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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Paul Engel who wrote (117671)	11/14/2000 12:30:18 AM
From: puborectalis	Read Replies (1) \| Respond to of 186894

Willamette margins may crimp Intel's profits By Jack Robertson Electronic Buyers' News (11/13/00, 05:54:48 PM EDT) SANTA CLARA, Calif. -- Intel Corp.'s long-awaited Willamette-class Pentium 4 processor is slated to launch next week, but what was once painted as a high-margin MPU may prove to be something of a profit damper for the company. Expected to steal back the clock-speed crown from Advanced Micro Devices Inc.'s Athlon, the 1.5-MHz dual-channel processor is aimed at the workstation and upper-end desktop-PC markets. The IA-32 design, the first new Intel architecture in five years, includes a quad-pumped 400-MHz processor bus, a deep 20-stage pipeline, and a complex NetBurst design for boosting execution of instructions per second. Paul Otellini, executive vice president and general manager of the Intel architecture group, predicted Pentium 4 sales will surpass the Pentium III in 2001. Intel will boost the chip's clock rate to 2 GHz by the third quarter of next year using 0.18-micron processing, and expects faster speeds when it moves to 0.13-micron late next year. Though heavily equipped and nominally aimed at pricey workstation applications, industry observers note that the Pentium 4 will nevertheless carry a competitive price right out of the gate and will likely be slotted for $1,500 to $2,000 desktop PCs. Because the Willamette is only equipped to accommodate Direct Rambus DRAM in main memory--a more costly alternative to SDRAM-enabled processors--Intel is offering a $65 to $70 rebate on each system shipped by OEMs through the first quarter of next year. Intel is also bundling the P4 with Direct RDRAM chips as a packaged sale to motherboard makers, distributors, and resellers, according to industry sources. "The Pentium 4 chip, at more than 200 sq. mm in size, also takes more silicon than other Intel processors, making it more costly to produce," said Nathan Brookwood, an analyst at Insight64 in Saratoga, Calif. "All this cuts sharply into profit margins at the beginning of its product cycle. This is the time when Intel should be expecting high margins from its highest-performance processor." Given the current pricing environment brought on by competition with AMD, Brookwood said Intel has little choice but to lower its sights. What's more, with Willamette entering the PC market next year, Intel's Direct RDRAM-enabled architecture and AMD's desktop Athlons with double-data-rate SDRAM will finally meet in a long-awaited head-to-head matchup. "[The P4] is the only Intel processor above 1 GHz to compete against AMD's 1.2-GHz Athlon, which will probably quickly go to 1.3 GHz," Brookwood said. Results of the market battle, however, may be tough to read, Brookwood warned. "Each side will tout its own results," he said. "It will be like the presidential election, whether you win the popular vote or the electoral college."