Intel?s price cuts will spark off another round of vendor price wars, according to industry analysts.
Prices to be introduced on 28 July show that Intel is positioning its MMX Pentiums as entry-level chips. The 233MHz chip falls from $580 to $355, and the 166MHz part is halved in cost, dropping from $270 to $135.
Intel will introduce a 300MHz Pentium II a few days later, and although the price has not been formally announced, the 30,000 available chips will cost $830 each in quantities of 1,000.
The reductions will have a knock-on effect on vendor and channel pricing. IBM admitted today that it will cut prices this week in an attempt to push products through its channel.
Nick Eades, senior product director at the IBM PC Company, said: ?Most of our channel partners realise that the price cuts are coming and there is a degree of reluctance to buy.?
Mark Davison, who runs the CPU unit at Datrontech, agreed. ?Our dealers are waiting until the price cuts come. This is causing a slow-down in our business.?
Intel has yet again blamed Europe for its flatter than hoped for results, but it also said that ?inventory correction and product transitions? were factors.
Second quarter results were far better than Wall Street had anticipated, following warnings by Intel that its sales would be down five to 10 per cent on the first quarter. In fact, turnover was $5.96 billion, down seven per cent on the first quarter, but up 29 per cent on the second quarter last year. Net profit was $1.65 billion, up 58 per cent on last year.
Gross profit margins are now about 50 per cent, said Intel representatives, down about 10 per cent on last year.
But that will not stop Intel from investing its very large liquid resources, they added. Capital spending is expected to total $4.5 billion this year.
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