Good Morning Yaacov, and threaders..Article...Bad times for pc makers..
April 6, 1998
PC Week: Intel Corp.'s next-generation Pentium II for desktops, due April 15, will be a boon for buyers, but not the vendors.
The company's forthcoming 350MHz and 400MHz Pentium II are expected to be unveiled with the usual parade of supporting PCs using the chips. But the systems will exacerbate the already bloated inventories of several major PC makers, including Compaq Computer Corp. and IBM Personal Computer Co.
As vendors clear out inventories, buyers can expect more intense PC price cutting. "There's a lot of inventory already out there," said Mark Specker, an analyst at Soundview Financial Corp., in San Francisco. "This [new product introduction] makes the PCs in the channel look that much older. "
Intel, of Santa Clara, Calif., is expected to cut chip prices in May, but Specker and others don't expect PC makers, anxious to move inventory, to wait until then.
After cutting the price of the 333MHz Pentium II by $139 in March, less than eight weeks after its release, Intel will cut it again to $525 next month. The 300MHz Pentium II will drop to $398, and the 266MHz Pentium II will drop to $275, sources said.
Intel and its OEM partners hope the low chip prices will spur demand, but they are struggling to understand why low prices did not grow revenue to their expectations earlier this year.
Both Intel and Compaq recently warned Wall Street that they will miss their revenue targets for the first quarter. Intel will report earnings on April 14, Compaq on April 15.
The forthcoming Pentium II chips will also usher in an era of enhanced channel configuration, in which resellers will begin installing the microprocessor in addition to other components.
Until now, PC makers have refused to allow resellers to install CPUs because of quality concerns. But the cartridge design of the Pentium II--in which the chip, cache and other components are completely enclosed--lessens those concerns. The result for buyers should be faster delivery times.
"There is absolutely a shifting in attitudes towards processor plug-ins, " said Bill Nanney, group vice president of quality integration services at MicroAge Inc., in Tempe, Ariz. "Slot 1 helps alleviate the quality question because all the parts are contained. It's not nearly the issue it used to be."
Nanney added that between 10 and 12 major resellers are in pilot tests with PC makers for processor installation, but described it as a "very controlled process that's kept very close to the vest."
The 350MHz and 400MHz Pentium II processors will be accompanied by the 440BX chip set, which supports Intel's first 100MHz bus and 100MHz synchronous dynamic RAM. The latter translates into faster execution of I/O intensive applications.
Later this year, Intel will modify the 440BX chip set to support 1394 and Device Bay, sources said.
PC makers including Compaq, IBM PC, Hewlett-Packard Co., NEC Computer Systems Division, Gateway 2000 Inc., Micron Electronics Inc. and Toshiba America Information Systems Inc. will make systems with the new components.
In June, some companies will also introduce Pentium II servers based on Intel's Slot 2 architecture, which also supports a 100MHz bus.
Intel's CPU conundrum
Cause ...
350MHz and 400MHz Pentium II for desktops, due April 15
440BX chip set that supports Intel's first 100MHz bus, due April 15
... and effect
New systems will exacerbate an already bloated channel and drive down PC prices down.
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Best, Michael
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