Intel Chips Raise the Ante

Company's rollouts intended to revive slumping sales, but economy has corporate customers wary

Intel Corp. hopes to ignite sluggish summer sales by launching a slew of chips, but its efforts to turn up the heat may receive a chilly reception. Corporate customers, especially, appear increasingly reluctant to buy new equipment amid worries of a possible U.S. recession.

"Weve been unable to bring in new machines for replacements for months, so were way out of whack as far as our normal replacement cycle," said Marshall Fernholz, procurement manager for the American Medical Association, in Chicago.

"I think everybody is looking at the bottom line more closely, and theyre questioning purchases that in the past would have gone through without difficulty. Thats just reflective of how everyones concerned about the economic situation," Fernholz said.

This month, the chip maker will introduce five mobile chips, sources said, and this quarter will launch its long-awaited 845 chip set, code-named Brookdale. Before the year is out, Intel plans to release a 2.2GHz desktop version of the Pentium 4.

The 845 chip set is expected to attract corporate users who want to package the Pentium 4 chip with more popular and less costly synchronous dynamic RAM, rather than the Rambus DRAM currently required with the existing 850 chip set.

Intel, based in Santa Clara, Calif., began its latest market assault earlier this month with the release of two Pentium 4 chips, a 1.8GHz and a 1.6GHz processor, for desktops.

As early as this week, sources said, Intel will release five mobile Pentium III processors, code-named Tualatin, built using the companys new 0.13-micron manufacturing process.

The process enables Intel to make chips that are smaller and faster than is possible using the current 0.18-micron process. Manufacturing tinier chips allows Intel to build more processors at a lower cost.

The advantage for customers is that the new mobile chips run cooler and use less power than their predecessors, enabling longer battery life.

But if the reception the Pentium 4 has received is any indication, there may be few buyers for the new chips.

Since last fall, PC demand has dropped dramatically, due in large part to a weakening U.S. economy. The slump proved particularly unfortunate for the Pentium 4, which was released in November.

According to Intel insiders and sources close to the company, the chip maker expected to sell 20 million Pentium 4 processors this year, but actual sales figures are running at half that.

To combat slumping sales, Intel has become increasingly aggressive in slashing prices. In April alone, the company slashed by up to 60 percent the prices on its fastest processor line.

While its unclear whether such cuts have helped sell chips, the moves have hurt Intels top rival, Advanced Micro Devices Inc.

Last week, the Sunnyvale, Calif., company reported dramatically lower-than-expected earnings, despite meeting projected unit sales of its Athlon processors. AMD blamed aggressive pricing from competitors for forcing it to lower prices, eroding its profit margins.