Intel cuts prices, analysts cut Q3 estimates

Intel completed a round of cuts in the prices of its processors Monday, reducing the price of its flagship Pentium 4 desktop processors, its mobile Pentium 4-M processors, its desktop and mobile Celeron processors, and its Xeon processors for workstations and low-end servers. At the same time, financial analyst firms warned of slower-than-expected sales, and revised their guidance downward for Intel's third quarter numbers.

The price cuts had been widely expected after Intel introduced on August 26 several new desktop Pentium 4 processors at clock speeds up to 2.8GHz. Intel at the time cut the price of its previous clock-speed leader, the 2.53GHz Pentium 4, and needed to cut the prices of slower Pentium 4s to bring the slower chips into line with the high-end prices.

The 2.4GHz Pentium 4 now costs US$193 in 1,000-unit quantities, down from $400, a decrease of 52 percent. The 2.26GHz and 2.2GHz chips also now cost $193, down from $241. The 2.0GHz chip costs $163, down from $193, and the 1.8GHz chip costs $143, down from $163.

Intel's fastest mobile processor, the 2.0GHz Pentium 4-M, now costs 45 percent less at $348, down from $637. The 1.9GHz Pentium 4-M is down to $241, a drop of 40 percent, the 1.8GHz chip now costs $198, down 43 percent, and the 1.7GHz chip now costs $171, down 29 percent.

The company's desktop Celeron processors were reduced by an average of 16.75 percent, and its fastest mobile Celeron processor, at 1.5GHz, was cut 44 percent to $96. Lower end Xeon processors were cut by an average of 16.67 percent. High-end Xeon and Itanium processors for servers were not affected by the latest round of price cuts.

The price cuts and new processors were expected to stimulate demand for PCs featuring the new processors, but that strategy has continued to be derailed by a sputtering economy.

Financial analyst firm Investec Inc. said Tuesday it is lowering revenue and earnings per share estimates for the third quarter and fiscal year, based on a survey of retail consumer electronics stores that indicated a weaker back-to-school market. The back-to-school market is the second-most important season for PC and processor sales, the fourth-quarter holiday season carrying the most weight.

Investec now expects Intel to earn $6.5 billion in the third quarter, down from its previous estimates of $6.7 billion. Earnings per share for the third quarter will now be $0.12 per share, down from $0.13, Investec said. The company also lowered expectations for Intel's 2002 and 2003 full-year results.

Analysts surveyed by Thomson Financial/First Call expect Intel to earn $0.13 per share in the third quarter.

Intel, based in Santa Clara, California, provided its own guidance for third-quarter revenue of between $6.3 billion and $6.9 billion when it announced its second-quarter results. Intel shares (INTC) were down $0.64, or 3.84 percent, to $16.03 in late-morning trading.

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Tom Krazit

PC World
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