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Technology Stocks : Intel Corporation (INTC)

INTC 36.82

+1.5%

Dec 19 9:30 AM EST

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To: Andy Patton who wrote (38554)	10/31/1997 11:22:00 PM
From: Paul Engel	Read Replies (2) of 186894

Andy - Re: "How will this scenario affect margins? Any idea?" Two forces will be at work. One, a price reduction obviously reduces margins. Two, Intel is in two transitions - Pentium MMX to Pentium II, AND 0.35 micron process --> 0.25 micron process. The smaller process features will reduce the die size of the Pentium II from 203 sq. mm. to about 131 sq. mm. This will be the Deschutes chip and it is 35% smaller than the Pentium II. As the 0.25 micron process ramps up, eventually a 35% cost reduction will be realized, neglecting some cost adders due to the more complex 0.25 micron process. Further, the Deschutes will result in much faster chips. The cost will be down yet Intel can extract higher selling prices for the faster speeds - 350, 400, 450 MHz, while REDUCING prices (as discussed previously) on the older 233, 266 & 300 MHz speed devices. Overall margins should be maintained unless Intel encounters unexpected competition from AMD (possible) and/or Cyrix (not too probable). Paul

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