PC sales slow ahead of expected Intel price cut

Global PC sales have slowed in recent weeks as the market waits for an anticipated price cut in Intel microprocessors.

Global PC sales have slowed a tad over the past few weeks as the market waits for Intel to announce new price reductions, market researchers said.

The world's largest chip maker is widely expected to publish a new price list on July 22 that shows lower prices for microprocessors aimed at the desktop PC market. The company regularly updates its pricing, but doesn't disclose when or how much prices will change, an Intel spokesman said Thursday.

Still, PC makers in Taiwan, as well as analysts and market researchers said they receive word of price changes ahead of time, and that the expected Intel price reductions were the reason Advanced Micro Devices announced microprocessor price cuts earlier this month. AMD slashed prices on its top-of-the-line desktop PC microprocessors by a few hundred dollars, and now offers six AMD Athlon dual-core microprocessors for below US$100 each. The AMD move was aimed at pre-empting Intel's anticipated July reductions, according to a report by investment banking firm Goldman Sachs Group Inc.

The expected price cuts are a continuation of Intel's battle for market share against rival AMD. It's a fight that has been great for users, particularly in desktop PCs. Microprocessors are among the most expensive parts in a PC, so price cuts on the chips usually lead to better deals for users, either on lower PC prices or more add-ons, such as better DVD drives, more memory, or larger hard disks. The market share battles have also prompted both Intel and AMD to boost technology, resulting in more bang for a user's buck.

The price war hasn't been so good for the companies. Intel's stock fell 4.8 percent to end at US$25.06 per share on the NASDAQ stock exchange Wednesday, a day after the company reported a lower than expected profit margin for the second quarter. Analysts blamed the price war. The fight with Intel has caused AMD to report weaker earnings in recent quarters, and analysts are not optimistic about its second quarter earnings, which it will report later Thursday in the U.S.

"We believe the worse than expected gross margin, higher than expected R&D [research and development] spending and low quality earnings leverage (tax rate changes, sold depreciation, etc.) will cast a shadow over [Intel's] stock," wrote Michael Masdea, chip analyst at Credit Suisse Securities (USA), in a recent report. He predicted that Intel gained market share on AMD in the second quarter, based on its earnings report.

Market researchers were not able to say exactly how much the PC market has slowed over the past few weeks, but indicated that the weaker sales have shown up in various places in the PC component supply chain. Slower trading in the DRAM (dynamic RAM) market, for example, caused prices to drop last week, according to DRAMeXchange Technology, which runs an online DRAM trading site. The company blamed the anticipated Intel price adjustments for the declines.

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Dan Nystedt

IDG News Service
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