices are lower for
large-volume computer vendors, with
discounts reaching as high as 15 percent,
according to some analysts' estimates.
Ashok Kumar, an analyst at Piper Jaffray,
expects the 450-MHz chip will probably sell
for around $625 to vendors in large
quantities. Single-lot retail prices for
consumers, of course, will be higher.
Although cuts reduce revenue, the most
recent round has stimulated demand. "The
PC market picked up in June driven by Intel's
price cuts and the release of Windows 98,"
Dan Niles, semiconductor analyst for
BancAmerica Robertson Stephens said
recently.
The stimulated demand, combined with the
reduction of PC inventory and the fall's
traditional seasonal uptick, could mean a
good second half, Niles added.
Mark Edelstone, semiconductor analyst for
Morgan Stanley, also remains bullish on
second-half demand, stating earlier that
price cuts boosted June demand and will
likely continue their magic in the second half.
Nonetheless, Morgan slightly lowered its
1998 and 1999 earnings estimates in June
because the September and October price
cuts may be deeper than earlier anticipated.
PC makers will see more sales from price
cuts, but will have to fight for unit growth rates
two to three times higher than the industry
average to sustain total earnings, said
Kumar. "Prices are dropping through the
floor and it will only get worse," he said. By
the first quarter next year, the 350-MHz
Pentium II machine will be hovering close to
the $1,000 price point.
Celeron prices are also being slashed in
anticipation of two Celerons containing
integrated high-speed cache memory that
are now coming in August.
Intel is an investor in CNET: The Computer
Network.
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