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Looks like Intel is going to pummel the competition. February will be an
excellent time to buy a Pentium II 300 MHz at about $550. A 300 Mhz is
probably the last CPU any end-user will need to buy, as long as he has an AGP
video board. I recommend the Diamond Multimedia Viper V330.
Daniel L. Martinez
<HTML><PRE> By Samuel Perry PALO ALTO, Calif., Nov 17 (Reuters) - Intel Corp. <INTC.O> is continuing an aggressive price-cutting program into 1998 as it entices customers to buy its latest Pentium II computer chips, analysts and industry sources said Monday.
Intel officials would not comment on future pricing plans, but an analyst said the world's biggest computer chip maker has begun notifying its customers about them.
Analysts said the price cuts signal Intel will not be complacent about fresh competition from Advanced Micro Devices Inc.<CYRX.O>.
Santa Clara, Calif.-based Intel makes the microprocessors that are the brains of personal computers used in more than four out of every five PCs sold worldwide.
Analysts said Intel's relatively aggressive price cuts -- it slashed prices in half on some chips in August and cut the price on certain chips by up to 40 percent Nov. 1 -- are designed to move customers to its Pentium II chips as it speeds up production of the new products.
Cowen & Co. analyst Drew Peck said he has turned neutral on Intel, citing uncertainty extending through the first quarter of 1998 over how much pricing inducements and unprecedented advertising will cut into financial results, and whether they will generate sufficient demand.
Peck said large customers told him Intel is already cutting deals significantly below price levels it expects to introduce Feb. 1, when, for example, the 233-megahertz (MHz) Pentium II will be reduced to $300 each.
"My understanding from some of Intel's large customers is that they will be getting deliveries of Pentium II 233s well before Feb. 1 at prices well below the $300," he said.
Such reductions and a consumer advertising blitz aim to generate demand for the new chips because they represent a less dramatic technological improvement over their predecessors than previous chip families, Peck said.
ABN AMRO Chicago Corp. analyst David Wu said Intel is expected to introduce new versions of the Pentium II next year aimed at lower-priced computers, which will strike a blow at AMD and Cyrix, whose chips generally undercut Intel's prices.
In the latest price cuts Oct. 27, Intel cut the price of its 233-MHz Pentium II by 24 percent to $401 from $530, and slashed other models by more while leaving unchanged the price of Pentium Pro chips for more powerful servers -- the computers that run computer networks -- and workstations.
Last week, the trade publication Computer Retail Week reported in its online edition that Intel was preparing to cut the price of large-quantity orders for its 233-MHz Pentium II chip by roughly one-third on Jan. 1 to only about $75 a chip more than its lower-end 233-MHz Pentium MMX chip.
Cited unnamed sources, it reported that in February Intel will cut prices of its 266-MHz Pentium II to $370 from $520 currently and its 300-MHz Pentium II to $520 from $721 and will add new 333-MHz Pentium IIs.
The 333-MHz Pentium II will be priced at $705 each. Two faster versions -- the 350-MHz at $840 and the 400-MHz at $980 -- are due to ship in April, according to the report.
Intel declined to comment on the report, noting that it typically informs customers of planned pricing changes several months in advance so the PC makers can set product and price strategy.
Intel has tended to reduce prices on at least some of its products every quarter, roughly following the pattern of Moore's Law. The "law" is named for Intel co-founder and Chairman Emeritus Gordon Moore, who predicted chips would double in performance for a given cost every 18 months.
Instituting two separate price cuts in a quarter would be unusual but not unprecedented for Intel.
Computer Retail Week reported Monday that Compaq Computer Corp. <CPQ.N> will use AMD's K6 chips in up to four Presario notebooks and at least two consumer desktop PCs.
Such a move by the world's largest PC maker, which already has been using Cyrix chips and has used AMD processors in the past, could put further pressure on Intel.
A spokesman for AMD, based in Sunnyvale, Calif., declined to comment, saying it lets customers make such announcements.
A spokeswoman for Houston-based Compaq said the company does not comment on future products. "We are partners with Intel and we've got flexibility with other partners," she said.
Intel stock rose $1.875 to $80.625 in afternoon trading on Nasdaq. It was the second most active issue on the exchange on volume of more than 10 million shares.
REUTERS
18:45 11-17-97
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