Yes, let's talk about the delay in Xenon. Posters on this thread are already treating it as "old news" when I think the news is only just leaking out to the public and is impacting the stock. The New York Times, for example, had their first article on it this morning, and while I think they over-played its significance, this is probably the single most important thing pushing INTC down today. Agree? Disagree?
June 24, 1998
Intel Expected to Delay Release of Chip Set
By GRETCHEN MORGENSON
The Intel Corporation, manufacturer of microprocessors that power 80 percent of computers worldwide, is expected to delay the release of its 450NX chip set, the newest version of the company's Pentium II technology.
The widely anticipated release of the so-called Xeon line of chips, intended for use in high-end PC servers and work stations, had been expected next week until a glitch, or so-called errata, in the microprocessor was discovered. News that the Xeon release could be delayed by between six and eight weeks was reported Monday in ZDNet, the on-line version of PC Week magazine.
The Xeon delay comes at a difficult time for Intel. On June 8, the company was sued by the Federal Trade Commission, which contended that Intel had abused its monopoly power in the chip market to quash its rivals. Its newly released low-priced chip, the Celeron, is not selling; PC makers panned it as too slow and chose instead to use Advanced Micro Devices' K-6 chip. And in late May, Intel announced that it was delaying production of its Merced processor, a high-margin chip with a completely new architecture that was designed to propel Intel into the advanced work station and PC server markets that it has never dominated.
An Intel spokesman, Chuck Mulloy, said: "The Xeon is an unannounced product. We can't comment on whether or not there is errata in an unannounced product."
Delays in the release of highly complex microprocessors are common, of course. But problems with the Xeon line would be the second disappointment Intel has had in its pursuit of the server and work station markets. With the Merced chip delayed until 2000, Intel's near-term penetration of both higher-margin markets, dominated by Sun Microsystems and I.B.M., depended upon success with Xeon. Sales of chips for use in work stations account for only 2 percent of Intel's revenues; its server business generates around 10 percent of total sales.
"Our analysis is that Intel desperately needs Xeon to restore revenue growth," said Nathan Brookwood, a microprocessor analyst at Dataquest in San Jose, Calif. "But because the bug only
affects the Xeon chip sets used in servers, we believe the business impact won't be severe." Still, Mr. Brookwood noted that success in the server market would be more important to Intel over the long haul than its acceptance by work station manufacturers.
Intel's Xeon line of processors is crucial to Intel's growth because the company is in a price war with rivals in the low- and mid-priced range of the microprocessor market. Intel has already cut PC chip prices several times this quarter, which will reduce its profit margins. And Intel's failure with the Celeron chip means it must go back to the drawing board. "Intel will have to have a
competitive chip at the low end and soon," said William J. Milton, a semiconductor analyst at Brown Brothers Harriman.
Investors in Intel shares shrugged off news of the Xeon delays Tuesday. The stock rose $1.375, to $75.25, leading a rally in technology stocks for the second consecutive day. Fears that Intel would warn of a disappointing second quarter seem to have been replaced by optimism that the second half of 1998 will bring strong demand for computers. |
