Intel Investors - Jonathan Joseph's (SSB) latest missive from the semiconductor front:
Copyright Salomon Smith Barney
INTEL PRICE CUTS SPUR DEMAND
Last week, Intel (INTC—138 3/16, 1M) reduced average prices on mainstream Pentium-IIIs by about 16%, ahead of the Back to School build. The action was the first price move since May and the fifth this year. These frequent cuts represent Intel’s new strategy of “fine tuning” price cuts to stimulate market demand.
The price cut affected only Pentium-IIIs, while Celeron list prices remained unchanged (low-end Celeron spot prices picked up last week). The most significant cuts of about 25-30% were in the Pentium-III 800-866MHz ranges, which Intel is trying to move the market toward. Spot market CPU prices, on average, are now about 2% higher than list, compared to last week’s 4% discount to list.
Though there is some stickiness in downward movement in prices, it is nothing like in the first half, when spot prices barely budged on list price cuts. This tells us supply relative to demand has improved sharply.
Availability of Intel processors last week was very good for nearly all speed grades of Pentium-III’s, from 600 to 933MHz. One major PC OEM said they could get any of these CPUs within three days. The only exception are the P-III 500-550MHz parts, which are being phased out. These end-of-lifes, coupled with attractive price cuts, have made the Pentium-III 667Mhz a favorite configuration for VARs and distributors.
In fact, the all-in cost of a 667-700MHz P-III system (CPU plus motherboard) is at parity with an Advanced Micro (AMD—80 1/8, 2S) Athlon system, which has a lower-priced CPU but higher-priced motherboard. We would expect AMD to respond with similar CPU price cuts in the near future. Intel microprocessor prices, according to our PC OEM, will likely continue to drop in the next two months. |
