Intel cuts chip prices as much as 53 percent
By Duncan Martell
SAN FRANCISCO, May 28 (Reuters) - Intel Corp. (NasdaqNM:INTC - News) has cut prices on some of its microprocessors by as much as 53 percent as the world's largest chipmaker's investments in manufacturing over the past two years are start to pay off.
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Intel regularly cuts prices throughout the year as its production costs drop and demand shifts. But the company said this round of price cuts is a direct result of the billions of dollars it has spent on upgrading chip factories with machines that make chips from larger wafers and with shrinking line widths and transistors on its chips.
"One thing that's different here is we're seeing aggressive production yields," said Intel spokesman Robert Manetta. "Our investments over the last couple of years are really starting to pay dividends."
The price cuts will likely mean lower prices for personal computers and laptops and could increase pressure on Intel's long-time rival Advanced Micro Devices Inc. (NYSE:AMD - News), analysts said.
Intel's price cuts, on its Pentium 4 desktop processors, mobile processors and Xeon processors for server computers, also came as Merrill Lynch analyst Joe Osha trimmed his second- quarter revenue and per-share earnings estimates, citing a soft first two months of the second quarter.
Among the price cuts, Santa Clara, California-based Intel shaved the price of its second-fastest processor, the Pentium 4 running at 2.4 gigahertz, by 29 percent to $400 from $562 in quantities of 1,000. Reductions in prices on other Pentium 4 chips for desktop computers ranged from 12 percent on a 1.7 gigahertz Pentium 4 to 43 percent on its 2.26 gigahertz Pentium 4 processor.
Intel cut prices on its Pentium 4 processor for laptop computers by 26 percent to 53 percent, with its fastest mobile chip coming down by 45 percent to $348 from $637. It also cut prices on Pentium III mobile processors, from 9 percent to 18 percent.
Intel cut prices on five of its Xeon server processors, with the cuts ranging from decreases of 10 percent to 44 percent. For example, the Xeon processor running at 2.2 gigahertz now costs $262, down 44 percent from $465.
Noting it has become harder to argue for a sequential revenue increase at Intel, Osha cut his estimate for second- quarter revenue to $6.76 billion -- little changed from the first quarter's $6.78 billion -- from $6.96 billion.
As a result, Osha trimmed his second-quarter earnings per share estimate by one penny to 17 cents.
"A soft first two months of the quarter has us pulling our horns in a bit," Osha wrote in a note to clients.
Analysts forecast Intel would earn 15 cents a share in the second quarter, within a range of 14 cents to 17 cents, on revenue of $6.67 billion, according to Thomson First Call.
Intel shares fell 56 cents, of 2 percent, to $28.10 on Nasdaq. The stock is down 0.79 percent year to date. |
