A lesson to be learnt by C-Cube from the master INTEL:
Monday November 17, 2:00 pm Eastern Time
Intel price cuts seen set to stymie rivals-analysts
PALO ALTO, Calif., Nov. 17 (Reuters) - Intel Corp (Nasdaq:INTC - news). will continue its relatively aggressive price
cutting program for microprocessors next year in a bid to bring further pressure on its rivals, according to analysts and chip
market sources.
Intel officials would not comment on future pricing plans, but analysts said the moves will provide further evidence the company
will not be complacent about competition from Advanced Micro Devices (NYSE:AMD - news) and Cyrix Corp
(Nasdaq:CYRX - news). (Nasdaq:CYRX - news).
Intel, based in Santa Clara, Calif., is the world's largest maker of semiconductors, supplying the microprocessors which are the
brains of personal computers for more than four out of every five PCs sold worldwide.
Analysts said Intel's relatively aggressive price cuts -- it slashed prices on some chips in half in August and cut the price on
certain chips by as much as 40 percent on Nov. 1 -- was also designed to move customers to its Pentium II chips as it speeds
the rate of production for the new products.
''I think they decided that they are going to aggressively move the cost and price point down,'' said David Wu, an analyst at
ABN AMRO First Chicago Corp.
''It's not that dramatic. It's not quite as much as you might think,'' Wu added, noting the company is expected to introduce new
versions of the Pentium II next year aimed at lower priced computers, which will strike a blow at rivals AMD and Cyrix whose
chips generally undercut Intel's prices.
In the latest price cuts, announced on October 27, Intel cut the price of its 233 megahertz (MHz) Pentium II to $401 from
$530, a drop of 24 percent, while cutting the price of some chips by more than that and leaving prices on its PentiumPro chips
for servers and workstations unchanged.
Last week, the trade publication Computer Retail Week reported in its online edition that Intel was preparing to cut the price
of its 233-MHz Pentium II chip by one third on January 1, 1998 to $263 in quantities of 10,000, only about $75 a chip more
than its lower end 233-MHz Pentium MMX chip.
The report cited unnamed sources, including a market source.
The publication reported that in February, a month later, Intel will cut prices of its 266-MHz Pentium II to $370 from $520
cuttently and its 300-MHz Pentium II to $520 from $721, adding new 333-MHz Pentium II processors on that date.
The 333-MHz Pentium II will be priced at $705 each. Two faster versions -- the 350-MHz at $840 and the 400-MHz at
$980 -- are due to ship in April, according to the report.
Intel declined comment on the reported pricing shifts, although the company does typically inform its customers of its planned
pricing changes several months in advance so that personal computer makers can set product and price strategy.
''It's our policy not to comment on potential future pricing moves,'' a spokesman said. ''We share pricing typically well in
advance with our customers, but don't comment on it publicly until the moment that the pricing goes into effect.''
The semiconductor giant has tended to reduce the prices on at least some of its products every quarter, following roughly the
pattern of Moore's Law, named after co-founder and chairman emeritus Gordon Moore, who predicted that chips would
double performance at a given cost every 18 months.
Instituting two separate price cuts in a quarter would be unusual, but not unprecedented for Intel.
Early last year the company trimmed prices on its 120-MHz and 150-MHz Pentium prices twice in the month of January, the
same month Intel launched its new MMX multimedia technology.
Separately, Computer Retail Week reported in its November Monday edition that Compaq Computer Corp. (NYSE:CPQ -
news) plans to use AMD's K6 microchips in up to four Presario notebooks and at least two consumer desktop computers.
Such a move by the world's largest maker of personal computers, which already has been using Cyrix chips and has used
AMD processors in the past, could further pressure Intel.
A spokeswoman for Compaq, based in Houston, Texas., said the company does not comment on future products, while a
spokesman for AMD, based in Sunnyvale, declined comment saying it is policy to let its customers make such announcements.
''We are partners with Intel and we've got flexibility with other partners,'' the Compaq spokeswoman said. Compaq chief
executive Eckhard Pfeiffer was giving a keynote address at the Comdex trade show in Las Vegas, Nev., on Monday.
Shares of Intel were up $1.50 to $80.25 in Nasdaq market trading. |
