Intel Moves Up Pentium 4 Price Cuts

In a bid to boost sagging sales, the chipmaker plans to move up price cuts for its Pentium 4 processors.

Intel Corp., which recently reported low quarterly revenues and announced plans to lay off 4,000 workers, has decided to move up price cuts originally set for late October to Sept. 1 in a bid to boost sagging sales, according to a market analyst.

Jonathan Joseph, of Salomon Smith Barney Inc., in San Francisco, said the giant chipmaker will slash prices on its Pentium 4 processors up to 67 percent in conjunction with the release of its 2.8GHz chip Aug. 25 and in a second round of cuts Sept. 1.

"The fact that the price move is coming seven weeks earlier, and in some cases is marginally greater than we expected, is probably an indication that the company is still unsure about demand in September, one of the most important months of the year," said Joseph, in a research note sent to investors Monday.

The price moves will likely increase investor concerns about the companys profitability, he said, given Intels recent sagging revenues and the fact that Intels cheaper and less profitable Celeron processors are accounting for a greater percentage of the chipmakers sales.

"Accelerated price cuts will not likely be seen as a positive by the market," Joseph said.

Investor confidence in Intels earnings outlook have pushed stock in the Santa Clara, Calif., chipmaker down to multiyear lows this year, with the companys share price Monday trading about 50 percent lower than it did in January.

Intels expected to initially price its 2.8GHz Pentium 4 at $637, based on 1,000-unit shipments.

At the beginning of this year, Intel had scheduled the release of the 2.8GHz chip for the fourth quarter, but sources close to Intel said last month that the chipmaker had moved up its release to the third quarter.

During a conference call last week with market analysts, Intel President Paul Otellini said the chipmaker plans to release a 3GHz version of the Pentium 4 in time for the holiday sales season. While Intel already has been showing off the chip at various company demonstrations, the processor wasnt originally scheduled for release until early 2003.

With the introduction of the new chip, Intel will slash the price on its current fastest processor, a 2.53GHz Pentium 4, from $637 to $236, a 67 percent reduction. Intel will also lower prices on its slower running Pentium 4s, although the cuts will be far more modest. For example, a 1.8GHz version will be priced down from $163 to $143, a 13 percent cut.