Intel to Release P4 Early, Reduce Prices

Offers 2.8GHz chip, but industry doesn't think faster processor will help to increase sales.

Intel Corp. is seeking to boost the sagging sales of its Pentium 4 processors by moving up the release of a 2.8GHz chip from next quarter to this summer.

In addition to raising the bar for its fastest chip from 2.53GHz to 2.8GHz, the Santa Clara, Calif., company is considering additional price cuts this quarter in a bid to reduce its rising supply of unsold Pentium 4s, according to sources close to the company.

In an apparent bid to increase the attractiveness of its leading brand, Intel is not only moving up the launch of its 2.8GHz Pentium 4 from next quarter to this summer but is also initially offering the chip at $637, with the price of its current speed king, a 2.53GHz chip, cut from $637 to $433, according to sources.

Intel will also release a 2.66GHz Pentium 4 priced at $562 per 1,000 units and a 1.9GHz Celeron costing $138.

Intel is considering moving up the release of a 3GHz Pentium 4 from the first quarter of next year to later this year, according to industry insiders. Before making the move, Intel will consult with PC makers to see if an earlier launch date would upset their holiday marketing plans.

Intel executives have repeatedly demonstrated 3GHz Pentium 4s during recent appearances showcasing their technology.

Industry observers doubt the moves will help Intel, given that processors currently deliver all the performance needed by most enterprises.

"Processor speed isnt a big concern, since virtually any PC you buy right now is probably more than fast enough to handle most business applications," said Marshall Fernholz, procurement manager for the American Medical Association, in Chicago.

Analysts doubt faster chips will ignite sales. "The basic problem is that processors already deliver more performance than most people need," said Nathan Brookwood, an analyst with Insight 64, in Saratoga, Calif. "Until software demands catch up, Im not sure how much interest folks will have in these faster chips."

Intel, which has a policy of not discussing future product releases, will tip its hand about upcoming chip plans when it reports its second-quarter earnings this week, according to sources.

Weak sales of desktop PCs during the second quarter left Intel with an unusually high number of unsold chips. Rising inventory levels pose a dilemma for the company as it continues to try to cut expenses to offset slumping sales.

Salomon Smith Barney Inc., in San Francisco, last week lowered its earnings forecast for Intel through the rest of the year. Salomon analyst Jonathan Joseph cited Intels growing inventory of unsold Pentium 4s and lower average selling prices for the companys chips.