Intel, AMD to slug out weak economy with price cuts

SAN FRANCISCO: Intel Corp. and Advanced Micro Devices Inc. on Monday cut the

prices of some of their microprocessors by as much as 29 per cent as the two

chip firms slug it out for market share gains and seek to spur demand for

personal computers in a weak economy.

The price reductions, which were widely expected, affect 10 of Intel's more

than 50 processors. Santa Clara, California-based Intel, which typically reduces

prices roughly every two months, now charges $401 for its fastest Pentium 4

chip, which runs at 2 gigahertz, down 29 per cent from $562. The company reduced

prices of the 1.9 gigahertz Pentium 4 by 27 per cent to $273 from $375 and the

1.8 gigahertz Pentium 4 by 12 per cent to $225 from $256.

Intel also decreased the price of its 2 gigahertz Xeon processor, aimed at

the server market, by 26 per cent to $455 from $615. It cut prices on four of

its Pentium III chips that run desktop computers.

AMD, based in Sunnyvale, California, cut prices on five of its desktop

processors, the company said. AMD's Athlon XP 1800+ processor is down 12 per

cent to $223 from $252. Prices on its 1700+, 1600+ and 1500+ chips remain the

same at $190, $160, and $130, respectively.

It also cut prices on some of its Duron processors, which are aimed at

lower-cost personal computers. The 1.1 gigahertz chip now costs $89, down from

$103, for example. Intel's share of the market for microprocessors, the primary

computing engine of personal computers, fell to 76.8 per cent at the end of the

first half of the year from more than 80 per cent at year-end 2000, according to

Mercury Research. But because of its fierce price war against AMD, the company

saw its market share edge up to 77.5 per cent in the third quarter.

Intel says that as manufacturing costs fall, it typically drops prices to

customers, which in turn lead to lower PC prices. But analysts have said the

cuts this year have been far more drastic than usual.

The price war, weak demand and comparatively dismal PC sales have wreaked

havoc on Intel and AMD's results this year. On Oct. 16, Intel reported a 77 per

cent drop in third-quarter profits before acquisition-related charges on a 25

per cent sales decline. One day later, AMD posted its first quarterly loss in

three years as sales fell 37 per cent.

(C) Reuters Limited.