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Intel cuts prices, analysts cut its earnings estimates

Intel cuts prices, analysts cut its earnings estimates

Intel has completed a round of cuts in the prices of its processors, 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 $US193 in 1000-unit quantities, down from $400, a decrease of 52 per cent. The 2.26GHz and 2.2GHz chips also now cost $193, down from $241. The 2GHz 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 per cent less at $348, down from $637. The 1.9GHz Pentium 4-M is down to $241, a drop of 40 per cent, the 1.8GHz chip now costs $198, down 43 per cent, and the 1.7GHz chip now costs $171, down 29 per cent.

The company's desktop Celeron processors were reduced by an average of 16.75 per cent, and its fastest mobile Celeron processor, at 1.5GHz, was cut 44 per cent to $96. Lower end Xeon processors were cut by an average of 16.67 per cent. 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 said 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. The company also lowered expectations for Intel's 2002 and 2003 full-year results.

Intel provided its own guidance for third-quarter revenue of between $6.3 billion and $6.9 billion when it announced its second-quarter results.


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