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

To: Mary Cluney who wrote (76462)	3/16/1999 3:13:00 PM
From: Ian Davidson	Respond to of 186894

From the WSJ: Intel Corp. Dow Jones Newswires -- March 16, 1999 Intel To Unveil High-Price, High-Margin Xeon Chips By Christopher Grimes NEW YORK (Dow Jones)--Intel Corp. (INTC) is expected to unveil Wednesday three Xeon chips aimed at high-performance workstations and servers, with the fastest chip running at 550 megahertz. The Xeon chips, expected to cost anywhere from $800 to more than $3,000, are becoming an increasingly important part of Intel's strategy as prices continue to tumble in its bread-and-butter business, the desktop PC market. Intel is slashing prices for its economy-model Celeron chips to fend off competition from Advanced Micro Devices Inc. (AMD) and National Semiconductor Corp.'s (NSM) Cyrix division. But those rivals can't compete with Intel's Xeon in the high-dollar market for workstations (souped-up computers for engineers) or servers (big computers that link networks of PCs together.) "One Xeon offsets several Celerons," in terms of profit margin, said Charles Boucher, an analyst at Donaldson Lufkin & Jenrette Securities Corp. Unlike in the desktop PC market, where routine tasks don't require as much raw processor speed, engineers and corporations lust for faster chips. "It's much different from the desktop (PC) space, where the bulk of users already have machines that are much faster than they know what to do with," said Nathan Brookwood, the principal analyst at Insight 64, a market research business in Saratoga, Calif. He said a server running a Web site on the fastest chip available now, 450 megahertz, could handle an extra 10% to 20% more Internet traffic with the 550 megahertz Xeon. "These markets are very performance-sensitive," Brookwood said. And the market for high-end chips is growing quickly. Erika Klauer, an analyst at BT Alex. Brown, estimates the market for high-end chips will grow by over 25% this year to 2.7 million units. "The growth there is very powerful," she said. "Because performance dominates, there's much less pricing pressure than in microprocessors for general-purpose PCs." Intel competes with Compaq Computer Corp.'s (CPQ) Alpha; International Business Machines Corp.'s (IBM) Power PC; Sun Microsystems Inc.'s (SUNW) Sparc chip; and processors from Mips Technologies Inc. (MIPS) in the market for server and workstation chips. Intel leads many of its rivals in terms of unit shipments, but lags some in revenues from high-end chips, Brookwood said. But Intel probably will become more dependent on the high end of the market in the future, particularly since the trend toward lower-priced PCs isn't expected to end. "It's real important for them to increase sales of these high-end products," Brookwood said. "My view is that over the next couple of years, they will derive more revenue from these high-end parts, and that will help them maintain their average selling price of $200." The new Pentium III Xeon chips are expected to run at 450, 500 and 550 megahertz and should be available by spring, analysts said. The company plans to roll them out in a Wednesday morning presentation in New York, and several computer companies - including Silicon Graphics Inc. (SGI) - will show off computers running the new chips. - Christopher Grimes; (201) 938-5253