Nihil, Intel Investors - Re: Intel's Pentium II Agressive Push
With system pricing on Pentium II machines being agresssively cut, Intel should have little problem obtaining 25% Pentium II shipments this quarter and reaching 50% by the end of Q298.
Check it out - a Pentium II/300 MHz - Monitor Included - for $2199!
Paul
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news.com
Price free fall hits high end
By Michael Kanellos
October 20, 1997, 4:45 p.m. PT
update The free fall in prices is clearly
happening in all PC categories now: Even
high-end machines are dropping down to the
$2,000 level.
Micron today released a new, full-featured
233-MHz Pentium II desktop with monitor for
$1,999 while NEC Computer Systems has
introduced a new system with a 300-MHz
Pentium II--the fastest Intel chip
available--with monitor for $2,199.
The two new systems are the latest salvos in
an escalating price
competition among
computer makers. In
addition to the explosion
of the sub-$1,000 PC
market created by
Compaq and
Packard-Bell, high-end
computers with the
newest and fastest
chips--historically costing well over
$3,500--are being pushed down to below
$2,000 in some cases.
The phenomenon demonstrates a radical
shift in PC pricing. Increasing customer
demand for cheaper computers, combined
with improved manufacturing efficiency,
competition over market share, and
accelerating processor price cuts from Intel
and others are conspiring to raise the
performance-price bar on a weekly basis.
The good news for consumers: it's likely to
continue.
While price cuts aren't new to Intel,
discounting has clearly accelerated the trend
in comparison to previous generations of Intel
chips. At major, top-tier PC vendors, it took
the 486 chip about three years to get into
sub-$2,000 computers and about two years
for the Pentium to finally make its way to
sub-$2,000 systems, noted an Intel
spokesman. Amazingly, with the Pentium II,
Intel's newest chip, this has happened in less
than six months.
"The $2,000 price point is kind of a driver" for
the Pentium II market, said Jeff Moeser, vice
president of the desktop group at Micron.
"You will see some pricing on action on
[266-MHz Pentium II and 300-MHz Pentium II]
machines coming up."
On one end of the spectrum, vendors such as
Compaq, Hewlett-Packard and Digital have
been cutting prices to get both business and
consumer computers under $1,000.
On the other end, vendors such as Gateway
2000 have been devising ways to get
high-end Pentium II systems under the
$2,000 price point.
Although the direct vendors such as Micron,
Gateway, and Dell have thus far stayed out of
the sub-$1,000 derby, the picture will change,
added Moeser. "You can expect that the
directs are not going to stand by and watch
the sub-$1,000 market take off," he said.
This year's price cuts are nothing if not
astounding. Systems with a 300-MHz
Pentium II sold for around $4,000 at the end
of August. Now NEC is selling a similar
machine for close to $2,000.
Processor price cuts have been one of the
chief drivers behind the price wars. Intel has
cut processor prices substantially each
quarter, a move that has been closely tracked
by AMD and Cyrix. Prices of Pentium II chips
running at 300-MHz have been more than cut
in half since the chip has been introduced this
past spring.
Further processor cuts are due at the end of
the month. After these take place, Pentium II
prices will be between 24 and 29 percent
lower than they were in the first quarter while
Pentium MMX prices will have dropped more
than 60 percent. End-of-life "classic" Pentium
chips have even dropped faster.
"Clearly, Intel wants to move the market to
Pentium II fairly quickly and one way to do
that is deeper-than-expected price cuts,"
said Scott Miller, an analyst at Dataquest.
At the same time, manufacturers have been
steamlining back-end operations to wring out
costs. Compaq, HP, and other
non-mail-order companies this year kicked
off "build-to-order" manufacturing initiatives
to cut out inventory and manufacturing costs.
NEC, in fact, converted from being an
indirect manufacturer which relies on
distributors and resellers to acting mostly as
a mail-order company.
This in turn has inspired the mail-order
companies to improve their own
manufacturing, said Moeser.
These companies are also taking a hit on
margins. Compaq admitted in a recent
conference call that its sub-$1,000
computers sell at relatively low margins,
which is made up in volume.
Joe Daltoso, chief executive at Micron, told
CNET in September that computer
companies were increasingly turning toward
lower-margin business models as a way to
land large accounts and increase market
share.
"We're taking a more aggressive price
position and a more aggressive margin
position," said Moeser.
Micron's new Millennia XKU 233 comes with
a 233-MHz Pentium II, 32MB of memory, a
2.1GB hard drive, a CD-ROM drive, and a
17-monitor, all for $1,999. The configuration
closely mirrors Gateway's G6-233, which was
discounted to $1,999 earlier this month. A
review of online computer resellers shows
that similarly configured systems from other
vendors are selling for approximately $2,300
and up.
NEC's new configuration for its Direction PC
features a 300-MHz Pentium II, 32MB of
SDRAM, a 4.3 GB hard drive, a CD-ROM
drive, and a 15-inch monitor. The sale price
of $2,199 is currently far below the price of
similarly configured systems from other
vendors, which are selling for $2,800 and
above. |
