Intel is expected to cut the price of its fastest microprocessor by
more than 50%, one financial analyst company said - a move that
will likely mean cheaper PCs for customers.
As the chipmaker prepares for the next battle in its ongoing price
war with Advanced Micro Devices (AMD), Lehman Brothers Holdings.
analyst Dan Niles said in a research note he expects Intel to cut
the cost of its Pentium 4 line of chips by as much as 54% by the
end of August.
Intel controlled about 79% of the microprocessor market in the
second quarter of 2001. AMD has continually grabbed market share
from the Intel for the past year, which has caused Intel to react,
Niles said. In the second quarter of 2001 AMD increased its
processor shipments by 23% from the same quarter a year ago, while
Intel shipped 12% fewer processors in the same time frame.
"We believe Intel is planning to detonate a price bomb on AMD,"
Niles wrote in his research note.
Stalled consumer demand for PCs is also driving the price cuts,
Niles said. "They wouldn't be doing this if they didn't see a
problem with the demand side of things,"
An Intel spokesman declined to comment, saying the company does not
discuss future price moves.
News of the continued price wars sent chip stocks lower. Analysts
said they expect consumers to see quick gains as computer
manufacturers pass the savings on to their customers.
Rob Enderle, an analyst at Giga Information Group said, PC makers
typically react as quickly as possible to price cuts.. In some
cases manufacturers such as Dell and Compaq who see price cuts on
the horizon will actually reduce the cost of PCs before chipmakers
adjust their prices.
"The vendors are in the middle of this price war," Enderle said.
"Any cut that Intel makes gets transferred almost immediately to
consumers."
Subsequent price cuts at AMD are likely to follow in response,
analysts said.
"It puts AMD under a huge amount of pressure," Enderle said. "I'm
not sure they have any choice (but) to lower prices."