Facing Slow Economy, Competition from AMD, Intel Slashes Prices

On the heels of poor earnings reports for the fourth quarter and all of 2008, the world’s largest maker of computer chips reportedly is slashing prices on some of its processors.

 

Faced with less demand for their chips – especially following the dip in consumer electronics industry devices that their flagship products power – officials at Intel Corp are cutting some of their higher-powered, faster quad-core chips by as much as 40 percent, according to Reuters (News - Alert) reporters Gabriel Madway and Bijoy Koyitty.

 

“Intel (News - Alert) reduced the price of its Core 2 Quad Q9650 chip (pictured right), which is used in desktop computers, to $316 from a $530 list-price in December,” Reuters reports. “It lowered prices on other Core 2 Quad chips by 16 to 20 percent. Quad-core chips have four processors on one piece of silicon.”

 

The company is also facing a slumping economy as well as competition from Advanced Micro Devices Inc., which makes cheaper chips, including its Phenom II quad-core products, which list at $275 at the high end.

 

One analyst interviewed by Reuters – Doug Freedman of American Technology Research called AMD’s (News - Alert) a “much more viable product portfolio than they did last year,” according to Madway and Koyitty.

 

“I would put it as a standard move with the caveat ... that the marketplace is far from in a standard condition and there’s a more viable product out of their competitors,” Freedman reportedly said. “To think that there is some impact there, yes, but I wouldn’t be ready to call it the start of round two of a price war.”

 

Yet the news comes, as TMCnet reported, as officials at Intel say revenues from the quarter ended Dec. 31 came to $8.2 billion – a 19 percent drop from the prior three-month period. The results include a $1 billion negative impact from the previously announced reduction in the carrying value of the company’s Clearwire investments.

 

According to Paul Otellini, Intel’s president and chief executive officer, the economy and industry are in the process of resetting to a new baseline from which growth will resume.

 

“While the environment is uncertain, our fundamental business strategies are more focused than ever,” Otellini said. “Intel will continue to extend its manufacturing leadership, drive product innovation, develop new markets and implement operating efficiencies that have already taken more than $3 billion out of our ongoing cost structure since 2006.”

 

Intel also cut prices on a number of other chips used in desktops, notebooks and servers, Reuters said.

 

Prices on Pentium dual-core chips used in desktops were dropped by as much as 24 percent, and Celeron mobile processor prices were cut nearly 50 percent, Reuters reports.

 

“Intel also introduced three new, more energy-efficient Core 2 Quad processors for use in desktops,” Madway and Koyitty write.