Intel quarterly chip discounts due
Which chips and what percentages Intel will cut April 28 are a matter of much speculation on Wall Street.
The market, however, is largely betting the cuts will be steep and affect the chip giant's profits. Intel was the most actively traded stock on Nasdaq today, closing at 130-1/2, down 6-3/4 over yesterday. The company also saw 24 million shares trading hands.
"We estimate there could be a 25 percent cut for the Pentium Pro [family]," Montgomery Securities analyst Jonathan Joseph said.
But Wasserstein Perella Securities analyst Stephen Dube said the cuts may be focused more on the low-end Pentium "classic" microprocessors. "Their high-end market is doing well and there are reports of shortages of the high-end Pentium Pro processors."
Intel historically has made quarterly price cuts of 20 percent in an effort to move sales or reposition itself against competitors, Dube added.
Last January, Intel slashed prices on its Pentium Classic microprocessors by a much as 35 percent. Its 166-MHz Pentiums, for example, were cut to $295 from $402, a 26 percent drop.
Meanwhile, Intel's MMX multimedia-enabled chip may see some cuts as well, analysts said. Dube said Intel has a history of rolling out cuts several months after a new product debuts and that the lower-end 166-MHz MMX processor may again be due.
Intel also cut its 166-MHz MMX chip prices by 12.5 percent to $356 from $407 last January.
Analysts note that Intel faces growing competition from Cyrix (CYRX) and Advanced Micro Devices (AMD), which recently unveiled their speedy multimedia-capable chips.
Cyrix demonstrated its MMX-enabled M2 processor at the Windows Hardware Engineering Conference in San Francisco last week. The M2 is scheduled to be officially announced in May or June. Meanwhile, AMD has begun shipping its MMX-capable K6 chip to PC makers, which are expected to roll out systems with the new chip in the coming months.
"AMD may be forced to make cuts themselves that may go as low as 30 to 40 percent," Joseph said.
Intel spokeswoman Luanne Darbonne said the chipmaker will not comment on its pricing plans until they are out April 28. "We don't price our products on the immediate changes in the industry," she said. "When we price our products, we look at a number of elements, such as the life cycle of a product."
She noted, though, that Intel provides for "serious" consideration of a competitor's imitation or alternative-architecture product.
Dube said it's a hard call whether Intel will immediately drop its MMX chip prices in response to its competitors. He added Intel may want to wait another quarter since it will take time for AMD to ramp up its product line.
(Intel is an investor in CNET: The Computer Network.)