Although the company said that its overall profit
margins would decline to 55 from 60 percent next
year in a conference call with analysts yesterday,
observers believe that the company has more room
for price movement than the projected decrease
might indicate.
The decline in margins, said many, comes as a
result of the new additional chip packaging that
comes as part of current Pentium IIs. The gross
margin on the microprocessor core remains close
to, or above, 80 percent, analysts said today.
By removing the pricey packaging on some
processors and introducing new high-end
chips--both of which will occur in the second half
of this year--Intel can effectively maintain its
average selling prices (ASP) and subsidize steeper
discounts on processors and hence completed
desktops--the latter a boon for users. In turn, such
discounting would force other processor makers,
and computer makers, to follow suit.
(Intel is an investor in CNET: The Computer
Network).
"The gross margin issue is a product transition
issue," said Ashok Kumar, an analyst at
Loewenbaum & Company. "ASPs will stay the
same in 1998."
The product shifts that will fuel the cuts will occur in
the year's second half, after Intel releases the
"Deschutes" processors, the next generation of the
Pentium II. news.com |
