Vendors slam Intel policy on price cuts

Ian Marsh
27 January 1997

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Intel is putting pressure on first-tier PC vendors to adopt MMX technology by slashing prices on a number of its chips. But the company will not be reducing prices for second-tier and third-tier vendors.

Price cuts from Intel, to be in force from 1 February, will make it sensible for first-tier vendors to switch completely from old Pentium Lite chips to new processors, which will be significantly cheaper.

This follows criticism from major customers that direct vendors Gateway and Dell had undercut them from the start. The price cuts reduce the cost of MMX chips for first-tier vendors less than a month after the launch of the new family, showing the pressure Intel is under. They also make the 133MHz Pentium the entry-level processor in PCs from February.

Richard Baker, European marketing director at AMD, said the price cuts betrayed Intel?s cynicism about its partners. ?The price point for P133s at $130 means that large OEMs will quickly drop the part. Big vendors can?t rely on this sort of chip being available in three months.?

One second-tier vendor, who asked to remain anonymous, criticised Intel for the move. He said: ?The prices on the P133 from Intel to us are identical, but we will have to pay 25 per cent more than the first-tier vendors will for MMX chips.

?They are being very clever by dropping the prices in this way.?

But he said performance tests on the 200MHz Pentium processor reveal that it performs slower than the 166MHz MMX part, and so speculated that Intel will prematurely drop the part.

Brendan Sherry, European managing director of clone chip company Cyrix, said that Intel was attempting to phase in its MMX Pentiums faster than expected by many.

?Our sense is that Dell and Gateway are the favourite launch customers [of Intel] and that comes with special terms. Packard Bell might be in that position too,? he said. Pentium Pro prices will remain unchanged.