Jules, interesting article...Pentium Pro shortage.
Chronic Pentium Pro Shortage Plagues VARs
(01/20/97; 9:30 a.m. EST)
By Ken Yamada, Computer Reseller News
Santa Clara, Calif. -- Despite Intel Corp.'s best efforts, chronic shortages of Pentium Pro chips continue to plague the channel, frustrating VARs and vendors.
Only a trickle of 200MHz Pentium Pro chips is flowing through Intel-authorized chip distributors, driving the price of Pentium Pros in the gray market as high as $300 above Intel's list price.
"Right now, the number of Pentium Pros is quite limited," said a West Coast distributor manager, who requested anonymity. Orders have been backlogged for months, he said.
The shortage and gray-market pricing has raised the ire of many resellers, who say the current situation obliterates profit margins and indicates a lack of commitment from Intel for its boxed processor program.
"I suspect that unless Intel makes the boxed CPUs a priority, there will be the same problem with the MMX and Klamath chips," said Frank Leser, president of Financial Technologies Inc., a Chantilly, Va.-based VAR.
And there appears to be no end in sight.
Paul Otellini, an Intel executive vice president, said he expects supplies of 200MHz Pentium Pro chips to continue to be "tight" during the quarter. "I don't think we'll reach equilibrium," he said.
Intel officials declined to say when that equilibrium would be reached.
The chip crunch adds to the challenges distributors and resellers face this year when managing a tricky product transition to faster, more powerful Intel processors featuring MMX multimedia technology. In early April, Intel also plans to unveil a 233MHz Pentium Pro chip with MMX, code-named Klamath, which will be followed by a 266MHz model, according to channel sources.
Furthermore, with the launch of Pentium chips incorporating MMX earlier this month, some chip distributors said they were concerned that the market may switch too quickly to the new chips, leaving them with excess supplies of the older Pentium chips. Intel list prices of Pentiums are expected to fall about 10 percent at the beginning of February.
Motherboard vendors, as well, have been frustrated by the shortages. Thin inventories of chips from Intel stifle sales of Pentium Pro motherboards.
Intel officials, acknowledging the shortages, said Pentium Pro production will continue to rise as it has every quarter since the third quarter. During a conference call with securities analysts last week, Intel Chief Financial Officer Andy Bryant said worldwide channel inventory in the fourth quarter fell $77 million to $1.2 billion, down from $1.3 billion in the third quarter.
"This is less than we would like to have," said Bryant. "We will increase it when the opportunity arises."
Had Intel shipped more units, its earnings might have been even better than the stellar results it posted last week.
The Santa Clara, Calif.-based chip maker beat analysts' estimates for its fourth quarter, ended Dec. 31, posting a 117 percent jump in net income to $1.9 billion, or $2.13 per share, compared with $867 million, or 98 cents per share, a year ago. Revenue grew 41 percent to $6.4 billion, compared with $4.6 billion a year earlier.
The earnings beat analysts' estimates. According to First Call Inc., net-income predictions averaged $1.84 a share.
Intel also offered a glimpse of its earnings for the first quarter, saying it expects revenue for the current quarter to be flat with fourth-quarter revenue of $6.4 billion and gross margins also flat, down from 63 percent in the fourth quarter. Expenses and capital spending are expected to increase.
"I think it was a mild warning," said Jonathan Joseph, an analyst at Montgomery Securities. The quarter "was a blowout. I think the picture here with Intel is that it continues to be a long-term growth story," he said.
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Regards, Michael |
