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Intel prepping chip price cuts?

15 to 40 per cent, rumors say

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It looks like Intel will soon cut prices on its Core processors used in PCs, and Xeon processors used in workstations and servers.

Intel hasn't announced cuts. But according to the Barron's tech blog, an announcement will arrive on 18 January.

Barron's is citing a report from stock watcher Michael McConnell at Pacific Crest Securities, which in turn has heard that Intel is going to cut Xeon chip prices by between 15 and 40 per cent. To be precise - maybe the precision lends credence to the rumor, and maybe it doesn't - McConnell says that prices on Xeon quad-core processors will be cut by 15 to 40 per cent, with a similar range of price cuts on quad-core Core chips used in PCs. Prices on older dual-core Core chips will be chopped by 13 per cent.

As we previously reported, Intel cut chip prices back in late October on a relatively small number of Core and Xeon chips, ranging from five to 15 per cent.

The economic slowdown has compelled Intel's customers to cut back on chip deliveries, which has hurt revenues and earnings for the fourth quarter. The company reports its financial results for the final quarter of last year this Thursday after the market closes, but warned Wall Street last Wednesday that sales in Q4 would be around $8.2bn, which is down 23 per cent from the year-ago quarter and down 20 per cent from its third quarter. Back in November, which seems so long ago, Intel revised its guidance downward for the quarter to somewhere between $8.7bn and $9.3bn in sales.

Clearly, predicting what its OEM customers are willing to buy has been problematic. And the launch of the 'Nehalem' Core i7 desktop processors in November and the impending launch of Nehalem variants of the Xeon server chips, expected by the end of March, has not helped matters. To keep customers buying the existing technology for servers, Intel has no other choice but to cut prices.

McConnell estimates that Intel's inventories will rise by 13 per cent to $3.85bn in the fourth quarter and says further that the "Shanghai" quad-core Opterons from Advanced Micro Devices could be taking share from Intel's Core and Xeon chips. How temporary that situation might be remains to be seen, but clearly with Nehalem not yet ramped, AMD has a little room to take some market share. Soon, however, Intel will slap back - and hard. ®

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