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Intel Reduces the Price of Some Microchips by Up to 34%

Technology: The biggest cuts are on chips for laptop computers. The pre-holiday reduction is part of a strategy employed annually.

September 15, 1998|From Bloomberg News

Intel Corp., the world's largest maker of computer chips, said Monday that it has cut the price of some microprocessors by as much as 34% to stimulate demand in advance of the holiday shopping season.

The largest cuts will be made on chips Intel makes for laptop computers. It will also reduce the price of one of its Celeron chips by 15% and four versions of its popular Pentium II chips, used in desktop computers, by 8% to 29%. No price cuts are planned on its top-of-the-line Xeon product line.

Intel cuts prices on its chips several times a year as manufacturing advances allow it to reduce the cost of making the chips. These cuts come just in time for PC makers to take advantage of the lower prices to lure holiday buyers with new, cheaper machines.

"It's the same old strategy," said analyst Mike Geran of Pershing, a division of Donaldson, Lufkin & Jenrette. "If Intel didn't cut prices, [PC makers] would go someplace else."

Indeed, Intel has had to accelerate some of its price cuts because of increased competition from Advanced Micro Devices Inc. and National Semiconductor Corp.'s Cyrix unit, both of which make inexpensive processors that compete with Intel's products.

Last week, Intel said third-quarter sales will be about 10% higher than the $5.9 billion reported in the second quarter, amid stronger-than-expected demand in North America and Europe.

The company also said its gross margin, which is the percentage of sales remaining after costs of production are subtracted, will widen from the 49% reported in the second quarter.

The price of Intel's 266-megahertz Pentium Processor Mobile chip was cut 34%, to $159 from $241, while the 233MHz version was cut 29%, to $95 from $134.

The Santa Clara-based company cut the cost of its 400MHz Pentium II processor 18%, to $482 from $589; the 350MHz version was cut 29%, to $299 from $423; the 333MHz version was cut to $234 from $316, a 26% drop; and the 300MHz version was cut 8%, to $192 from $209.

Intel also cut the price of its 300MHz Celeron processor by 15%, to $95 from $112.

Shares of Intel rose 88 cents to close at $85.81 on Nasdaq.

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