Intel, AMD to Cut Prices

Financial pressures on Intel Corp. and Advanced Micro Devices Inc. are mounting amid weak sales and falling stock prices, spurring the PC chip makers to initiate a new round of price cuts in the next month in a bid to boost demand.

System managers buying new PCs will be able to reap savings of up to 67 percent on Intels top-performing Pentium 4 processors as the chip maker slashes prices to move inventory.

AMD, of Sunnyvale, Calif., is also expected to reduce its prices this month, sources said, only a few weeks after trimming up to 20 percent off prices late last month. Although details on the cuts remain cloudy, sources close to the company said AMDs next round of cuts will further reduce chip prices about 15 percent.

The price reductions come as Intel, of Santa Clara, Calif., and AMD have seen their stock prices fall close to multiyear lows in recent weeks.

However, one IT manager said lower PC prices wont alter his buying plans. "We buy based on our needs, rather than based on system prices," said Marshall Fernholz, procurement manager for the American Medical Association, in Chicago.

Although Intel is optimistic the lower prices will attract buyers, the company is hedging its bets. It is planning a two-week shutdown of its Pentium 4 manufacturing plant in Qiryat-Gat, Israel, starting Sept. 13 to reduce operating expenses and lower its inventory of unsold processors.

"The second quarter was much worse than expected" for the chip makers, said Dean McCarron, an analyst for Mercury Research, in Cave Creek, Ariz. "In the 10 years that Ive been keeping quarterly statistics, that quarter was the second-worst second quarter I have seen, based on unit sales."

And while McCarron said hes aware that Intel and AMD are planning to cut prices to spur demand, he doubts the moves will have a significant impact on either companys sales.

"Cutting processor prices does not usually result in a big upswing in sales, particularly in a down market," McCarron said.